At its party conference in Brighton last month Labour made several pledges to further reform taxation since its 2017 manifesto. Although not formally adopted, these pledges will be considered for inclusion in the party's manifesto in a future general election, which could well be held in the next few months.
Here I am going to look at the main tax proposals the Labour party has put forward since 2017 and their potential impact.
In 2017 manifesto the party proposal that individuals earning between £80,000 and £123,000 would pay a tax rate of 45% on their income, while those earning over £123,000 would pay 50%.
Labour pledged to raise the rates charged on the gains made when selling assets (eg a second home or other investments).
Labour would plan to abolish basic rates charged on smaller gains currently 10% on liquid assets such as shares and 18% on property and higher rates would automatically apply; these rates would be in line with the new income tax rates.
Labour has not made any mention of plans to remove the current CGT exemption on main residences.
Labour proposes to scrap Inheritance Tax (IHT) and replace it with a new ‘Lifetime Gifts Tax’ This would be levied on the recipients of the assets at the marginal rate that applies to them as individuals. Recipients would have a tax-free allowance of £125,000.
The ‘family home allowance’, which was recently introduced and allows family to pass homes with an added IHT allowance would be abolished by Labour. Married couples would lose the ability to share allowances.
Labours plans include giving tenants the power to buy their rental property from landlords, and rent capping.
Under Labours plans a ‘progressive property tax’ payable by the property owner (not the tenant) would replace council tax. Rates for this tax would be set on a national level with empty homes and second homes paying most, whilst the lowest value properties pay nothing.
Within the next few months we will have a clearer idea of what the future holds for the UK's tax regime.
If you have any questions on personal or business tax matters please do get in touch.