What the Election Means for UK Businesses
With the UK General Election just around the corner on 4thJuly, business owners are keen to gain insight into the policy positions of the Labour and the Conservative parties. Here's a look at where each party stands on crucial business related topics that might affect SMEs.
Corporation Tax
Labour has announced that it does not intend to increase Corporation Tax from its current rate of 25%. They plan to outline a comprehensive business taxation strategy within their first six months in office. Conversely, the Conservatives have expressed their commitment to "back businesses with lower taxes." Therefore, it's likely that Corporation Tax rates will remain stable for the near future, regardless of which party wins.
VAT
One of Labour’s signature policies is ending the VAT and business rate exemption for private schools. In terms of broader VAT policy, the party has simply said it would not raise VAT.
The Conservatives have also committed not to increase the main rate of VAT for the duration of the next Parliament.
Income Tax and National Insurance
Chancellor Jeremy Hunt has announced that a future Conservative government will not increase any rate of income tax or National Insurance for the next Parliament's duration. He confirmed that income tax thresholds will remain frozen until 2028 as legislated, but not extend beyond this point. There is an important exception for pensioners, both the Conservative and Labour parties have committed to maintaining the pensions 'triple lock'—which ensures the state pension rises in line with the higher of average earnings, inflation, or 2.5%. The Conservatives have introduced a 'triple lock plus' policy, increasing the personal allowance for pensioners by the same percentage as the triple lock, ensuring that the state pension alone will not push a pensioner into paying tax.
Labour has also stated it will not raise income tax or National Insurance. Sir Keir Starmer has said that Labour would not undo the freeze on income tax thresholds that will stay in place until 2028. Although Labour has not specified how it will address distortions in the tax system, the party is carefully managing expectations around tax cuts, including the potential abolition of National Insurance.
Minimum Wage
From April 2024, the Conservatives rose the National Living Wage for workers aged 21 and over, increasing it from £10.42 an hour to £11.44— nearly a 10% rise. In their manifesto they declared they will maintain the National Living Wage in each year of the next Parliament at two-thirds of median earnings.
However, labour also want to deliver more with their ‘Making Work Pay’ initiative by introducing a new deal for working people and delivering a ‘genuine living wage’, banning zero hours contracts and ending fire and rehire.
Business Rates
Labour plans to overhaul business rates, replacing the current system with one more suited to the 21st century, as part of their strategy to support small businesses. The Conservatives propose reviewing and reducing business rates, starting with the retail sector and extending discounts to small cinemas, pubs, and grassroots music venues.
Immigration
Recent changes to migration and visa policies include restrictions on dependants for social care workers and increased income requirements for sponsoring spouse/partner visas. Both Labour and the Conservatives are prioritising border security in their election campaigns.
Post-Brexit Trade
Brexit has introduced complexities in trade with the EU, leading to increased costs and paperwork. The UK government has signed trade deals with countries like Japan, New Zealand, and Australia and introduced a post-Brexit scheme to cut tariffs and reduce import costs.
With Labour, Britain will stay outside of the EU. They state to seize the opportunities ahead, we must make Brexit work. They have declared they will work to improve the UK’s trade and investment relationship with the EU, by tearing down unnecessary barriers to trade by reducing unnecessary border checks and help tackle the cost of food.
Artificial Intelligence
AI's growing influence is being addressed by both parties. The Conservatives have outlined regulatory principles in their March 2023 whitepaper, focusing on safety, security, and robustness. Labour acknowledges AI's potential threats but supports its integration, advocating for worker training and protection.
Supply Chain Issues
Given the uncertainties caused by global events, Labour proposes setting up a supply chain task force to ensure the stability of essential imports across sectors like energy, food, and construction. The Conservatives emphasise the importance of safeguarding access to vital goods, citing unpredictable global events as significant threats.
Sustainability
Both parties recognise the importance of sustainability in business. Labour plans to introduce a clean energy strategy, including a windfall tax on oil and gas companies to address the cost of living crisis. In their manifesto the Conservatives stated that they intend to invest £1.1billion into the Green Industries Growth Accelerator to support British manufacturing capabilities, boost supply chains and ensure energy transition is made whilst scaling up nuclear power.
High Street Reform
Revitalising the high street is a priority for both parties. The Conservatives have a detailed plan to support bricks-and-mortar stores, including repurposing empty buildings and improving public spaces. Labour also supports high street reform but has yet to provide specific details.
In Conclusion
As the election approaches, the business community awaits further details from both parties to better understand the potential impacts on their operations. Regardless of the outcome, staying informed and prepared for changes in policies will be crucial for navigating the post-election landscape.
As with many political changes, the specifics will be crucial, we must wait to see the election results and the subsequent actions.
Rest assured, Blue Rocket Accounting will be here to support you, offering pragmatic advice to help you lead your team and navigate any forthcoming challenges. If you would like to discuss how to navigate times of change within your business and team up with an accountant whose mission matches your own, get in touch with the Blue Rocket Accounting team today. Call us on 01322 555442.
Disclaimer: This article should not replace legal advice. Blue Rocket Accounting assumes no responsibility or liability for any errors or omissions in the content of this site. Although every effort is made to ensure information is accurate and up to date, Blue Rocket Accounting takes no responsibility for legal action the reader chooses to take as a result of reading said literature. Please seek direct advice based on your individual circumstance.
