The Reform party has pledged £70 billion in tax cuts in their ‘contract’ ( note they’re not calling it a manifesto) which was launched today. In it, income tax, inheritance tax and stamp duty are all on the chopping block as is raising the tax-free personal allowance to £20,000, which would save workers almost £1,500 a year. Finally, setting the higher-rate income tax threshold to £70,000 would save the highest earners £4,000 a year
Laura Suter, director of personal finance at AJ Bell, comments on the personal finance announcements in the Reform manifesto as follows:
“The Reform party has come out with a huge £70 billion tax giveaway for people’s personal taxes, covering a whole gamut of taxes from stamp duty to income tax to inheritance tax. While the other parties have been more frugal in their proposed tax breaks, Reform have gone all out with crowd-pleasing measures. But, of course, the cost for that has to come from elsewhere, with a cut to government spending, a slashing of the foreign aid bill and scrapping net zero all on the cards, among other things.”
Income tax
“If you’re a voter looking for a big income tax giveaway, then Reform is certainly planning to deliver it. The party has pledged to hike the tax-free personal allowance from the current £12,570 up to £20,000 – saving almost £1,500 a year in tax for anyone earning more than the new limit. On top of that, higher-rate taxpayers would see that threshold increased from the current £50,270 up to £70,000 – which on its own would save the highest earners £4,000 a year in tax.
“Considering the two main parties have committed to maintaining the freeze on income tax bands, this move from Reform is a departure from its rivals in Labour and the Conservatives. The move is no-doubt crowd pleasing, as it would bring millions out of having to pay income tax altogether and give millions more people a tax cut. However, clearly it represents a big cost and Reform have had to make cuts elsewhere to afford it.
“On top of this, Reform would hand a bigger tax break to married couples, who would get a bigger marriage allowance than the current system. Currently if one half of a couple earns less than the £12,570 personal allowance they can hand any unused allowance to their spouse, with a potential tax saving of around £250 a year. But Reform would extend this for couples with children to hand them an even bigger tax break.”
Stamp duty
“Another big tax break is the proposal to scrap stamp duty on all home purchases up to £750,000 and reduce the rates for more expensive properties. For many homeowners this would mean never having to pay stamp duty in their lifetimes. Someone buying a property worth £750,000 at the moment* would pay £25,000 in stamp duty – a huge chunk of money that homeowners have to find in cash, rather than being able to add to the mortgage. Those buying more expensive properties would benefit from a reduction in rates, and the move would save someone who is buying a £1.5 million property more than £76,000 in stamp duty.
“We know that stamp duty is a disliked tax among the UK population and can prevent people from moving, as the levy represents a huge chunk of money in comparison to their deposit or other moving costs. Raising the threshold to be universal for all takes away the price advantage that first-time buyers currently have, as they get a stamp duty break on properties worth up to £650,000.”
*Assumes they are not a first-time buyer or someone buying a second/additional property.
Inheritance tax
“Often referred to as the most hated tax in the UK, despite only being paid by a small proportion of the population, Reform’s pledge to scrap inheritance tax for some people is likely to be welcomed even by those who would never pay it. The party plans to scrap the tax for estates worth £2 million or less, meaning that only the wealthy would pay it, and lower the rate of tax to 20%.
“We know that wealthy people with large estates already pay a lower effective rate of inheritance tax than the middle class, as they are able to make use of more tax breaks and experts to organise their affairs. IHT raised around £6 billion a year in the latest data available and is increasing this year, so the change would leave a significant dent in the Treasury ledger.”
