How the main parties compare on tax and personal finance

Rachel Vahey

Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

With the main political parties having set out their position on a range of tax, pensions and savings issues ahead of the General Election on 4 July, AJ Bell summarises where they stand on key personal finance policies.

With less than three weeks to go to the general election, we are now in the thick of campaigning. Over the past seven days most political parties have published their manifestos and promises to the nation. Their major long-term goals have been set out, but there are still some doubts across the board about whether the overall sums and anticipated level of revenue make sense. The three main political parties seem tied on a promise not to increase income tax, national insurance and VAT, with the Conservatives going one step further to promise a cut in National Insurance contributions for employees and to abolish them for the self-employed.

Tellingly, none promised to tackle the stealth tax of frozen thresholds, at least in the short to medium term. Except for pensioners, where the Conservatives promised their triple lock guarantee plus would also apply to the personal allowance for this group, to keep them from paying tax on their state pension. There is widespread commitment to the triple-lock guarantee for state pensions, despite its rising and unpredictable cost. However, little has been said about social care – another key election issue for older generations.

Finally, Labour promised a review of workplace pensions, certainly with one eye on achieving greater consolidation and, they hope, unleashing greater productive investment in the UK. Whereas the Conservatives gave us a pension tax guarantee not to introduce any new taxes on pensions and to keep the 25% limit on tax-free lump sums. However, with all parties scrabbling down the back of the sofa to raise funds to meet election promises, there is always the possibility of the next government exploring ways to tinker with pensions to generate extra money.

Tax

Issue Conservative Labour Lib Dem Other
Headline tax policies No increase to income tax, VAT or corporation tax. No increases to income tax, National Insurance, VAT, and corporation tax. Green Party: new tax on the wealthy. Levied at 1% a year on the assets of people with more than £10m and 2% on those with more than £1bn. Revenue: £15bn

Reform: Raise VAT threshold. Raise corporation tax threshold to £100k. Reduce main rate from 25% to 20%, then to 15% from year 5.

Income tax thresholds New pensioner personal allowance increasing by triple lock guarantee from April 2025. Saving: around £100 for 8m pensioners, rising to £275 a year by the end of the Parliament No mention When public finances allow, cut income tax by raising the tax-free personal allowance. Reform: Raise minimum income tax threshold from £12,570 to £20,000. And higher rate threshold from £50,000 to £70,000. When finances allow introduce 25% transferable marriage tax allowance meaning no tax on the first £25k of income for either spouse.
National Insurance 2p cut in employee National Insurance to 6% from April 2027. Saving: £1,350 for average worker on £35k Abolish main rate of National Insurance for self-employed by end of the Parliament. No mention No mention Green Party: charge 8% National Insurance on earnings above the Upper Earnings Limit.
Capital Gains Tax (CGT) CGT relief for landlords if sold property to existing tenants Close loophole where performance-related pay in private equity industry is treated as capital gains.

Close ‘loopholes’ exploited by the super wealthy. Raise allowance to £5k, on top of a new tax-free allowance for inflation. Introduce relief for small businesses. Increase rates to 20/40/45 (more akin to income tax rates). Revenue: £5,210 bn
Tackle tax avoidance and evasion Tackling tax avoidance and evasion. Revenue: £6bn a year by the end of the Parliament Tackle tax avoidance by modernising HMRC – increase registration and reporting requirements, strengthen HMRC’s powers, invest in new technology and build capacity – and focus on large businesses. Revenue: £5bn Narrow the £36bn tax gap by investing an extra £1bn a year in HMRC to improve customer support and boost compliance and anti-avoidance activities. Revenue: £7,230bn Reform: Improve HMRC staffing and management to address failure to collect tens of billions of taxes.
‘Big Banks’ Reverse Conservatives’ tax cuts for big banks – restore Bank Surcharge and Bank Levy revenues to 2016 levels in real terms. Revenue: £4,250bn
Windfall tax Time-limited windfall tax on oil and gas giants (to fund publicly-owned clean power company). One off windfall tax on super profits of oil and gas producers and traders. Revenue: £2,120bn
Share buyback 4% tax on share buyback schemes of FTSE 100 listed companies to incentivise productive investment, job creation and economic growth Revenue: £1,420 bn
Stamp Duty Abolish stamp duty for first time buyers (up to value of £425,000). Increase by 1% stamp duty on purchases of residential property by non-UK residents. Reform: Reduce stamp duty to 0% on properties under £750,000; 2% on £750,000 - £1.5m; 4% over £1.5m.
Help to Buy First time buyers offered 20% government equity loan.
Inheritance Tax No mention No mention No mention Reform: Inheritance tax abolished for estates under £2m (98% of estates) and reduced to 20% for those above, with option to donate to charity instead.
Other Reform: Scrap VAT on energy bills. Abolish IR35 rules. Tax relief of 20% on all private healthcare and insurance.

State pension benefits

Issue Conservative Labour Lib Dem Other
Triple lock guarantee Protect the triple lock guarantee. Protect the triple lock guarantee. Protect the triple lock guarantee.
WASPI Carefully considering the Ombudsman report and will work with Parliament to deliver an appropriate and swift response. No mention Ensure women born in the 1950s are treated fairly and properly compensated.
Helplines Invest in helplines to ensure quicker responses to queries and resolution of underpayments

Private pensions

Issue Conservative Labour Lib Dem Other
Pension taxation Pension Tax Guarantee – will not introduce any new taxes on pensions. Maintain 25% tax-free lump sum and tax relief at marginal rates. Will not extend employer national insurance to pension contributions. Green Party: introduce single rate of tax relief at basic rate tax (currently 20%)
Reform: Remove ‘lifetime cap’ on NHS pensions.
Pension investment - Green Require pension funds and managers to show their portfolio investments are consistent with the Paris Agreement.
Pension investment – UK Plc No mention Review of workplace pensions with emphasis on consolidation and scale to deliver better returns for UK savers and greater productive investment in UK. No mention
Auto enrolment No mention No mention No mention
Other Will review the unfair surplus arrangements of the Mineworkers Pension Scheme, and transfer the Investment Reserve Fund back to members. Developing measures to end the gender pension gap in private pensions and ensure working age carers can save properly for retirement. Reform: Review pension system, referring to Australian example, to make it better and cheaper and available at a much younger age. Also establish a Royal Commission to tackle social care. Amend Mineworkers Pension Scheme so all scheme surpluses accrue to the members.

ISA

Issue Conservative Labour Lib Dem Other
British ISA No mention No mention No mention

Childcare

Issue Conservative Labour Lib Dem Other
Childcare 30 hours of free childcare a week – 9 months to when start school (England only)
Rates Review rates paid to providers for free hours to ensure they cover the actual costs of delivering high-quality childcare and early years education.
Maternity Benefits Double statutory maternity and shared parental pay to £350 a week
Parental leave In the longer term, ambition to give all families six weeks of use-it-or-lose-it leave for each parent paid at 90% of earnings; and 46 weeks of parental leave to share between themselves as they choose paid at double the current statutory rate
Child Benefit/Higher Income Child Benefit Charge Families only lose child benefit when combined income reaches £120,000 Saving: £1,500 average family Introduce a Toddler Top Up – enhanced rate of Child Benefit for one-year olds
School Fees Apply VAT to private school fees Revenue: £1.5bn Reform: Tax relief for private schools

Other

Issue Conservative Labour Lib Dem Other
National financial inclusion Require FCA and PRA to have regard to financial inclusion, such as protecting access to cash, supporting banking hubs, expanding access to bank accounts, delivering Sharia-compliance student finance and supporting vulnerable customers.
Offshore Trusts End use of offshore trusts to avoid inheritance tax so that everyone who lives in UK pays taxed in UK

Disclaimer: These articles are for information purposes only and are not a personal recommendation or advice. How you're taxed will depend on your circumstances, and tax rules can change.
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Written by:
Rachel Vahey

Rachel is AJ Bell's Head of Public Policy. She helps financial advisers and planners understand the changing pensions and savings environment, as well as how new legislation and regulation affects them and their clients. Rachel is well known within the pensions and savings industry, and regularly speaks at AJ Bell events, alongside writing content and articles for the AJ Bell website.

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