The election pledges that will be good and bad for your wallet
With just over a week to go until Brits head to the polls, the leaders of the main political parties are doing all they can to win votes.
At YourMoney.com, we’re obviously interested in everything Theresa May, Jeremy Corbyn and Tim Farron have to say, but we’re particularly concerned with how their pledges will affect people’s personal finances.
Here’s a summary of the main money-related promises from the two front-runners.
- Raise the personal allowance to £12,500 (from the current £11,500) by 2020
- Increase the higher rate tax threshold to £50,000 (from £45,000) by 2020
- Increase the National Living Wage – currently set at £7.50 per hour – to 60% of median earnings by 2020
- Extend automatic enrolment to the self-employed
- Replace the state pension ‘triple lock’ with a ‘double lock’ from 2020, (meaning the state pension would no longer rise by a minimum of 2.5% a year but in line with earnings or inflation – whichever is highest)
- Introduce a cap on long-term care costs
Tom Selby, a senior analyst at investment firm AJ Bell, says: “Despite making interventionist noises in markets where she sees failure – such as energy – Theresa May remains a traditional low-tax Conservative.
“Her pledge to continue with planned rises to the personal allowance will boost most workers, with around 24 million basic-rate taxpayers set to be £33 a year better off in today’s prices under the plans.
“Higher earners will also benefit from the party’s commitment to raise the higher-rate tax threshold to £50,000 from 2020. Combined with the planned increase to the personal allowance, higher-rate taxpayers would gain £208 per year in total, the IFS [Institute for Fiscal Studies] says, while about half a million additional rate taxpayers – who do not get a personal allowance – will still gain £175 per year.
“On pensions, plans to extend auto-enrolment to the self-employed could potentially provide a savings boost to millions – although details on how this would be done have yet to be spelled out. And while moving from a state pension ‘triple-lock’ to a ‘double-lock’ has been portrayed as an attack on pensioners, the reality is that if inflation or earnings are above 2.5% the two policies will cost exactly the same.”
- Will not impose an increase in income tax for those earning below £80,000
- Earnings above £80,000 will be taxed at 45% and earnings above £123,000 will be taxed at 50%
- Guarantee that personal National Insurance Contributions and VAT will not go up
- Keep the Help to Buy shared ownership scheme in place until 2027
- Boost the living wage to £10 an hour by 2020
- Stop all planned state pension age rises beyond age 66 and retain the triple-lock
- Introduce a care cost cap, increase the asset threshold below which people are entitled to state support, and provide free end of life care
Selby says: “Where Theresa May promises to be a low-tax Conservative Prime Minister, Jeremy Corbyn is unashamedly standing on a ‘tax and spend’ manifesto. However, the IFS reckons there is a £9bn black hole in its budget, citing ‘some factual mistakes with regard to part of their tax avoidance package, optimistic assumptions and unspecified tax increases’.
“Clearly higher earners will face the biggest burden in funding Labour’s ambitious spending plans – which include an extra £50bn in spending on the state pension in 50 years’ time and £8bn on social care.
“Labour has said it wants to take account of variations in life expectancy in the state pension system, although there is a danger this search for fairness will increase complexity and administration costs.
“While the youngest in society would benefit from the party’s plan to scrap tuition fees, those who are already in work may feel Labour’s plans offer little to get excited about.”