Analyses & Studies

Tax Policy

6 June 2024

After last night's leaders' face-off, where Sunak and Starmer clashed over tax policy, we examine the Conservative and Labour tax policies.

Britain's tax burden is at its highest since World War Two due to increased public spending during the pandemic and the energy price surge in 2022. Labour has pledged not to raise income tax or National Insurance, with Shadow Chancellor Rachel Reeves rejecting taxing and spending as a growth strategy. Conversely, the Conservatives aim to abolish National Insurance over several decades, with only gradual reductions expected.

Both parties' reluctance to raise taxes limits the scope for improving public services and public finances.

Some key tax debates:

Conservatives are focusing on pensioners with the “triple lock plus”, which aims to mitigate the impact of the income tax personal allowance freeze, which will last until 2028. Having already reduced National Insurance Contributions (NIC) from 12% to 8%, they plan to abolish NIC entirely in the future. Having already reduced Capital Gains Tax from 28 to 24% and cut the stamp duty land tax in 2024, Conservatives have further committed to phase out the non-dom tax status.
Labour has vowed not to raise the rates of income tax on individuals and corporation tax. Alongside boosting tax compliance, they plan a series of targeted moves, such as charging value-added tax (VAT) on private school fees, shifting business rates tax burden from high streets to online retailers, squeezing non-domiciled taxpayers, and increasing the windfall tax on profits from oil and gas extraction.

The tables below compare Conservative and Labour tax policies on key UK business, property and personal taxes.

Business Tax

Tax Policy	Description	Conservative Party	Labour Party
Business Rates	A tax on non-domestic commercial properties.	Review and reduce business rates, starting with retail. Extend discounts to small cinemas, pubs, and grassroots music venues.	Promised to publish a roadmap for business taxation within first six months in office. Shift the tax burden from physical stores to online retailers. End the tax-free status and business rates relief for private schools.
Corporation Tax	A tax on the profits of companies.	Reduced tax from 28% to 25%, no plans for further reductions Committed to full capital expensing until March 2026, allowing companies to write off investment costs immediately.	Cap corporation tax at 25% for the next parliament A windfall tax on energy companies' profits (see below).
Capital Gains Tax	A tax on the profit when you sell (or 'dispose of') something (an 'asset') that's increased in value.	Reduced the higher rate charged on residential property gains from 28% to 24%. No plans to change the headline rate No plans to reform taxation of carried interest.	No changes to the headline rate. Propose changes to taxation of carried interest for private equity firms.
Environmental Taxes	Includes taxes like the Climate Change Levy and Landfill Tax.	Introduced Windfall Tax on profits made from extracting UK oil and gas. Raised tax to 24% to 35% and extended to 2029.	Raise the current Windfall Tax 37% to fund publicly-owned renewable energy company.
VAT	A tax on the value added to goods and services, collected at each stage of production or distribution.	Increased VAT thresholds £85,000 to £90,000. Opposed to introducing VAT on private school fees.	Introduce VAT on private school fees.

Property Tax

Tax Policy	Description	Conservative Party	Labour Party
Stamp Duty Land Tax (SDLT)	A tax on property or land transactions in the UK.	Extended SDLT reliefs for Registered Social Landlords and first-time buyers Abolish for first time buyers (purchases up to £425k) New Help to Buy Scheme May raise the stamp duty threshold from £250,000 to £300,000.	Increase the 3% surcharge for overseas buyers of UK property.
Council Tax	A local tax on domestic properties, used to fund local services such as education, police, and waste collection.	No intention to freeze council tax.	Pledged to use a windfall tax to freeze council tax for one year.

Personal Tax

Tax Policy	Description	Conservative Party	Labour Party
National Insurance/Income Tax	Taxes on earnings that fund state benefits and services, and a tax on individual income.	Halve employee NI to 6% by 2027 (£1,300 for 'average worker') "Triple lock plus" for pensioners. Freeze income tax thresholds until 2028	Pledged no increase in income tax or National Insurance. Freeze income tax thresholds until 2028.
Non-Doms	Special tax rules for UK residents whose permanent home is outside the UK. See recent Non-Dom article	Abolish the current non-dom system and replace it with a new 4-year foreign income and gains (FIG) regime.	Close loopholes in offshore trust taxation. Abolish transitional reliefs. Subject offshore trust assets to IHT, income tax, and capital gains tax.
Inheritance Tax (IHT)	A tax on the estate (property, money, and possessions) of someone who has died.	Potential cuts to headline rates	Opposed to any cuts in headline rate