The approach to taxation of the Labour government: manifesto promises and key themes

The approach to taxation of the incoming Labour government has attracted attention due to the lack of detailed information in its manifesto pledges. During the election campaign, several key themes have emerged, including a renewed focus on tax avoidance, modernisation of HMRC, and a commitment to increase registration and reporting requirements. The government aims to raise an additional £5 billion annually  from measures to counter tax avoidance by the end of its first term, building on the "plan to close the tax gap" report published by Labour in April 2024.

The Labour party's manifesto promises regarding business tax largely resemble those of the outgoing government, indicating a commitment to maintaining the status quo. The party pledges to cap corporation tax at 25% for the duration of the new parliament but hints at a potential reduction to ensure international competitiveness. Additionally, promises include retaining capital expenditure incentives and reforming the business rates landscape to "level the playing field" between high street retailers and online competitors.

Regarding employers, the Labour party vows to keep taxes on working people as low as possible, with specific undertakings not to increase National Insurance contributions, income tax, or VAT. The manifesto also emphasises the importance of employment rights, proposing new legislation within the first 100 days to deliver a new deal for working people, including addressing issues such as parental leave, sick pay, and protection from unfair dismissal. Changes to the National Minimum Wage and the Apprenticeship Levy are also on the agenda.

For individuals, the Labour government has committed not to increase income tax or National Insurance contributions and pledges to provide greater certainty to business taxpayers. Measures related to international tax, non-dom status, offshore trusts, and capital taxes are also outlined. Additionally, the intention to apply VAT to private school fees and the uncertainty surrounding furnished holiday lets from the previous Conservative budget are highlighted.

As the new government's plans gradually unfold, businesses, employers, and individuals will keenly watch for further details and announcements, particularly in relation to taxation under the Labour government.