What does the General Election mean for your tax bill?

Emma: Hi I'm Emma Wall and joining me today is Tom McPhail to talk about what the general election means for your tax bill. Hi Tom.

Tom: Hello Emma.

Emma: So how will the different political parties fiddle with taxes if they get into the position of power?

Tom: There's some clear distinctions between left and right in terms of tax policy and I think broadly we can characterise it as Labour in particular but other parties on the left of the political spectrum really are looking to impose higher taxation on wealth, so that's the key distinction is that they will look to impose tax on wealth and on the wealthier. So for example I just want to start with talk about capital gains and income tax where the Conservatives have said nothing on the subject but Labour have said that they would tax capital gains and dividends at the same rate as your income tax is paid and that's quite a substantial increase for higher earners. The Liberal Democrats similarly have said they would look to merge capital gains tax and income tax allowances and they reckon that would raise them about 5 billion pounds so for those two there's quite a distinction between the current Conservative policy. The Greens as well I want to give them a mention they've also talked about merging income tax, national insurance, dividends, capital gains tax, and inheritance tax so they would look to bundle all of individual taxation into one overall tax rate so I think if we see a Labour led government on taxation and wealth we'll see quite a departure from the current system there.

Emma: And that is both a simplification of the system which broadly most political parties are in favour of when they talk about what they want to do to tax. But the main take-home for what you're saying there is really it's the wealthy who will feel the brunt of that simplification?

Tom: That's correct and if we move on to income tax where the Conservatives have made a very bold promise that they will not raise the rates of income tax national insurance or indeed VAT and those three between them account for around two-thirds of all government tax revenues so that's a very big commitment and they've gone further than that and said they will look to raise the national insurance threshold to £9500 fairly immediately and look to push it up to £12500 in the longer term so that's a big commitment there from the Conservatives. Labour on the other hand have said well the wealthy the higher earners they need to pay more so if you're earning more than £80,000 a year you'll then be facing a top rate of income tax of 45% and if you earn over £125000 a year you'll be paying 50% tax and that's on top of your national insurance costs as well. Liberal Democrats again worth picking out them they've said they would raise all the bands of income tax by 1% so up to 21%, up to 41% and up to 46% depending on which band of tax you pay, so this is a contrast to most previous elections where there's been this relentless pressure to cut taxes as being the way to appease voters. What we're seeing here from from at least the Labour and Liberal Democrats is we're going to raise taxes and we're quite unashamed about it. And I also just want to pick up on the marriage allowance where both Labour and the Liberal Democrats have said they would scrap the current marriage allowance, the other parties have have not made any any commitment on that.

Emma: And then from income tax to income itself because there have been some promises or some policies that seem to indicate there'll be a change to the living wage?

Tom: Yep so all the parties are talking about increasing the living wage. They recognise that that is an important policy ground so the Conservatives looking to go to £10.50 an hour, Labour to £10 an hour, the Liberal Democrats have said they'll introduce an independent review of the living wage, the SNP have said they want to raise it but they've given no details, the Greens they want to go to £12 an hour for the living wage so there's very strong political consensus there that the bottom earners of society should all be getting a higher hourly rate and on top of that the Greens have committed to a universal basic income so everybody would get paid an income from the state. If you're below retirement age it would be £89 a week, above retirement age £178 a week so for pensioners that's a very generous payout and interestingly Labour have also said they're interested in looking at a pilot on this universal basic income concept so if we see a Labour government we could see about one surface again.

Emma: Tom, thank you very much

Tom: Thank you

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HL is not expressing a view on the merits or otherwise of any of the policies or any of the political parties, and nothing in this video should be taken to be an endorsement or recommendation of any particular party, candidate or policy.

Views as at date of filming - 2 December 2019.