Conservatives promise national insurance tax cuts but not corporation tax

The Conservative Party have published their general election manifesto, promising not to raise the rates of income tax, National Insurance or VAT in the next Parliament.

In a relatively low-key manifesto the most substantial tax cut promised is an increase in the NICs threshold to £9,500 next year, with an ambition to raise it to £12,500 by the end of the five year Parliament. There are small boosts to the Employment Allowance, Structures and Buildings Allowance and R&D tax relief, and a statement of intent to fix an anomaly affecting pension tax relief for some low paid people which the CIOT’s Low Incomes Tax Reform Group has been campaigning on. As previously trailed, the corporation tax cut from 19 per cent to 17 per cent has been dropped.

Under the heading ‘Get Brexit Done, Unleash Britain’s Potential’ the manifesto states that a Conservative government would start putting the current Brexit deal through Parliament before Christmas and we would leave the European Union in January. It emphasises that the Conservatives would keep the UK out of the single market, out of any form of customs union, and would end the role of the European Court of Justice. It repeats the commitment that the Conservatives would negotiate a trade agreement next year and would not extend the implementation period beyond the end of the year.

The manifesto pledges not to borrow to fund day-to-day spending and states that the party’s fiscal rules mean that public sector net investment will not average more than three per cent of GDP. If debt interest reaches six per cent of revenue, the Conservatives will ‘reassess our plans to keep debt under control’.

Support working families (including personal taxation measures)

The Conservatives promise not to raise the rates of income tax, National Insurance or VAT ‘to protect the incomes of hard-working families across the next Parliament’.

The Conservatives will raise the NICs threshold to £9,500 next year – representing a tax cut for 31 million workers. “Our ultimate ambition is to ensure that the first £12,500 you earn is completely free of tax – which would put almost £500 per year in people’s pockets,” it says. The cost of the change to NICs is £2.2 billion in 2020-21, £2.2 billion 21-22, £2.3 billion 22-23 and £2.5 billion 23-24.

A new £1 billion fund to help create more high quality, affordable childcare, including before and after school and during the school holidays.

The Conservatives will keep the triple lock, the winter fuel payment, the older person’s bus pass and other pensioner benefits.

A number of workers, disproportionately women, who earn between £10,000 and £12,500 have been missing out on pension benefits because of a loophole affecting people with net pay pension schemes. The Tories will conduct a ‘comprehensive review’ to look at how to fix this issue.

The Conservatives will abolish the tampon tax (VAT on tampons).

Driving down costs and supporting small businesses

Conservatives will cut the burden of tax on business by reducing business rates. This will be done via a fundamental review of the system. As a first step, we will further reduce business rates for retail businesses, as well as extending the discount to grassroots music venues, small cinemas and pubs. The cost of changes to business rates (including a one year boost to retail discount, extension of discount to music venues and cinemas and pubs relief) is £320 million in 2020-21 and £10 million in each of 21-22, 22-23 and 23-24.

Increase the Employment Allowance for small businesses – a tax cut for half a million small firms.  The cost of raising this from £3,000 to £4,000 is £470 million in 2020-21 (£480 million in 21-22, £490 million in 22-23 and £500 million in 23-24).

Support start-ups and small businesses via government procurement, clamp down on late payment more broadly and strengthen the powers of the Small Business Commissioner.

Expand start-up loans, help SMEs to become exporters, and look at how we can improve the working of the Apprenticeship Levy.

Backing entrepreneurs and innovation

Seed Enterprise Investment Scheme and Enterprise Investment Scheme will continue in the next Parliament

Increase the R&D tax credit rate to 13 per cent and review the definition of R&D in order that so that important investments in cloud computing and data, which boost productivity and innovation, are also incentivised. The cost of the raise to the R&D tax credit measure is £85 million 20-21, £235 million 21-22, £265 million 22-23 and £275 million 23-24).

Review of how government can better support the self-employed. That includes improving access to finance and credit (not least mortgages), making the tax system easier to navigate, and examining how better broadband can boost homeworking.

“We also have to recognise that some measures haven’t fully delivered on their objectives. So we will review and reform Entrepreneur’s Relief.”

Building a fairer taxation system

Tackle tax evasion and reduce opportunities for aggressive tax avoidance. At £35 billion the tax gap is still too large. A new anti-tax avoidance and evasion law will:

  • Double the maximum prison term to 14 years for individuals convicted of the most egregious examples of tax fraud;
  • Create a single, ‘beefed-up’ Anti-Tax Evasion unit in HMRC that covers all duties and taxes, from individual errors to deliberate noncompliance – which is put on a legislative footing;
  • Consolidate existing anti-evasion and avoidance measures and powers.
  • Introduce a new package of anti-evasion measures, including measures to end tax abuse in the construction sector, crack down on illicit tobacco packaging and further measures to avoid profit-shifting by multinational companies to avoid paying taxes

The Conservatives claim such measures will bring in £50 million in 2020-21, £150 million in 22-23 and £200 million in 23-24.

Major multinational companies should pay their fair share of tax. The Conservatives will implement the Digital Services Tax.

Redesign the tax system so that it boosts growth, wages and investment and limits arbitrary tax advantages for the wealthiest in society.

Strengthen the UK’s corporate governance regime, reform insolvency rules and the audit regime.

Improve incentives to attack the problem of excessive executive pay and rewards for failure.

Reintroduce legislation that protects pension pots from being plundered by reckless bosses, helps savers be better informed with pension dashboards, and creates a new style of pension scheme which is more sustainable for workers and employers.

Other tax proposals

As already announced in the lead up to the manifesto, the corporation tax rate will stay at 19 per cent rather than go down to 17 per cent. The costings document claims holding off on a drop will bring in £3 billion in 2020-21 (£5.2 billion 21-22, £6 billion in 22-23 and £6.3 billion in 23-24).

Maintain support for creative sector tax reliefs.

Increase the rate of Structures and Buildings Allowance from two per cent to three per cent. This will cost £130 million in 2020-21 (£205 million 21-22, £260 million in 22-23 and £315 million in 23-24).

Bring in a stamp duty surcharge on non-UK resident buyers. The increase in SDLT for non-residents is not shown in the costings document because the proceeds will go directly to the budget for tackling rough sleeping. By the fourth year of the period, this is expected to be £120 million a year.

A plastic packaging tax, applicable where recycled content is below 30 per cent at £200 per tonne, will bring in £330 million in 2022-23 (and £310 23-24).

A Conservative government will address the ‘taper problem’ in doctors’ pensions, which causes many to turn down extra shifts for fear of high tax bills. Within the first 30 days, a Conservative government will hold an ‘urgent review’, working with the British Medical Association and Academy of Medical Royal Colleges to solve the problem.

A one-year employer NICs holiday for employers that hire people up to one year after they have left the armed forces. This will cost £20 million in 2020-21 (£25 million in 21-22, £25 million 22-23 and the same in 23-24).

Welfare

The Conservatives will continue the roll-out of universal credit, vowing to do more to make sure that universal credit works for the most vulnerable. They will also end the benefit freeze, while making sure it pays to work more hours.

Continue efforts through the tax and benefits system to reduce poverty, including child poverty.

As in other countries, people making the UK their home should pay into the tax system for a reasonable period of time before they can access welfare.

Other announcements include extending the entitlement to leave for unpaid carers, reduce the number of reassessments a disabled person must go through when a significant change in condition is unlikely and publish a National Strategy for Disabled People before the end of 2020. This will look at ways to improve the benefits system.

Employment

Create a single enforcement body and crack down on any employer abusing employment law, whether by taking workers’ tips or refusing them sick pay.

Ensure that workers have the right to request a more predictable contract and other reasonable protections.

Other announcement include extend the entitlement to leave for unpaid carers, encourage flexible working and fund more high-quality childcare before and after school and during the holidays

Strengthen our Union (Scotland, Wales, Northern Ireland)

Ensure that the UK’s 10 new freeports benefit the people in each of the four nations. We believe that there are many places across the UK that have the opportunity to be successful innovative hubs for global trade.

Devolve responsibility for corporation tax to Northern Ireland and consider the same for short-haul Air Passenger Duty.

Review alcohol duty to ensure that our tax system is supporting British drink producers. [Strongly implied that this will lead to reduced duty on Scotch whisky]

Other measures

Local people will continue to have the final say on council tax, being able to veto excessive rises.

Roll out gigabit broadband across the country by 2025.

Through bodies like the Northern Powerhouse, Western Gateway and Midlands Engine we will drive greater levels of foreign investment into the UK.

A start-up visa, alongside our new rules for those of exceptional talent, will ensure that the UK can attract the entrepreneurs of the future who want to start great businesses here in the UK.

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