The Labour party says they will make the tax system fairer. Here’s how they plan to do that
The general election looms on July 4 and with it an increasingly likely prospect that a Labour government will be voted in. Tax policies are typically one of the most charged items of any political party and with the UK’s tax burden currently at its highest since World War Two it’s important to understand how the party plans to approach taxes.
The confidence to invest
The Labour party has said that, as far as business taxes go, it wants stability and certainty to give business the confidence to invest and so the UK can compete on an international level.
In fact, in laying out Labour’s approach to corporate taxes, Shadow Chancellor Rachel Reeves said: “I see Britain’s potential wherever I go, in our fantastic creative industries, our world-leading professional and financial services, and in pioneering work in general purpose AI and other digital technologies, in life sciences, and renewable energy – happening right here in the UK. There is no one-size fits all approach – different sectors have different needs, and face different barriers. But if we can get the policy right, then the rewards are immense.”
This means they plan to keep the main corporation tax rate capped at the current 25% with the caveat that that may be reduced if tax changes in other countries threaten to undermine the UK’s competitiveness. It will also retain a permanent full expensing system for capital investment and the annual investment allowance for small business, but we need to get clarification on what qualifies for allowances. This last point might hide some significant changes.
Business rates will be replaced with a new system – still unspecified – of business property taxation, with the aim of levelling the playing field between high street and online retailers.
Labour also committed to implementing the OECD global minimum rate of corporate taxation and back an international agreement on the fairer taxation of large multinationals. They plan to increase the Energy Profits Levy or “windfall tax” by 3%, and will also consider the removal of loopholes which most likely refers to the levy’s valuable investment allowance.
In an effort to raise funds, Labour says it wants to tax carried interest as income, possibly at the top marginal rate of 45%. Labour anticipates this will raise £500 million over its first five years, but HM Treasury disagrees.
One of the controversial tax moves that the Labour party plans is to get rid of the current preferential tax regime for UK resident, non-UK domiciled individuals or “non-doms.” They also are proposing closing what it says are loopholes in the system such as doing away with the concession that only 50% of foreign income is taxed in the first year of the new regime; and that non-doms can no longer protect offshore assets from inheritance tax (IHT) by transferring them to an excluded property trust before the start of the new regime.
Finally Labour has said it plans to to increase the existing 2% stamp duty land tax surcharge for overseas buyers acquiring residential property in England or Northern Ireland.
It is becoming increasingly likely that the Labour party will emerge victorious on July 4. The Labour party states that it will implement a new approach to corporate taxes. It’s time for businesses to get ready.
Compliance and the UK General Election – Special Webinar
Every sector could be impacted and every area of compliance is likely to be reviewed by the next government. From overhauls of financial services regulation, reviews of data protection law, closer alignment with EU regulations and an expansion of health and safety protections, the next parliament will see compliance at the centre of the regulatory agenda.
With everything from whistleblowing reform to overhauls of corporate governance, new employment rights like menopause leave and expanded equal pay rules, alongside crackdowns on tax evasion and expansion of the money laundering regulations, organisations large and small should prepare for the outcome of the general election.
This webinar will cover:
- What the main parties are pledging on key compliance areas
- Potential changes to legislation including the Equality Act, sexual harassment and employment rights
- Expected legislation on AML, bribery, sanctions, fraud and economic crime
- Possible expansion of regulations around GDPR, AI and health and safety
- Preparing your organisation for future regulatory changes and new requirements