An article on the implications for private client practice of the policy statements made by the main political parties in the lead-up to the general election on 7 May 2015.
Contents of this article
This article lists the key statements relevant to private client practice that the main political parties have made in the lead-up to the general election on 7 May 2015. The statements are mainly taken from the parties' election manifestos. We also link to measures that the Coalition government announced in the March 2015 Budget but did not include in the Finance Act 2015.
Raise the threshold for the 40% higher tax rate band to £50,000.
Introduce legislation so that the income tax personal allowance automatically rises in line with the national minimum wage.
Introduce a new Help to Buy ISA. The scheme will work by providing a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. This scheme was announced in the March 2015 Budget but was not included in the pre-election Finance Bill 2015 (see March 2015 Budget: key private client tax announcements: ISAs: eligibility, flexibility and Help to Buy).
Not raise VAT, National Insurance contributions (NICs) or income tax. (Outside of the manifesto David Cameron has pledged to introduce a law guaranteeing no rise in income tax rates, VAT or NICs before 2020 (see, for example, The Independent. co. uk ).
Increase the effective inheritance tax threshold for married couples and civil partners to £1 million with a new transferable main residence allowance of £175,000.
Not increase the basic or higher rates of income tax.
Introduce a "mansion tax" on houses worth over £2 million. The threshold for the mansion tax will rise in line with house prices and those on lower incomes will be protected with a right to defer the charge until the property changes hands.
Abolish non-domicile tax status.
Close tax loopholes and introduce tougher penalties for those abusing the tax system.
Restrict tax relief on pension contributions for the highest earners. The manifesto does not specify how the restrictions would apply although elsewhere it has been reported that the cut will be financed by cutting the annual allowance eligible for relief to £30,000 and capping the total pension pot eligible for relief at £1million. Those earning more than £150,000 a year would receive pension tax relief at 20% (see Private Client news round-up to 5 March 2015: Labour would cut tax relief to fund education).
Support measures to cap the costs of care.
Devolve more power and control, not only to Scotland and Wales, but also to English cities and regions.
Allow individuals to transfer unused elements of their income tax personal allowance to offset against CGT liabilities.
Reform dividend tax relief by aligning dividend tax with the income tax rate for additional and higher rate tax payers.
Not increase income tax, NICs or VAT.
Introduce a tax on homes worth over £2 million in a banded structure. For properties valued at between £2 million and £2.5 million the charge would be up to £2,000 a year. For properties between £2.5 million and £3 million the charge would be up to £3,500 a year, for properties between £3 million and £4 million the charge would be up to £5,000 a year and for properties between £4 million and £5 million the charge would be up to £9,000 a year.
Restrict access to non-domicile status by removing the link with a father's domicile of origin.
Increase the annual charge for remittance basis taxpayers. Those who have been resident in the UK for 7 of the past 9 years will see a rise from £30,000 to £50,000. Those who have been resident in the UK for 12 of the past 14 years will see a rise from £60,000 to £100,000, and those who have been resident in the UK for 17 of the past 20 years will see a rise from £90,000 to £150,000.
Crack down on international tax avoidance and evasion.
Press ahead with plans to allow more freedom in the use of pension pots.
Deliver on promises to Scotland, devolve more powers to Wales and work for a shared future in Northern Ireland.
The Green Party manifesto states that if elected, a Green Party government will:
Increase the top rate of income tax to 60%.
Abolish the employees' NICs upper threshold.
Abolish the CGT annual exempt amount.
Introduce a wealth tax of 2% a year on those whose wealth exceeds £3 million.
Change inheritance tax to an accession tax. The level of tax would depend on the wealth of the recipient, not the donor. Gifts on death to individual recipients who have less than £200,000 would be free of tax.
Abolish potentially exempt transfers making all lifetime gifts chargeable to an accession tax with exceptions for small annual amounts.
Tighten up the tax treatment of certain trusts widely used for inheritance tax planning.
Close tax loopholes and crack down on tax avoidance.
The SNP manifesto states that, if elected, SNP MPs will:
Vote for:
the reintroduction of the 50% top tax rate of income tax;
the reversal of the transferable marriage tax allowance;
the introduction of a mansion tax on houses worth over £2 million;
the abolition of non-domicile tax status; and
a crackdown on tax avoidance.
Support increases in the personal allowance.
Call on the UK government to move forward cautiously with plans to increase the higher rate threshold to £50,000, ensuring first that tax revenues are sufficiently buoyant.
Back proposals for a review of the pension tax relief available to the wealthiest.