The Labour party election manifesto was published on 21 November 2019 and, as expected, includes highly ambitious spending pledges and the promise to take the UK economy in a 'radical' new direction. Those pledges, of course, require significant increases in taxation - but some may be left unsatisfied with the lack of detail offered in the manifesto, particularly with regards to personal taxation.
Our previous article on Labour party tax policies and proposals might be helpful to fill in the gaps but, to the extent that the election manifesto actually deals with taxation and property ownership more generally, here are some of Labour's key pledges.
The manifesto confirms that the general direction of travel will be to increase the tax burden on 'those with the broadest shoulders'. As the foreword puts it, the party intends to tax 'those at the top' in order to fund the UK's public services. This means those earning over £80,000 will pay more tax, while for everyone else rates of income tax and national insurance contributions will be frozen. The Shadow Chancellor, John McDonnell, recently confirmed that these increases for higher earners will include a new 50% income tax rate kicking in at £125,000 (which will be known as the 'super-rich rate'). The party also pledges to end 'the unfairness that sees income from wealth taxed at lower rates than income from work'. This rather untechnical wording is clarified in the 'Funding Real Change' report which accompanies the manifesto as meaning that capital gains and dividends will be taxed at income tax rates. Furthermore, the capital gains annual exemption will be abolished (above a minimum £1,000 per year).
The party pledges to reverse Conservative cuts to corporation tax while keeping the rate lower than it was in 2010. This means that over the course of the next three years, the party would increase the corporation tax main rate to 26%. Further promises are made to conduct a wide-ranging review of corporate tax reliefs. A land value tax, which would tax commercial landlords on the value of the land they hold, would also be considered as a wholesale replacement of business rates.
Increases to VAT have been ruled out, except, it appears, for those paying private school fees, the current VAT exemption on which would be scrapped. As for inheritance tax, the party promises to reverse what is described as 'George Osborne's inheritance tax cut'. This is likely to mean the scrapping of the residence nil rate band, which currently allows married couples to leave (broadly) up to £300,000 extra of inheritance tax-free property to their children or grandchildren in the form of residential property.
Various reforms are promised with regards to the taxation of property and the rights of leaseholders, and these are worth noting particularly for owners of second properties.
An annual levy on second homes used as holiday homes will be brought in, equivalent to 200% of the current council tax bill for the property. Councils would be given the power to impose taxes on the owners of properties which have been vacant for over a year and a new levy on foreign companies buying UK housing would be introduced. The latter of these policies is in line with the suggestion made in the Labour-commissioned 'Land for the Many' report, which may serve as a useful indicator of further land taxation reforms should Labour form the next government (see our previous article on Labour tax policies). A right for leaseholders to buy their freehold 'at a price they can afford', with an equivalent right for freeholders on privately owned estates, suggests there would be important reforms to the existing right to enfranchisement that could see the value of landlords' reversions diminished. Councils would be given the powers and funding to buy back homes from private landlords (although such purchases are not currently described as compulsory). Landlords holding on to their rental properties would see rents capped at the level of inflation, with cities being given the power to cap them even further. It is further promised that the ownership of land will be made 'more transparent'. Given the already relatively transparent system of ownership of registered land in the UK, this last reform looks like it is aimed squarely at those making use of nominee owners for the purpose of discretion.
Labour's manifesto contains a number of serious spending commitments, among them the nationalisation of energy and water services and the upgrading of the insulation in 27 million homes. The plan to fund this involves tax increases on high earners as well as changes to how 'wealth' more generally is dealt with by the taxation system. The Conservative election manifesto is expected soon and we will provide analysis of its contents once it is published.
If you have any questions regarding the UK General Election 2019, please contact your usual Withers contact. You may also wish to view our dedicated webpage which will be updated regularly before Thursday 12 December, click here to view it.