With the UK heading to the polls tomorrow, in what could be our most important election ever, politicians are fighting it out to win over voters’ hearts, minds – and wallets.
Here we round up the main parties’ key policies on income tax, pensions and property to help you understand how your vote could affect your personal finances.
Boris Johnson has had to back down on the income tax cuts he pledged during his leadership campaign, but the Conservatives have promised voters a “triple tax lock”. This would mean no increase in income tax, national insurance or VAT rates for five years.
It also proposes raising the national insurance threshold from the current £8,632 to £9,500 by 2020-21. The gain from this is pretty meagre though – a £150 tax break to the highest income 30 per cent of working households, and only about £30 to the poorest 10 per cent.
Meanwhile, Labour plans to squeeze more money out of higher earners. It would create a new £80,000 threshold at which the 45 per cent income tax rate kicks in, and introduce a ‘super-rich’ rate of 50 per cent for those earning over £ 125,000. It would also clamp down on executive pay, promising to tax capital gains at income tax rates. Further to this, it would require all individuals earning more than £1 million to file a publicly accessible tax return.
The Liberal Democrats plan to increase each existing income tax band by one percentage point – going up to 21, 41 and 46 per cent for basic, higher and additional taxpayers respectively. The Lib Dems is the only party to commit to reviewing IR35 changes. These are new tax rules for freelance workers due to come in next April that would result in many being taxed via PAYE with none of the benefits of employment.
The Green Party would merge various taxes into one Consolidated Income Tax. This would involve combining national insurance, capital gains tax, inheritance tax, dividend tax and income tax into a single tax. The idea is that everything an individual makes in a year is subject to the same tax rate, regardless of whether it has come from working, investment or an inheritance windfall.
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The issue of pensions has played a central role in the campaign as all sides vie for the so-called ‘grey’ vote.
Higher earners have expressed frustration at the pensions taper – a complex piece of tax legislation which limits the amount top earners can save tax-free into a pension to just £10,000. With the taper tax causing issues for highly paid consultants in the NHS, the Conservatives have pledged to hold an “urgent review” within the first 30 days of being reelected. The Lib Dems have pledged to “listen and act” on the NHS pensions crisis.
Labour, Conservatives and the Lib Dems are all committed to keeping the “triple lock” on the state pension. This would increase payments for more than 12 million pensioners by either their average earnings, the rate of inflation or 2.5 per cent, whichever is the highest.
The parties are also seeking to woo older voters by protecting the state pension and the promise of a compensation deal for “Waspi women” (Women Against State Pension Inequality).
The Green Party would limit pension tax relief at 20 per cent, the lowest level currently available. With much of ‘middle England’ currently entitled to 40 per cent tax relief, this reduction could lower people’s incentive to save for retirement.
The main parties are pitching a range of property proposals in a bid to meet voters’ concerns over rising house prices, and issues with leaseholds and the rental market.
The main parties have all pledged to boost housebuilding. The Conservatives are promising a scheme where “local families” receive a one-third discount for buying into new developments. This would be funded through taxes raised through the planning system.
Labour proposes its own discounted homes schemes for local buyers and first-time buyers, with prices linked to local incomes. It has also committed to end the “right to buy” for council tenants.
The Conservatives is wooing first-time buyers by allowing them to fix their mortgage interest rates for 25 years, rather than the 2, 3 or 5 year deals that are common today. Overseas buyers will pay more under all the main parties’ plans, with the Conservatives pledging to impose a stamp duty surcharge of three per cent on their purchases (up from a one per cent charge already in the pipeline).
Labour says it would go further with levy on their property purchases of as much as 20 per cent. Buy-to-let landlords have found themselves at the sharp end of Labour’s manifesto, which pledges to cap increases to private rents at the rate of inflation. It would create “open-ended tenancies” as well as tougher sanctions for landlords who flout new national standards.
The Conservatives would help tenants avoid rogue landlords by creating a “lifetime deposit” that moves with the renter. They would also strengthen rights of possession for “good landlords”.