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General Election on 4 July 2024 – what could it mean for tax?

23 May 2024

On 22 May, Prime Minister Rishi Sunak announced that a general election will take place on 4 July 2024, triggering a 6-week campaigning period.

No pre-election fiscal statement will take place; instead the government is standing on the drop in inflation to 2.3% and the claim that the economy is now improving.

Will there be an emergency Budget?

Depending on the outcome of the election, it may be followed by an ‘emergency budget’ or other fiscal event to establish new tax policies. Exactly when this would happen is unclear. We know that the State Opening of the new Parliament will be on Wednesday 17 July but summer recess is currently scheduled to start less than one week later on Tuesday 23 July! We can perhaps expect to see some variation to the usual Parliamentary calendar.

What is the impact on HMRC and other Government departments now?

With all Government departments now in a ‘period of sensitivity’ (previously known as ‘purdah’), ministers and civil servants will exercise caution in making announcements or decisions that might have an effect on the election campaign.

We can therefore expect to see less from HMRC over the coming weeks.

An interesting component to this is the journey to Making Tax Digital (MTD) for Income Tax, due to commence in April 2026. HMRC have been actively encouraging agents and taxpayers to voluntarily sign up for ‘testing’ (or the private beta) now, for the 2024/25 tax year. While the testing phase will need to continue for those already in the new system, it is yet to be seen if HMRC will continue encouraging or admitting others to join. Similarly, we are waiting on HMRC guidance on some key components of the MTD regime – including in relation to joint property owners – and we don’t now expect those to be immediately forthcoming.

Dissolution of Parliament – what about the Finance (No 2) Bill 2024?

At the time of writing, Finance (No 2) Bill 2024 was making its way through Parliament and due to receive Royal Assent this summer. With business in both the House of Commons and House of Lords coming to an end until a new Parliament opens, this planned progress will not be possible.

The Bill will either be rushed through before Parliament is prorogued on 24 May or put on pause until business re-commences in both Houses.

Finance (No 2) Bill 2024 includes measures from the Spring Budget. It is a relatively small Bill and includes tax rates for 2024/25, the extended thresholds for the High Income Child Benefit Charge, the reduction in the higher rate of CGT for residential property gains and more.

When will we know more about the April 2025 plans for furnished holiday lets and non-domiciled individuals?

It seems there will be radio silence on the FHL and remittance basis fronts for a couple of months now, subject to the content of the party manifestos.

Unfortunately, this leaves affected taxpayers in a difficult position and unable to fully plan ahead for the 2025/26 tax year and beyond. It is however understood that regardless of political power, both the FHL and remittance basis regimes will be abolished from April 2025, although some of the technical details may differ depending on which political party comes out on top.

What future tax policies could we see?

The political parties will soon be releasing their party manifestos. These will set out their promises and intentions, should they win the election. These will make very interesting reading.

Until such time, we can review the statements already made over the last few weeks and months by both the Conservative party and Labour.

What could happen under a Labour government?

At recent conferences, Shadow Chancellor, Rachel Reeves has announced the following Labour policies:

  • Removing VAT and business rates exemptions from private schools;
  • Increasing stamp duty land tax for buyers from overseas;
  • Abolishing non-domicile status (a measure that was taken up by the current Chancellor in Spring Budget 2024); and
  • Capping the headline rate of corporation tax at 25% for the rest of the next parliament, along with retaining full expensing and the annual investment allowance.

In addition to the above announcements, in April 2024, Labour published their ‘Plan to close the tax gap’. In summary, the tax gap would be reduced by engaging in the following:

  • Increased compliance activity from HMRC;
  • Investing in technology transformation in the tax system; and
  • Making more legal challenges in order to deter tax evasion.

Labour acknowledges HMRC’s challenges with digitisation, including MTD for ITSA, to date and say that there will be “new, achievable timescales for delivery”.

What could happen under a Conservative government?

In this scenario, the picture is clearer because the current government’s plans were set out in recent fiscal events.

Chancellor Jeremy Hunt has also said that he views National Insurance as “unfair” and that he plans to reduce it with a view to scrapping it entirely. He has also announced that in future, the high income benefit charge (HICBC) will be calculated on a household income basis.

2024 – a year for setting our future direction of travel

What is clear is that regardless of who is successful in this summer’s general election, 2024 will be a year in which we gain a clearer view of future plans. As usual, 20:20 Innovation will keep you updated on the major developments, giving you the insight that is most relevant to you and your clients.