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Sunak promises a trio of tax cuts in Conservative Party manifesto

Sunak promises a trio of tax cuts in Conservative Party manifesto
Matt Browning
Written By:
Matt Browning
Posted:
11/06/2024
Updated:
12/06/2024

Prime Minister Rishi Sunak pledged to cut National Insurance (NI) by another 2p as part of a flurry of cuts in his Conservative election manifesto.

In his speech at Silverstone racetrack, the PM announced the Government would ditch stamp duty for most first-time buyers and permanently end self-employment NI contributions, as well as confirming that the ‘triple lock plus’ policy will be introduced for pensioners.

The plan to drop NI payments by 2p follows the decrease from 10% to 8% made in the last Budget by Chancellor Jeremy Hunt.

This latest NI cut would see the rate workers pay slide down further to 6% by April 2027, should the Tories win the general election.

He said that means there’s been a £1,350 tax cut on the average worker earning £35,000 since the previous 12% rate was reduced in January 2024.

Self-employment NI contribution cut

As well as reductions for employees on PAYE (pay as you earn) tax codes, Sunak promised that self-employed workers will see their NI payments completely abolished “when it is economically responsible to do so”.

The PM also confirmed his proposals for a rejigged pension allowance, hailed as the ‘triple lock plus’. This means pensioners will see the tax-free pension allowance rise every year out of the highest of average wages, inflation, or 2.5%.

This will only apply to people over 66 years old – the current state pension age – and the PM said he is doing so to “give peace of mind” to those in retirement “who have worked hard all their lives”.

Previously, pensioners saw their tax-free allowance freeze in 2021 to £12,570, and it was planned to remain there until April 2028.

Tax burden will stay ‘whoever wins election’

However, with tax thresholds frozen in the last Budget, Alice Guy, head of pensions and savings at Interactive Investor, said that, whoever wins the next election, “we’re unlikely to see an overall reduction in our tax burden.”

Guy said: “With taxes on income at a high level, it’s never been more important to protect your wealth by investing in a tax-efficient wrapper like a pension or an ISA.

“Paying into a pension through salary sacrifice is a simple way to reduce your National Insurance bill, and is particularly beneficial for basic-rate taxpayers who save £28 tax for every £100 they pay into a pension through salary sacrifice, £20 income tax and £8 National Insurance.”

Elsewhere, the PM targeted first-time buyers with a couple of proposals, one being the permanent scrapping of stamp duty for most homebuyers getting on the property ladder for the first time.

At present, the threshold to pay the duty is £425,000 after it was temporarily increased from £300,000 in September 2022. However, this will continue indefinitely if the Conservatives win another term.

Return of the Help to Buy scheme

Sunak also said in his speech he would launch a “new and improved” Help to Buy scheme. The policy was closed to new buyers in 2019, leading to the lowest-ever year of sales in 2023 for those using the Government savings mechanism.

If the Conservatives are victorious at the ballot box on 4 July, first-time buyers will receive a 20% equity loan to put towards buying a new-build home if they can provide a 5% deposit.

In the election manifesto, Sunak wrote: “First-time buyers will be able to get on to the housing ladder with a 5% deposit on interest terms they can afford.”

Other housing plans saw the Prime Minister pledge a two-year temporary capital gains tax (CGT) relief for landlords who sell their properties to existing tenants.