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The first day of the official five-week election campaign period got off to a fiery start as Labour and the Conservatives clashed over their tax plans for the next parliament.
The Conservatives, Labour and Liberal Democrats have all promised not to increase income tax, national insurance or VAT after the general election on 4 July.
write The Daily TelegraphChancellor of the Exchequer Jeremy Hunt has said the Conservatives will not increase the headline rate of VAT after the election and has called on Labour to make the same promise.
Mr Hunt suggested Labour would raise VAT, currently 20 per cent on most goods and services, by 1 pence to plug a £9 billion shortfall in its spending plans.
Hunt wrote that this would “deal a blow to household finances, pushing inflation back up just as it had been returning to normal”.
Shadow Chancellor Rachel Reeves quickly ruled out a VAT increase, describing Mr Hunt’s suggestion that Labour was seeking to increase it as “complete nonsense”.
Munira Wilson, the Liberal Democrat education spokeswoman, told the BBC: breakfast The party said it would not increase VAT, income tax or national insurance premiums.
Let’s take a look at how each party’s tax plan would affect your money if they win the general election.
Conservative Tax Planning
The Conservative Party has promised not to increase VAT, National Insurance or income tax in the next Parliament.
Mr Hunt has cut National Insurance contributions twice since becoming Chancellor and suggested this will save people an average of £900.
Speaking at an event in London on Friday, Mr Hunt said the Government would make further cuts to NHS in the autumn “if we can afford to do so”.
“If we can afford to responsibly reduce double taxation on labour further this autumn, we will do so,” the prime minister said.
“We make no apologies for wanting to continue making cuts until there is no double taxation on work, but only if we can do so without increasing debt or cutting funding for public services and pensions.”
Mr Hunt said National Insurance tax was “unfair” given that other incomes are only taxed once, and expressed his determination to abolish National Insurance altogether in future.
Labour has criticised Hunt’s plans to scrap the NHS, claiming they would cost £46 billion and create a “black hole” in the UK’s finances.
The Conservatives have also promised to cut tax for pensioners by creating an “age-related” tax-free allowance they call the “triple lock plus”.
Currently pensioners receive £12,570 a year in their pension before they start paying income tax, but if the Conservatives win the general election, pensioners’ benefits will increase from April next year in line with 2.5% inflation or average earnings, whichever is higher.
Rishi Sunak said the policy would give people “peace of mind and security in retirement” and show the Conservative Party was “standing on the side of pensioners”.
Mr Hunt also called inheritance tax “harmful”, adding: “Inheritance tax is deeply anti-Conservative because it discourages and prevents people from saving for their future.”
In an interview of The Daily TelegraphMr Hunt refused to confirm whether a cut in inheritance tax would be included in the Conservative manifesto.
Labour’s tax plan
Labour has also promised not to increase VAT, National Insurance or income tax in the next Parliament.
Shadow Chancellor Darren Jones told the BBC. breakfast“We’re not going to raise VAT. We’re not going to raise income tax. We’re not going to raise national insurance.”
“We talk about these taxes as taxes on workers because the vast majority of workers know that the big taxes they pay are the ones they see on their pay slips, on the things they buy and on their everyday bills.”
“So we’ve been saying all along that we want to reduce workers’ tax burden because it’s the highest it’s been in 70 years.”
Asked where the money for Labour’s spending pledges would come from, Jones said: “They’re entirely funded by closing a number of tax loopholes – VAT on private school tuition fees, private equity bonuses, closing some of the non-resident tax loopholes and tackling tax avoidance.”
Speaking at the Labour Party conference in October 2023, Shadow Chancellor Rachel Reeves said: “In my first Budget as Chancellor, I will close the tax loophole that exempts private schools from VAT and business rates.”
Labour’s analysis suggests that VAT on private school tuition fees alone could raise £1.7 billion a year.
Labour announced its intention to broadly stick with the non-resident tax system introduced by the Conservatives in the Spring 2024 Budget, but will amend the policy to close certain “loopholes” in the non-resident tax system. Taxation of Offshore Trusts.
Chancellor Keir Starmer has drawn a line between Labour and the Conservatives, announcing earlier this year that he was “fundamentally opposed” to the Conservative proposals to cut inheritance tax.
Rumours that Labour intends to introduce a wealth or mansion tax were denied by Reeves. Said She said she would “not target expensive homes” and that Labour had “no plans for a wealth tax”.
Liberal Democratic Party tax plan
The Liberal Democrats have also promised not to increase VAT, National Insurance or income tax in the next Parliament.
The party has also pledged to end the freeze on personal income tax allowances, which it calls “Hidden taxes that unfairly burden low-income earners” “.
In an interview with BBC’s Hunt Radio 4 TodayNick Robinson put pressure on the Chancellor, arguing that freezing income tax personal allowances meant four million people would have to pay income tax for the first time, with three million paying the higher rate of 40%.
Mr Hunt responded: “Have I been able to wipe out all of those tax increases? No. But I can assure you that the tax base freeze that we put in place until 2028 will not continue beyond that.”
“This means we will not increase contributions or national insurance premiums above the levels currently set. In fact, we want to reduce national insurance premiums.”
The Liberal Democrats have promised to tax capital income more fairly by abolishing the separate tax exemption for capital gains and instead taxing capital gains and salaries through a single exemption.
The party also promised to tackle tax evasion, reduce the tax gap to boost the incomes of low-income earners and allocate more resources to HM Revenue and Customs to tackle tax evasion.
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