If the Conservatives are successful at the 2024 General Election, what employment laws will they change?
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After a difficult week, PM Rishi Sunak has set out a raft of tax measures at the Conservative manifesto launch with plans to abolish main NICs rate for four million self employed workers
In a surprise move which had not been trailed before the manifesto launch, the self employed would see national insurance contributions cut during the course of the next parliament if the Conservatives were to win the general election, first time buyers would see stamp duty relief extended and capital gains tax rates will not rise.
Under a new pensions tax guarantee, the Conservative manifesto stated that they would not introduce any new taxes on pensions, maintaining the 25% tax free lump sum and maintain tax relief on pension contributions at their marginal rate, adding that they ‘will not extend national insurance to employer pension contributions.’
At the launch at the Silverstone circuit, prime minister Rushi Sunak stressed the contribution of self employed entrepreneurs to the economy and set out plans to cut tax for this segment of the working population.
‘Their taxes must be cut so in the next parliament we will scrap entirely the main rate of self employed national insurance, a tax abolished and enterprise encouraged,’ Sunak said. ‘We will abolish that tax for millions of self employed. We will do more for the self employed so they can do more for Britain.’
The self employed main rate of Class 4 NICs is currently 6%, reduced from 9% from 6 April 2024. The manifesto stated: ‘This will not affect their entitlement to the state pension.’
The costings for the Conservative manifesto showed that the Class 4 NICs abolition is budgeted to start in 2025-26 tax year at a cost of £417m and with full removal costing £2.6bn a year by 2029-30.
In additional national insurance contributions will be cut again for employees with the rate cut by the 2027-28 tax year, from the current 8% to 6%, so it looks like this would come into effect from April 2027. Bearing in mind that personal tax thresholds are frozen, the tax burden will continue to rise. ‘This means national insurance will have been halved since 2024,’ Sunak said.
The manifesto ruled out any hikes in capital gains tax (CGT) and plans to introduce from April 2025 a two-year temporary CGT relief for buy to let landlords who sell to their existing tenants at the cost of £20m a year.
Part of the measures will be paid for by a further crackdown on tax avoidance, which the Conservatives hope will raise an additional £6bn a year by the end of the parliament on top of the current £6.7bn achieved in the last year by current HMRC activity. It is projecting an extra £2bn from tax avoidance in 2025-26, going up by a further £1bn a year until 2029-30.
Another target to pay for the £17bn in tax cuts over the next five years will be further action to reduce benefit payments with £12bn slated to be cut from the growing welfare bill with more pressure on claimants to return to work and claims for disability payments scrutinised more closely.
Under a new pensions tax guarantee, the Conservatives also would not introduce any new taxes on pensions.
The manifesto stated that: ‘We will maintain the 25% tax free lump sum and maintain tax relief on pension contributions at their marginal rate. We will not extend national insurance to employer pension contributions.’
Sunak confirmed the triple lock plus, ‘ensuring that the state pension is never dragged into income tax’.
Due to the freezing of thresholds, the Conservatives plan to introduce a separate pensioners’ tax-free allowance, worth £100 a year per pensioner from April 2025. This new triple lock plus will guarantee that both the state pension and the tax free allowance for pensioners will always rise with the highest of inflation, earnings or 2.5%.
The much trailed doubling of the threshold of higher child income benefit charge (HCIBC) to £120,000 will go ahead based on total household income not individuals. This will affect over 700,000 households, each gaining an average of £1,480 a year. It will also reduce tribunal costs for taxpayers as the number of cases has soared in recent months.
Following last Budget’s increase to the VAT threshold to £90,000, and this will be kept under review and explore options to smooth the cliff edge.
In a bid to cut the £1bn bill for the use of private sector consultants, the plan is to halve the amount of taxpayers’ money spent on external consultants by Whitehall departments and the public sector. In addition, they will also introduce curbs on equality, diversity and inclusion (EDI) initiatives and spending.
The national minimum wage will be maintained in each year of the next parliament at two-thirds of median earnings. On current forecasts, that would mean it rising to around £13 per hour, up from a minimum wage of £5.80 when the Conservatives came to power in 2010.
There are also plans to fund 100,000 high quality apprenticeships – ‘paid for by curbing the number of poor-quality university degrees that leave young people worse off’. This will be achieved by ensuring that ‘courses that have excessive drop-out rates or leave students worse off than had they not gone to university will be prevented from recruiting students by the universities regulator’.
First time buyers will see the abolition of stamp duty entirely for properties valued at up to £425,000, making permanent the increase to the threshold at which first-time buyers pay stamp duty to £425,000 from £300,000, introduced in 2022. They will also look to introduce a new help to buy scheme.
In the manifesto launch, Sunak also touched on education, trailing plans for an Advanced British Standard, effectively a merger of academic and technical education qualifications for 16 to 19 year olds.
There are also plans to reverse the ultra low emission zone outer area in London, which came into effect earlier this year.
Reacting to the proposal to abolish Class 4 NICs, Will Johnstone, tax director at MHA said: ‘The pledge by the Tories in their manifesto launch that by the end of the next parliament they will have entirely abolished Class 4 (self-employed) NICs will increase the gap between the already preferential NIC treatment for the self-employed to those in employment.
‘The gap is already a major driver of tax litigation - see IR35, Christa Ackroyd and the long line of TV presenter cases that has followed - and no doubt this change would increase the stakes for those workers whose status is marginal, driving yet more tax disputes and uncertainty for those workers who may be under pressure to accept positions on a self-employed basis.’
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