Vital tax, pensions and investment details missing from manifestos

17 June 2024

The Conservative and Labour parties could face ‘very tough choices’ if elected by not factoring in spending cuts within their manifestos, which could spark more tax hikes, according to Hargreaves Lansdown.

Both parties “studiously ignored” the fact they used the baseline of current government spending, which includes large cuts to unprotected departments, in their manifestos, says Hargreaves Lansdown. This could result in the next government having to make some “very tough choices” on spending or revisiting tax pledges in the second half of the coming parliament.

Despite both parties agreeing not to raise the three main taxes – National Insurance, Income Tax and VAT – neither party has pledged to change the frozen income tax thresholds, which are set to remain static until 2028 and will see many taxpayers pushed into a higher tax bracket. Labour also failed to make mention of Capital Gains Tax in its manifesto, prompting speculation that the party may seek to make changes if they come into power.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “What’s left out of the manifestos can be as important as what makes the cut. Like a teenager describing their weekend to their parents, you’re only ever going to see the most positive edited highlights.

“In this instance, there were vital details missing, raising concerns that those pledges left off the page might be expensive enough to spark more tax hikes. There were some missed opportunities too, where parties could have fundamentally improved the nation’s financial resilience.”

According to the investment platform, Labour’s decision to shy away from mentioning pension tax free cash or tax relief “leaves the door open to further tax tinkering” and pointed out  a clear indication in the manifesto would have gone a long way to quelling rumours that Labour may decide to introduce a flat rate of tax relief.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said Lifetime ISA pledges were also “notable for their absence.” Hargreaves Lansdown has called for changes to the product to make it more appealing, including a reduction in the 25% early access penalty charge to 20% and an increase in maximum age to 55.

It has also called for greater tax simplification.

Coles said: “Making tax more straightforward hasn’t been a key governmental mantra for a while and it was disappointing that it didn’t get a look-in within the manifestos either. Over the years, income tax has naturally become more complex. While nobody wants to see endless tax tinkering, if there are any tax changes to come they need to make it straightforward for people to navigate the tax landscape and do what’s best for their circumstances.”

The British ISA was also omitted from both the Labour and Conservative party manifestos, despite both stating that they are committed to encouraging people to start saving and investing. However, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said if the aim is to make investing in UK enquiries more attractive, there are other measures which could be used.

Streeter said: “All too often, retail investors are cut out of IPOs and secondary capital raising rounds. It’s essential that the FCA Review of the listing regime puts improving retail investors’ rights at its heart. There was no mention in the Conservative or Labour manifestos of cutting stamp duty on UK share purchases or increasing the dividend or capital gains tax allowances, which may disappoint some investors.”

The subject of financial advice was also raised by Hargreaves Lansdown, with the firm dubbing it “disappointing” that it didn’t receive any mention by either party.

Coles said: “Currently financial advice is well regulated but it’s costly and so is only used by a small proportion of people. In the review of the boundary between guidance and advice, the FCA and Treasury proposed a new category of targeted support. This would make the information more useful without crossing the line into advice. Given the support from across the political spectrum for this idea, it’s to be hoped that this was eased out of the manifestos purely on grounds of space.

“A new government has the opportunity to accelerate this process to a conclusion and it would be a crying shame if an election did anything to hamper its progress.”

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