16 December 2019

Conservative election win – what now?


The Conservatives have just achieved their best electoral performance in several decades, securing a considerable majority in Parliament which will pave the way to delivering their manifesto commitments. While the commentators and the psephologists bicker about what this result ‘means’ (whether it is anti-Corbyn or pro-Brexit or something else), many will be asking the more practical questions about how to look forward and plan in the light of the Conservatives’ manifesto promises.

Tax rates

As covered by our previous article on the Conservatives’ election manifesto, many tax rates will not change. Income tax, VAT and National Insurance (‘NI’) rates will be frozen. Furthermore, it has been promised that the NI threshold will be raised next year to £9,500, leading to a modest saving of around £100 for affected taxpayers.

Entrepreneurs’ relief

There will be a review of entrepreneurs’ relief (‘ER’) with a view to tightening up the requirements to obtain it. Currently, this relief operates to lower the rate of capital gains tax (‘CGT’) to 10% on qualifying disposals. It exists ostensibly to reward those entrepreneurs who work in a business in which they have risked some of their own capital. For some time, questions have been asked about whether the ER requirements are too widely drafted, meaning more taxpayers are benefiting from it than those for whom the relief was originally intended.

In anticipation of the review and potential adverse changes to the rules, it might make sense for those who are in a position to do so to crystallise any of their gains which will benefit from ER before the first Budget, which is expected in early March (the Chancellor having promised to deliver a first Budget within 100 days of the election).

Stamp duty land tax

A further proposed change is an increase in stamp duty land tax (‘SDLT’) for non-UK resident buyers of UK residential property. Such purchasers are already subject to a potential effective marginal rate of 15% (the 12% top residential rate plus the second property surcharge of 3%). The promise of a further surcharge of up to 3% could make residential property less attractive to foreign purchasers. Ensuring that pending residential property transactions are completed before early March could lead to an SDLT saving for those affected by the change.

Getting things done

Brexit-related uncertainty is unlikely to disappear purely as a result of the Conservative win. The Prime Minister campaigned on a ‘Get Brexit done’ slogan, but it is still unclear what exactly this means. The Conservatives probably have the numbers now to push through the revised Withdrawal Agreement reached with the EU but that will only in turn lead us into the fraught next stage of negotiating trade deals. We should expect Brexit to continue to dominate the political discourse at least for the next 12 months.

The Conservatives made several costly promises in their manifesto, having entered into something of a bidding war with Labour during the campaign. This leaves some tension between promised tax rate freezes and the need to spend to fund those commitments.

Perhaps though the greatest benefit will be the stability and consistency in policymaking that a single party with a significant majority and a five year term in government can bring. The election of a conservative government also brings a commitment to a business friendly agenda and policies that will seek to maintain the UK’s role as a jurisdiction receptive to the HNW community and their advisors.

We can help you look forward and plan your tax affairs sensibly so that you are protected for whatever future developments occur.

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