How much will the election cost you?
, As election mode approaches, we thought your readers would be very interested in the below perceptive article about what the main parties say about tax. We hope you will be able to use this article as is, but do not hesitate to let us know if you would like any areas expanded upon. How much will the election cost you? With the party season over and our political representatives now in election mode it is interesting to look at how the parties stand from a tax policy point of view. Labour has finally bitten the bullet on income tax and the old promise of ‘no increase’ has been long forgotten. It seems that the main parties are all aligned with this strategy on Income Tax with the conservatives making a statement about ‘keeping the new 50p rate for now’ and the Liberal Democrats taking a silently approving stance on the new top rate. It is also clear when reading between the lines that none of the parties will do anything to reverse governments stated policy of removing the personal income tax allowance from April 2010 for those earning over £100,000. Not a lot of clear blue water between the parties on income tax – so what are the key tax differentiators between the three main parties? Property is certainly on the tax agenda. The Liberals lead the charge this year with Vince Cable’s vote losing annual property tax charge – dubbed the ‘mansion tax’ by one and all. This tax would be charged at 0.5% each year on the value of property owned – not dissimilar to the wealth tax charged in many continental jurisdictions. The Lib Dems also want to increase revenues from capital gains by severely reducing the capital gains tax annual allowance, currently worth £10,100, and reverting to higher rate tax on gains, effectively increasing the rate from 18 percent to 40 or even 50 percent. Investment landlords beware! The Labour party have also been running with a new tax on house values – a local property tax to replace the current council tax we are told. This appears to be in the wake of the Burt report on local government finance. On the plus side however they have also talked about extending the Stamp Duty Land Tax holiday on properties below £175,000 which is due to expire on 1st January 2010. The conservatives on the other hand seem to be the only party to have avoided additional tax burden on property owners. They want to put a freeze on council tax for the next two years and want to abolish stamp Duty Land Tax for first time buyers acquiring properties less than £250,000 to try and stimulate this section of the residential market. More importantly it remains conservative policy to raise the Inheritance tax threshold to £1million from the current £325,000, taking many ordinary homeowners out of the IHT net and removing the need for taxpayers to put complicated part ownership structures in place for many family homes. Delving into broader tax issues, the conservatives seem set to reduce Corporation tax to 25 percent (and 20% for small companies) and cut National Insurance contributions whilst the Lib Dems want to talk about local income taxes which they say would be fairer than council tax, a reform of business rates, tax on pollution and national insurance charges on all benefits in kind – all clear revenue raisers for the exchequer. No doubt the government’s position will be clarified in November’s pre-budget report. The tax profession is expecting some fairly draconian legislation in the new Fiscal Responsibility Act which will see the legislation to crackdown on banker’s bonuses as well as further inroads into the use of offshore tax heavens. The worry is that the same onerous tax legislation will drive large swathes of the financial services industry away from our shores and thus lead to an overall reduction in the tax take. In the end they all need to balance the books and repair the country’s own balance sheet so the next 5 years are likely to be painful for the taxpayer. The one area that all parties do however seem to be agreed upon is the simplification of the tax system – but given this is a stated labour party aim and they have presided over the grossest expansion of red tape and legislation ever seen – one wonders if the reality behind the well intentioned policies of politicians will ever be achieved! Paul Windsor is a partner at WSM partners LLP Contacts: Paul Windsor, WSM Property 020 8545 7606 firstname.lastname@example.org www.wsmproperty.com Lauren Alexander, Maltin PR 020 7887 1357 email@example.com www.maltinpr.com Notes to Editors: Paul is a regular commentator on property and finance trends, including taxation. Picture of Paul is available at www.maltinpr.com/paul-windsor