The General Election: Tax and Employment Law Implications
With the general election just around the corner, I thought it was a good time to write about the Employment Law implications of your vote, together with some information on the tax implications for you from one of our Corporate Partners, Think Tax.
Employment Law Implications
For each of the main parties I have detailed below the information contained in their manifesto on Employment Law.
No changes are proposed in the Tories’ manifesto (probably because if they did propose changes it would only highlight that the changes they brought in since the last election have failed).
Have said they will “abolish the …Employment Tribunal fees system”. Now to me as a sceptical lawyer this doesn’t mean the fees will be abolished in their totality – but that the “system” we be changed. As an educated guess, I would suggest the most likely outcome here is that rather than just do away with the fees (which given the substantive changes imposed by the fee regime such as the role that ACAS now play, would be impractical and costly) that Labour will simply make the remission scheme easier and perhaps do something along the lines of automatic qualification for remission if you are on certain state benefits.
Labour have also said they would outlaw zero hours contracts (although give no details how they would achieve this, or replace them with a suitable alternative to allow companies to have a ‘bank’ of staff).
Have said very little other than they would “review” the Employment Tribunal fee system to ensure it’s not a “barrier” to justice and would also review zero hours contracts to ensure they are not being abused by employers.
Suggest they would reduce Employment Tribunal fees to make them more accessible to people and “end exploitative zero hours contracts” (which again as a sceptical lawyer does not suggest to me the end of zero hours contracts – simply amending them to make them less exploitive – such as banning them from containing exclusivity clauses which prohibit the worker from working for someone else).
Their manifesto is silent on employment law.
Think Tax have detailed below the tax implications for you dependant on the party that comes to power.
It is worth bearing in mind that if there was a coalition government again, all parties would have to compromise, so not all policies will be implemented.
The Conservatives have said that they will restrict tax relief on pension by cutting annual contributions from the present £40,000. This will be applicable for those earning £150,000 or more.
They have gone big on Inheritance tax in their manifesto promising a new £175,000 per person transferable allowance for civil partners and married couples when their main residence it passed to their children on death. With other reliefs already available, this essentially means parents will be able to pass on property worth up to £1million free of inheritance tax.
The personal allowance will be raised from the current £10,600 to £12,500 over the course of the next parliament.
The higher rate tax threshold (40 percent) will rise to £50,000 from its current level of £42,386 a year.
A very important promise (although you may not believe them!) is that they will not increase Income Tax, National Insurance contributions or VAT.
Labour has also promised to cut pension relief for individuals earning in excess of £150,000 a year.
One of the greatest pieces of spin by Labour in the last parliament, is naming the under-occupancy penalty the ‘bedroom tax’ and this being adopted as the name. The bedroom tax isn’t in fact a tax at all, but it probably goes without saying that Labour are promising to abolish this.
A mansion tax on properties worth over £2 million pounds will be introduced and the will be an end to so ‘Non-Dom’ status.
Two bands of tax that have been scrapped in the past will be reintroduced. A 10 per cent starting rate for income tax and a 50 per cent income tax for those earning over £150,000.
They also intend to ditch the marriage tax allowance. This allows a spouse or civil partner who does not pay income tax to transfer up to £1,060 of their tax-free allowance to their partner
The Liberal Democrats, like Labour will also introduce a Mansion tax, but with narrower lines like council tax.
The tax-free personal allowance will be raised to £11,000 next April – and, like the Conservatives, to £12,500 within the next five years. This is probably something that will be a bedrock of any Con-Lib coalition.
They will also look to align Income Tax with National Insurance. It has intrigued many people over the years why these ‘taxes ‘have different starting rates.
Capital gains tax will be increased from the current rate (currently 18 per cent or 28 per cent depending on your marginal tax rate) and the annual tax-free allowance of £11,100 will be reduced. It is unclear how much extra tax this will actually bring in.
The Lib Dems will look at the introduction of a single rate of tax relief for all pension contributions. Relief would be set higher than 20 per cent, but one suspects there to also be a cut to the 40 per cent and 45 per cent tax reliefs available to higher earners
It’s probably not surprising that the Green’s want to raise taxes to increase spending and combat climate change.
They are proposing raising the top rate of tax to 60%, plus introducing a wealth tax of 2% a year for the ‘top 1%’ of households.
As it stands, National insurance has an upper limit of 2% on all income above £42,380. The Green Party want to remove this limit so it rises from 2% to 12%.
Corporation tax will be raised from 20% to 30%.
A so called “Robin Hood” tax will be introduced of 0.1% on every stock market trade.
They have also promised to increase taxes on petrol, alcohol, tobacco and plastic bags. They will also remove tax incentives for buy-to-let.
The personal allowance seems a popular policy with most parties. UKIP have pledged to increase the personal allowance to the level of full-time minimum wage earnings. This will mean a personal allowance of approximately £13,500 by the end of the next parliament.
There is a very clear policy on Inheritance Tax. Inheritance tax will be abolished altogether.
A 35p income tax rate will be introduced for earnings between £42,285 and £55,000, whereupon the 40p rate becomes payable.
A Treasury Commission will be set-up to look at ways to introduce a ‘turnover tax’ to ensure big businesses cannot get away from paying tax on a proportion of their UK turnover.
If you would like any further information on anything detailed in the above article then please do not hesitate to contact Michael Lewin Solicitors on firstname.lastname@example.org or Think Tax on email@example.com.