The Conseratives and Labour are promising to put more money in voters’ pockets as they battle to woo the public ahead of next week’s general election.
The Tories have unveiled plans for a “tax-cutting” budget if elected, while the opposition party is promising to save ordinary households a total of £6,700 a year.
And that poses a key question for voters: what does this mean for my taxes?
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Conservatives
The Conservatives have promised to present a “tax-cutting” budget within their first 100 days of government if re-elected.
The income threshold at which workers start paying national insurance (NI) would rise from the current £8,632 to £9,500 - which would save workers about £85 per year, according to the independent Institute for Fiscal Studies (IFS). And the Tories have an “ultimate ambition” of increasing the minimum threshold to £12,500.
The proposed cuts to NI contribution would cost the government around £2bn a year, and would mostly benefit middle and higher-income households, says the IFS.
Boris Johnson’s party has also pledged a “triple lock” on personal taxation, meaning that there will be no increase in rates of income tax, national insurance or VAT.
However, Johnson has ditched his Tory leadership campaign pledge to raise the threshold at which people pay 40% income tax from £50,000 to £80,000.
The prime minister has also shelved his plan to cut corporation tax, which at 19% is already lower than many European partners like France and Germany.
When it comes to council taxes, the IFS has said that the party’s lack of additional local funding means authorities will have to charge households more. The Conservative manifesto “would not be sufficient to meet rising costs and demands over the next parliament even if council tax were increased by 4% a year”, the institute's website explains.
The Conservatives are also under pressure to explain how they can fund the significant new spending pledges put forward in their manifesto and simultaneously announce tax cuts.
Read a summary of the party’s manifesto here
Labour
Labour says its policies would save families an average total of £6,700 a year. Shadow chancellor John McDonnell claims households would save cash as a result of the nationalisation of public services; reductions in the cost of rail season tickets; free childcare and school meals; and the axing of prescription charges.
But critics have said that total saving figure doesn’t apply to all families. For instance, the calculations are based on two people in a household saving £1,097 on train fares following the nationalisation of the railways, but not all people regularly use trains.
Labour would fund part of its new spending pledges by implementing a new “super” income tax rate of 50% on people earning over £125,000, while the threshold for the additional income tax rate of 45% would be lowered from £150,000 to £80,000. According to the Daily Mirror, this would raise “£5.4bn a year by 2023-24”.
Labour would also hike capital gains tax from the current 20% or 28% to the rates of income tax – bringing it to 40% or higher for the richest. The party says this would raise “£14bn a year by 2023/24”.
An additional £5.2bn a year would be raised by reversing inheritance tax and bank levy cuts, forcing private school fees to be subject to VAT and introducing a second homes tax, the party says. It has not made any specific pledges on council tax.
Labour has pledged not to increase VAT, national insurance or income tax for anyone earning less than £80,000 a year – 95% of earners.
However, it will scrap a tax break for married couples in a move that will impact those earning less. Jeremy Corbyn conceded that while removing the tax break would impact people’s income by around £250 per year, they would nonetheless benefit from a living wage and “free nursery provision for two to four-year-olds”, the BBC reports.
Read a summary of the party’s manifesto here
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Liberal Democrats
The Lib Dems are promising to raise £7bn a year over five years – a total of £35bn – by adding one penny in the pound on income tax and ring-fencing the proceeds for the NHS and social care.
The party is also pledging to introduce a tax rise for those who take the most international flights, while costs would come down for people who take one or two international return flights a year. The air passenger duty rise would help pay for the fight against climate change, the party says.
The Lib Dems have said that the proceeds from any tax increases will be spent fufilling specific manifesto commitments. This is called hypothecation and, according to the BBC, is very out of fashion in the Treasury, “which prefers everything to go into a central pot”.
The party has said that it will allow local authorities to increase council tax by up to 500% when homes are being bought as second homes. It will also abolish the separate capital gains tax-free allowance of £12,000 and tax gains at income tax rates - 20%, 40% and 45%. The latter will particularly affect higher earners. The party would also keep the state pension triple lock.
The IFS said that the Lib Dems were the only party whose pledges “would appear to put debt on a decisively downward path”.
Read a summary of the party’s manifesto here.
