Politicians Find Hung Parliament Taxing

Politicians Find Hung Parliament Taxing

ACCA looks at how parties’ tax policies will end up post-election

Launched to much fanfare over the past month, the parties’ carefully crafted manifesto and policy pledges now face being dropped or changed as politicians seek compromise in light of a hung parliament. With the Conservatives and Liberal Democrats most likely to do a deal, ACCA (the Association of Chartered Certified Accountants) takes a look at the tax policies that may, or may not, make it.

Conservative policies

Policy

Conservative position

Liberal Democrat position

Agreement?

IHT – Raising the IHT threshold to £1m

One of the early flagship tax policies of David Cameron’s Conservatives – very popular with the grassroots

Attacked by Nick Clegg during the campaign as a tax cut for millionaires – left leaning Liberal Democrat MPs have recently ruled out supporting the cut

Unlikely – this policy will probably be pushed to the back of the queue of priorities – may remain as an ‘aspiration’

NIC – Stopping part of the proposed NIC rise next year

Dominated the Conservatives’ first week of campaigning, with a Conservative co-ordinated letter opposing the cut garnering plenty of business support

Vince Cable called the business support for the plan “utterly nauseating” and accused Tories of “barefaced cheek” – but manifesto says they want to reverse the rise when finances allow

:) Both parties are committed in principle to reversing the rise, and the Conservatives made too much noise about this in the campaign for them to give ground

CT – Cutting Corporation tax (CT) cut

Conservatives would like to see this go down to around 25% – believe it would be self-funding as they’d decrease the asset depreciation allowance

The Liberal Democrats have focused more on closing down CT ‘loopholes’ than on any changes to the rate itself

:) The rate is likely to be cut to the Conservatives’ preferred rate of 25%, possibly with concessions given to Liberal Democrats on loopholes

VAT – Potential VAT rise

David Cameron has said the Conservatives have “no plans” to raise VAT, but refused to guarantee that

Accused the Conservatives of a “VAT Bombshell” in the campaign, but haven’t ruled out a rise themselves

:) Could go up to help plug holes in public finances

CTC – Reforming  Child Tax Credits

Looking to remove CTCs for those on high to middle incomes

In the debates, Nick Clegg mocked his ability as a well-paid MP to claim CTCs

:) A strong area of agreement for both parties and an easy way to save money

Liberal Democrat policies

Policy

Conservative position

Liberal Democrat position

Will it survive?

Income Tax – Raising the Income Tax personal allowance to £10k

A big tax cut? An aspiration for the Conservatives but they are concerned how it would be funded

Key part of their ‘fair tax’ approach – to be paid for by tax rises elsewhere

The Liberal Democrats plan to cover the cost with their mansion tax and more green taxes – the mansion tax is a no-go with the Conservatives, so this is a non-starter

Introducing a £2m mansion tax

The Conservatives claim that this idea is “unworkable” and poorly planned

Designed to fund tax cuts elsewhere – originally set at £1m but revised upwards shortly after

Not happening – rules out the £10k allowance too

CGT – Equalising the CGT and Income Tax rate

The rates were originally equalised by the Thatcher government in the 1980s but will now be seen as a hindrance to the private sector

Another part of the ‘fair tax’ approach – proceeds would go towards funding the £10k allowance

Conservatives would see this as discouraging for business – another blow to the £10k allowance

Introducing a per-plane green tax on flights

Similar plans were floated by the Conservatives two years ago, although they were met with a frosty reception at the time

Switching current per-passenger green tax to a per-plane one

:) A green tax would bolster both parties green credentials – the Conservatives have been keen to encourage a switch from air to rail travel

Ending child trust funds

Want to end contributions to child trust funds

Want to end contributions to child trust funds

:) Accused by Labour of being a ‘coalition of cuts for kids’, the parties agree on this issue – money may be spent on other projects, such as a ‘pupil premium’ for the most disadvantaged school children

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