Manifesto mayhem

We’re almost there – the 4th of July. No, not Independence Day, but a general election. Whether you think he should have called one ages ago or was off his rocker for doing it now, the outcome might (or might not) hit you in the pocket. So, I’m going to attempt to help you compare the various manifestos but, in particular, to understand the potential impact on your personal finances. You have my promise to be as objective and factual as possible. I will though offer some professional opinion where relevant, and if I am scathing, attempt to be scathing in equal measure to all. 

As of the date of writing, the polls currently have Labour and the Conservatives in the lead, with Reform and the Liberal Democrats following in third and fourth [1]. Given this, I’m going to focus more heavily on the two main parties but provide a smattering from the other two where there is something interesting to say. This is solely to ensure you aren’t overwhelmed with the detail—the Labour manifesto alone is 136 pages long! 

What do the manifestos say on pensions?

As a personal finance geek, it would be remiss of me not to start with, and spend the most time on, pensions. The Conservatives probably have the most to say on pensions, clearly deciding to make it a focus of their campaign with the aim of retaining some of their traditional voter base. 

They are promising to: 

• Introduce a new ‘Triple Lock Plus’. 

• Introduce a new pension tax guarantee, ensuring that they will not introduce any new taxes on pensions in parliament. 

• Maintain the 25% tax-free lump sum and tax relief on pension contributions at their marginal rate. 

• Not extend National Insurance to pension contributions. 
• Carefully consider the WASPI women. 

The majority of this is simply ‘no change.’ The headline grabber here, though, is the ‘triple lock plus.’ This guarantees that “both the State Pension and the tax-free allowance for pensions always rise with the highest of inflation, earnings, or 2.5%, so the new State Pension doesn’t get dragged into income tax.”[2]. This certainly has little downside for pensioners, but has the potential to create further complexity in an already complex system by creating differing personal allowances for different members of society. There is potential to keep it simpler, though, and just increase the personal allowance for all at a rate that ensures the state pension doesn’t get pulled into a taxable bracket, but this would be expensive and could well continue to support inflation, which is why I expect they have chosen to be targeted. 

Sadly, there is (rather unbelievably) very little else to say about pensions in any other offering. This is a hugely important issue for our clients and the UK population in general but receives little consideration. The Reform Manifesto/Contract, for example, simply says the “current pension system is riddled with complexity” and that, instead, we should look to “countries like Australia that “do savings and pensions much better than we do” [3]. That’s it! 

Both Labour and the Lib Dems say they will continue to protect the triple lock in its current form. Both also promise a review of some sort of the ‘pension landscape’ but are very light on detail [4]. The Lib Dems perhaps go further than Labour on the detail, being the most supportive in tone of the WASPI women of all parties. They also note an interesting regulatory change to encourage pension funds and managers to be closer aligned with the Paris agreement with regard to how they invest. Finally (don’t fall out of your chair with excitement on this one), they also say they will invest in HMRC’s telephone line [5]. Although it’s not exactly revolutionary, this would of course be helpful, particularly for those who have suffered from underpayment of or missed pension payments. 

The silence in Labour’s manifesto around pensions is probably the most interesting element about it. There has been caution in the wording to not commit to anything significant at this stage. They don’t even mention the WASPI women, which is pretty uncontentious. Perhaps the most significant absence is anything relating to the lifetime allowance. Not long ago, we were expecting a clear statement in the manifesto promising to re-introduce it at a particular level [6]. Rachel Reeves has since confirmed that they will not bring it back if they win the election. This might have followed a chat with the Department for Work and Pensions discovering the insurmountable challenges this would present from both a practical and legislative angle. This was possibly why the Conservatives chose to abolish it rather than simply raise it. 

So, here’s my summary on pensions from all the parties mentioned: change at the pace of a snail on a treadmill and as revolutionary as a beige jumper. 

Anything more exciting on Capital Gains Tax?

Maybe a little, but, again, there’s not a tremendous amount to write home about here. Neither the Conservatives nor Labour mention any changes to CGT across the board. This likely means that the reduced CGT annual allowance, which has been slashed from £12,300 in the 22/23 tax year to £3,000, will remain. They have both made more targeted pledges, though. The Conservatives offer an interesting relief on CGT to landlords if they sell their property to the existing tenant, with the aim of providing some relief on the housing crisis front [7]. Labour has also stated that they will end a tax loophole where performance-related pay in the private equity industry is considered a capital gain [8].

It is the Lib Dems who are making the most noise this time, though. In their manifesto, they only pledge to reform “capital gains tax to close loopholes exploited by the super wealthy,”. They have provided additional detail in a separately published piece. They are giving with one hand by increasing the capital gains tax-free annual allowance from £3,000 to £5,000 as well as introducing something they are referring to as an “inflation allowance.” This would effectively ensure that gains that are purely the result of inflation are not taxed at all. I’m not sure what this really means, though. Inflation is simply a general increase in prices in an economy and a consequent fall in the purchasing value of money. Everything, though, contributes to this. Does this mean all houses are exempt, for example, unless you do some sort of active development? Are bad stock market investments exempt but good ones aren’t? Who knows? Then comes the other hand. They go on to say that anything over the annual allowance would be taxed at three “rates of capital gains tax, like there are for income tax: 20% (for gains up to £50,000), 40% (between £50,000 and £100,000), and 45% (over £100,000).” The rate would only be based on the gains, regardless of your income bracket [9].

What about ISAs or the new ‘British ISA’?

Nothing. That is all. 

A gift on inheritance tax maybe?

If I could play the sound of crickets to you, I would. You might be starting to detect a theme. Of all four, Reform is the only party to even mention it. They promise to abolish IHT for estates under £2 million and cut the rate in half to 20% for those that do have to pay it [10].

Business owners

It is perhaps the information (or lack of information) relating to CGT that business owners looking to exit will be most interested in. However, the Conservatives pledge to abolish the main rate of National Insurance for the self-employed may perk up the ears of some small business owners. Labour and the Lib Dems have both proposed an overhaul of the business rate system to address a noted imbalance of tax paid by local businesses compared to online businesses. 

Surprisingly, Labour have avoided any direct mention of IR35.  This is a piece of UK tax legislation which aims to prevent the self-employed paying less tax by setting up a limited company or partnership for tax reasons [11]. This is a policy that has (overall) caused some upset with many small business owners due to the complications of the rules and paperwork they encounter. It is only the Lib Dems and Reform that have jumped on this, with the Lib Dems promising to review it and Reform stating they will abolish it. 

Headline tax policies – is this where the magic bullet resides?

No increase to income tax, VAT, or corporation tax is the main line being rolled out by both the Conservatives and Labour in almost identical fashion. No magic bullet—they haven’t even picked up the gun, let alone loaded it. 

There’s no mention of National Insurance changes for Labour, the Lib Dems, or the Reform Party. The Conservatives are breaking from the crowd here, promising a 2% cut to National Insurance to take it to 6% in April 2027 [12].  Even that’s a fair way off, though! 

Generally, income tax thresholds are skipped over by the main parties. The Lib Dems have cautiously proposed an increase in the personal allowance but only when public finances support it. Reform has gone all out here with some headline-grabbing statements promising to raise the corporation tax threshold to £100k and reduce the rate down to 15% by the end of the Parliament. In addition, they are proposing a significant personal allowance raise to £20,000 and a higher rate threshold raise from the current £50,000 to £70,000 [13]. There is a huge caveat here though as they haven’t really attempted to effectively cost this. As such, it’s difficult to read without taking it with a giant pinch of salt. 

So, in summary, what does this all mean?

The reality is that, from a personal finance perspective, all the manifestos have as much potential for excitement as a lukewarm cup of decaf coffee. The IFS’s director, Paul Johnson, has summed it up, stating, “Their proposals on tax, benefits and public service spending would be barely enough to detain us in analysing a modest one-year fiscal event. They certainly don’t answer the big questions facing us over a five-year parliament.”