What are Labour’s tax plans?
We have summarised what we know to date about the new Government’s approach to tax and Richard Coombs, Tax Partner at Bates Weston, gives us his views.
According to its manifesto, the Labour government plans to fund its mission-driven plans from revenues generated by:
- Closing “non-dom” tax loopholes
- Ending the use of offshore trusts to avoid Inheritance Tax
- Close the loophole in the Private Equity industry which treats performance related pay as capital gains – “the carried interest loophole”
- Applying VAT & business rates to private schools
- Increasing stamp duty on purchases of residential property by non-UK residents by 1%
- Extending and increasing the windfall tax on oil and gas companies
- An increased focus on tackling tax avoidance
It will not:
- increase National Insurance, the basic, higher and additional rates of Income tax and VAT – but the income tax thresholds will remain frozen until 2028
Business Taxes
The Government plans to issue a roadmap for business taxation within 6 months, but from the information published to date we expect:
- Corporation tax to be capped at the current 25% for next 5 years
- The permanent full expensing system for capital investment and the annual investment allowance for small business to be retained
- The business rates system in England to be replaced with a fairer way to raise revenue that levels the playing field between the high street and online, incentivises investment, tackles empty property and supports entrepreneurship
To boost confidence in economic plans, all fiscal events making significant changes to taxation or spending will be subject to an independent OBR forecast. We are expecting the government to deliver only one major fiscal event per year.
Richard Coombes, Tax Partner at Bates Weston comments on Labour’s tax plans:
“Assuming Labour sticks to its manifesto pledges then the cap on corporation tax at 25% for the full term of Parliament will at least give company owners some certainty on their tax cashflow, albeit most would welcome a reduction towards the previous levels of 19%.
Likewise, no movement on income tax, NIC and VAT will also hopefully give some stability to the taxpaying public.
Capital Gains Tax is the big unknown here. There were rumours some time ago that Labour wanted to bring CGT rates in line with income tax rates but this would be a hugely unpopular move and therefore I suspect if it does happen it won’t be imminently, and Rachel Reeves’ comment that there are no immediate plans to increase CGT will at least buy some time.
The devil will be in the detail though. Whilst headline rates may well be held steady, withdrawal of reliefs, not inflating allowances and other “stealth” taxes can cause as much disruption, so we will have to wait and see what the first Budget brings to get a feel for how this new Government intends to tax us. “
As always, you are reminded that this article is generic in nature and you should take no action based upon it without consulting your professional advisor.
