What does the General Election mean for your pocket?
With the policies of the mainstream political parties further apart than ever before, the result of the 2019 General Election could have a major impact in the finances of wealthy individuals and their families.
Conservatives
The Conservative Party was the last of the major political parties to launch its manifesto and, putting Brexit to one side, its message on personal wealth appears to be ‘leave alone’. The promise of no tax increases – or steady as she goes – underpins much of its manifesto policies.
Given that the party has been in power for 9 years it is perhaps no surprise that it appears to be happy with its policies that affect higher earners.
However, commentators have criticised the lack of ambition, and higher rate taxpayers will no doubt be disappointed that earlier promises to lift the amount that can be earned before paying the higher rate of tax from £50,000 to £80,000 has quietly been dropped.
Business owners will also have taken note of the freeze to Corporation Tax at its current rate of 19%, rather than the reduction to 17% which was previously set for 1 April 2020.
Liberal Democrats
The Liberal Democrats promise varying degrees of tax reform, notably lifting the rate of income tax by 1% and abolishing the Capital Gains Tax allowance and instead taxing capital gains and salaries through a single allowance.
Notably the Liberal Democrat manifesto is silent on the issue of Inheritance Tax, which has otherwise been a hot topic of discussion in recent months both as a result of the upcoming election as well as the Office of Tax Implication’s report on IHT published in the Summer.
The Corporation Tax rate would be restored to 20%.
Labour
The Labour Party’s proposals could give rise to the most significant changes to the current tax regime.
On top of new rates of income tax (45% for those earning over £80,000 and a new 50% rate for those earning over £150,000), it has announced a new tax on dividends that will affect the self-employed and those receiving an income from shares and investment funds.
Capital Gains Tax relief will be reduced from £12,000 to £1,000, and Inheritance Tax rates could return to pre-2015 levels. Those with a £1m home wishing to pass it down to children could, for example, face an IHT bill of £140,000 compared to £20,000 today.
Those with second homes or buy-to-let portfolios would also face additional taxes and compliance. Holiday home owners would be looking at a 200% council tax rate, and those with buy-to-let properties face rent caps, open-ended tenancies, and an annual property MOT.
In addition, the party proposes to remove the VAT exemption independent schools currently enjoy, adding a further 20% on school fees.
Whether any of the parties will achieve a sufficient majority to get their proposals through Parliament remains to be seen but reform in some form or another seems inevitable.