What the July UK General Election Could Mean for Taxes

Prime Minister announced an unexpected snap General Election yesterday meaning that since the 2010 election, this is the third time for the voting public to choose whether the Tories remain in power.

Earlier yesterday we published an article following up on proposed stamp duty cuts this Autumn with further possible NIC cuts. This is now all up in the air the incumbent party may no longer be in power at that stage, and a Summer Budget is likely after the election to announce new economic policies.

The state of the economy and how pay will be affected will be one of the key campaign issues and something people will put at the top of the priorities when deciding which way their vote goes.

At this early stage, we will focus on the three parties likely to be front-runners in the campaign, Conservatives, Labour and the Liberal Democrats. We will soon also provide you with a predicted election tax comparison calculator for all the parties involved, like we did back in 2015.

So, what do we know at the moment?

• Conservatives

  Cuts to national insurance twice over the last twelve months did lead to an increase in take-home pay, and did put more money in people's pockets. But these tax cuts were offset by fiscal drag, as the tax thresholds continue to be frozen, resulting in higher taxes paid due to inflation.

  The Tories have announced plans to phase out the non-domiciled tax regime, which may affect some individuals' tax liabilities. Additionally, the Chancellor Jeremy Hunt has expressed a desire to further reduce National Insurance Contributions (NICs) as we reported on yesterday, and this could lead to an increase in take-home pay again for some individuals - but still the affect of fiscal drag will be apparent.

  The likelihood of being able to implement such plans after warnings from the International Monetary Fund is not high. Overall, income tax rates and bands (at the moment) are unlikely to change, which means that people can expect their take home pay to be around the same.

• Labour

  Based on Labour's currently published policies, it looks like people can expect no changes to their income tax rates or bands, with the party also ruling out increasing capital gains tax and corporation tax.

  Starmer's party do plan to raise Treasury revenue by scrapping the "non-dom" tax status for wealthy foreign nationals, cracking down on tax avoidance, and introducing VAT and business rates to private schools.

  People may not see a direct impact on their take-home pay due to income tax changes, but may benefit from the party's efforts to tackle tax avoidance and ensure that corporations and wealthy individuals contribute their fair share - such as windfall taxes in oil and gas giants.

• Liberal Democrats

  Wealthier individuals may see a reduction in their take-home pay due to the abolition of the capital gains tax-free allowance, which could lead to a higher tax bill on investments and assets. This has been on the way out in recent years, seeing multiple reductions.

  The party's promise to "tax income from wealth more similarly to income from work" might lead to a more progressive tax system, potentially benefiting those on lower incomes.

  At the moment there are no direct clues to changes to income tax rates changing, so it's unclear whether people should expect a change in their take-home pay due to income tax. However, this could change in coming days.