Amongst a number of different policy statements head of the election next month, Rishi Sunak has announced Conservative party plans to cut NI by a further 2 percentage points by 2027 and gradually abolish self-employed NI during the next parliament in the Conservatives’ manifesto which was released today.
Sharing their analysis into the detail of the Tory manifesto, experts from across the financial services and legal spectrum have been sharing their views with us as follows:
Tom McPhail, Director of Public Affairs at the lang cat said: “The repeated cuts to national insurance raise questions about the sustainability of the state pension given universal political commitment to preserving the triple lock. On the one hand they’re cutting national insurance which funds state pensions, but on the other, making promises to retain the triple lock. While the promise of a Pensions Tax Guarantee of no new taxes on pensions adds little to the debate.
“As a matter of urgency, we need to have a sensible conversation about what a sustainable, adequate and fair pension system looks like. This constant tinkering with the UK’s pension system highlights yet again, the need for a long-term savings commission to establish a consensus, drive reform and provide continuity regardless of changes in government.”
Following stamp duty holidays under Labour in 2008 on homes worth up to £175,000 and again in 2020 under the Conservatives on homes worth up to £500,000, today’s Conservative manifesto again puts property centre stage.
And arguably, more so than ever, with a pledge to permanently scrap stamp duty for first time buyers on properties up to £425,000.
Paul Diggle, Chief Economist, abrdn, says: “Today’s Conservative manifesto once again positions property as a key election battleground. But despite a tendency to prioritise property wealth at the expense of pensions or investments, the two don’t have to be mutually exclusive. Successive governments have provided support for the UK property market. Imagine the impact on people’s long-term financial resilience, not to mention the wider economy and UK capital markets, if a UK Government could build a broader culture of investing.”
This is why abrdn says that it is calling for the following:
1) scrapping stamp duty on UK shares and investment trusts
2) any advertising campaign around the mooted NatWest share sale to be broadened and to include long-term tax efficient investing
3) ISA simplification
4) a radical reimaging of what minimum pension contributions should look like (with minimum contributions doubled)
5) for UK financial literacy levels to be measured, paving the way for better policy, better funding, better long-term outcomes and a shake-up of financial education in schools
Paul Diggle continues: “There could be wider macroeconomic benefits from building a Savings Ladder culture, including for the UK’s dismal productivity performance. Resolution Foundation analysis suggests that if UK productivity had increased in line with the average of France, Germany and the US since 2008, Britons would be on average £3,400 better off.
“We believe that removing stamp duty on UK shares and UK domiciled investment trusts could give a big boost to UK share ownership. An admittedly old Bank of England working paper from 1985 found that a 1 percentage point fall in transaction costs would lead to a 1.65% increase in share turnover in the long run, although that paper was written when stamp duty was higher still, at 1%.
“Stamp duty on UK shares has stood unchanged at 0.5% since 1986, at the same time as other investing costs have fallen dramatically, leaving stamp duty a disproportionate cost. The impact of a reduction, or removal, in stamp duty on transaction volumes would be larger the lower that other transaction costs are in relation to it. And the impact could be significant. With stamp duty factored in, investment projects for which the expected rate of return is below the cost of capital in the presence of stamp duty won’t go ahead.”
John Phillips, CEO of Spicerhaart and Just Mortgages, said: “The Prime Minister and his party has announced some significant pledges to bring some much-needed support to the housing market. The question is now whether they will be enough, along with other measures, to help turn the tide and overcome the considerable momentum and lead Labour has built in the polls.
“Many across the industry have long called for a return to Help to Buy. While opinion is split on its legacy, there’s no denying its success in getting people onto the housing ladder. In its absence, Shared Ownership has become the only way for many to make their dreams a reality – especially in the current climate with clear affordability pressures. If successful, I’d like to see this include second-hand properties to increase the options available to first-time buyers.
“We have all seen the impact a stamp duty cut can have – both positively and negatively. While this certainly does drum up demand and help with affordability, a permanent removal is the only way to avoid a cliff edge deadline like ones previously seen, which gummed up the wheels of the entire sector and caused incredible stress and strain.
“Given the track record of governments on housebuilding figures, we should probably take this 1.6 million with a pinch of salt – especially as it struggled to meet its previous target of 300,000 homes per year. There’s no question that increasing supply is incredibly important and long overdue. The return of Help to Buy will certainly help, giving builders, developers and lenders and popular and proven mechanism to meet the demands of the market and to get building.”
Nick Hale, Chief Executive Officer at Movera, a group of home moving businesses including ONP Solicitors, commented: “Today’s manifesto pledges by the Conservative Party sound promising on paper but the devil will be in the detail. The abolition of stamp duty for first time buyers on properties up to the value of £425,000 will give some relief but will not alleviate the significant and higher moving costs for other buyers which are often a blockage in the rest of the housing market. The proposed new Help-to-Buy scheme could give first-time buyers another boost but, given today’s property prices, a 5% deposit is still likely be a significant sum for these buyers to find, especially if they are already renting. It is clear that affordability and housing supply still remain a big issue. Even though Mr Sunak has promised that, should the party form the next Government, the Conservatives will deliver 1.6 million new homes in the next parliament, it is uncertain how this will be achieved. The Government has missed its annual housebuilding targets since 2019 and there is already a focus on developing brownfield sites. Whatever happens after 4th July, our focus at Movera will continue to be on supporting those looking to move or remortgage to make the homebuying experience as easy as possible.”
Simon Kew, Head of Market Engagement at leading independent pensions consultancy Broadstone comments: “There were no surprises on pensions reform in the Conservative manifesto with the previous commitment to a ‘Triple Lock Plus’ to protect the State Pension from being dragged into income tax reaffirmed.
“The proposed National Insurance cut for the self-employed will support their financial health and it is positive that this will not impact their State Pension, but we would have liked to see further detail of a plan to boost adequate pension saving among this group.
“For the pensions sector it appears to be a continuity manifesto with myriad existing reforms still going through the legislative process.”
Andrew Goldstone, Partner in the Mishcon de Reya Private Tax group, commented on some of the tax policies revealed today as follows:
On inheritance tax
“There is no mention of abolishing IHT. However, there is a promise to retain key tax incentives that encourage small businesses to grow, including Business Property Relief and Agricultural Property Relief. But will they be retained exactly as they are now? Even though both reliefs are important in preventing forced sales on death, they don’t necessarily encourage small businesses to grow. They are both exceptionally generous tax reliefs claimed by a small number of generally wealthy taxpayers. If taxes still need to be increased by the backdoor, retaining the reliefs but limiting their scope would be one way to do that.”
On Capital Gains Tax
“The Conservatives have pledged to retain Business Assets Disposal Relief (formerly Entrepreneurs’ Relief), which provides a reduced 10% CGT rate on the sale of a business. Whilst billed as a tax incentive to encourage small businesses to grow, it’s actually a reward for success. Both are important, and to be welcomed, but they aren’t synonymous. Of course, with the Government having slashed the BADR lifetime allowance from £10 million to £1 million in 2020, retaining the relief with this lower limit won’t cost a huge amount.”
“The Conservatives have clearly stated that they won’t increase CGT. That will be welcome news for those looking to sell their business or their buy to let property. In contrast, whilst Labour have said they have no current plans to increase CGT, that could change, and we await their manifesto with interest. The Conservatives have remained silent on whether carried interest might no longer be taxed as capital gains but rather as income. Should private equity and venture capital executives be concerned? Probably not.”
Carol Katz, Partner in the Tax and Wealth Planning group in Mishcon de Reya Private, has also shared her comments saying:
On non-doms
“Despite the Chancellor’s announcement on 6 March to abolish the UK’s non-dom regime, the Conservative manifesto is surprisingly silent on the topic, with no further information of when the changes might be introduced. Labour’s manifesto may include more detail on their proposals, and we await its publication with interest.”
On stamp duty
“The Conservative manifesto pledges to permanently increase the threshold at which first-time buyers pay Stamp Duty to £425,000 from £300,000 should benefit those struggling to find deposits and at the same time saving to pay the Stamp Duty. The proposals to launch an improved Help to Buy scheme will also be welcome news for first-time buyers who, under the proposals, will be able to take out affordable borrowing to help fund the costs of their first home.”
