Reform’s 2024 Election Manifesto: Business Breakdown
We all know there is an election around the corner on 4th July. With any campaigning, the focus on financials and taxation always plays a key part. We’ve pulled together some of the key topics from the various party’s manifestos. Whilst we know the proof is in the pudding in terms of the politicians delivering what they say in their manifestos, it is important for both your business and personal finances that you can identify a direction of travel from these policies.
Our goal is to provide an objective analysis of the business-related policies proposed by each party in the 2024 UK general election. We aim to present the potential impacts on businesses without any political bias, ensuring that our readers can make informed decisions based on the factual details of each manifesto.
This is a LIVE BLOG and will continue to be updated as information is released and analysed.
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Reform UK has published its manifesto. They plan tax cuts which they say will cost £70bn; however our analysis shows that they’ve miscalculated, and the actual cost will be at least £93bn.
Reform UK says it will fund these tax costs with £70bn of savings and additional revenue, but it provides few details. Their proposal to change Bank of England reserve rules is over-stated by at least £15bn, and the cost would likely fall on businesses and consumers, not banks.
These two factors mean that Reform UK’s plans have a total unfunded cost of at least £38bn – about twice the unfunded cost of Liz Truss’s ill-fated 2022 “mini-Budget”.
It’s important to be cautious with promises from Reform UK, as they are unlikely to form a government. They can propose ambitious policies without the pressure of having to implement them.
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Business Impact of Raising the corporation tax threshold to £100,000 and reducing the main rate from 25% to 20%, and then to 15% from year three
Raising the corporation tax threshold to £100,000 and reducing the main rate from 25% to 20%, and then to 15% from year three, would have several notable effects on businesses and personal finances.
Corporation tax is one of the areas of taxation where we have seen significant increases over the past 18 months. An introduction of a tax-free allowance for businesses would take a lot of small businesses out of the requirement to pay. Currently, the starting rate of corporation tax is 19% which is payable from the first £ of profit you make, increasing up to 25% as your profits grow. This change would see more funds within the business either for future growth or reward for shareholders. For larger businesses, this is seen to make the UK more competitive for corporations to want to base themselves here and grow.
On the personal finances front, more post-tax profits being available to shareholders would be a welcome addition for owner-managed businesses who largely see their income via salary and dividend combination, with dividends being another area to see significant tax increases and changes over recent years.
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Business Impact of Lifting the Amount Businesses must earn before charging VAT, and ending business rates for High Street-based Small and Medium-sized firms
The proposal to increase the VAT threshold from £90,000 to £150,000 and end business rates for High Street-based small and medium-sized firms could have significant effects on businesses and personal finance, though actual outcomes depend on effective implementation.
For businesses, raising the VAT threshold would mean that more small businesses could operate without charging VAT, reducing their administrative burden and potentially lowering prices for consumers. This change could encourage growth and entrepreneurship, as smaller businesses would find it easier to manage cash flow and profitability. However, if not implemented effectively, the anticipated benefits might not materialise.
Ending business rates for High Street-based small and medium-sized firms could provide significant financial relief, helping these businesses reduce operating costs and improve profit margins. This could support the revitalisation of High Streets, encouraging more foot traffic and economic activity in local communities. However, the overall impact would depend on how the policy is funded and whether it effectively targets the intended businesses.
In terms of personal finance, consumers might benefit from lower prices and increased availability of goods and services from small businesses. Additionally, the potential growth of small businesses could lead to job creation and improved economic stability in local areas. However, the long-term benefits depend on the practical implementation and sustainability of these policy changes.
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Business Impact of stopping the Bank of England from Paying interest
The proposal to stop the Bank of England from paying interest on £700 billion of bonds could tighten credit conditions. Commercial banks, losing this interest revenue, might raise loan rates or reduce credit availability. This would make borrowing more expensive and less accessible for businesses, especially small and medium-sized enterprises.
Higher borrowing costs could slow business expansion, innovation, and investment, impacting overall economic growth. Banks might also shift to higher-risk investments to maintain profitability, increasing market volatility and affecting business stability. The actual impact will depend on how banks and businesses adapt to these changes.
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Impact of Nationalising 50% of Key Utility Companies, with the other 50% Owned by UK Pension Funds
Nationalising 50% of key utility companies, with the other 50% owned by UK pension funds, would have several impacts on businesses and their activities.
For utility companies, nationalisation could lead to changes in management and operational strategies, as government ownership may prioritise public service over profit. This could result in increased investment in infrastructure and service improvements, potentially enhancing reliability and customer satisfaction. However, the transition period might create uncertainty, affecting business stability and planning.
For other businesses, particularly those that rely heavily on utilities, there could be benefits from potentially more stable and possibly lower utility costs. Government ownership might aim to keep prices affordable, reducing operational expenses for these businesses. On the other hand, the efficiency and innovation often driven by private sector competition might diminish, potentially leading to slower advancements in technology and service quality.
The involvement of UK pension funds owning the other 50% could ensure that a significant portion of the profits remains within the country, benefiting pensioners and the broader economy. However, the dual ownership model might lead to conflicts between profit-driven pension funds and the public service goals of the government, affecting decision-making and operational efficiency.
Overall, while the goal is to balance public service with economic benefits, the actual impact will depend on how effectively the government and pension funds manage these companies and address potential conflicts between their objectives.
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Business Impact of Reforming Benefits Support, as well as Training to get Two Million people back to Work
The proposal to reform benefits support and training to get two million people back to work, coupled with tax relief for businesses offering apprenticeships, could have several effects on businesses and their activities.
For businesses, the influx of two million people re-entering the workforce could provide a larger pool of potential employees, potentially easing labour shortages and reducing recruitment costs. Companies might find it easier to fill vacancies and expand their operations with a more readily available workforce. This could improve productivity and overall business performance.
Offering tax relief for businesses that provide apprenticeships would incentivise companies to invest in training and developing new talent. This could lead to a more skilled workforce, enhancing the quality of products and services. Businesses might also benefit from reduced training costs due to the tax relief, making it more financially viable to invest in apprenticeships.
Reforming benefits support and training programmes aims to make it easier for individuals to transition back into the workforce. This could reduce dependency on welfare and increase consumer spending, as more individuals gain employment and have disposable income. Increased consumer spending could drive demand for goods and services, benefiting businesses across various sectors.
However, the success of these reforms will depend on effective implementation and whether the training provided aligns with market needs. Businesses may need to collaborate closely with training providers to ensure that the skills being developed meet industry requirements.
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Impact of Abolishing IR35 for Sole Traders
The proposal to abolish IR35 for sole traders could have significant effects on businesses and their activities, though its actual impact will depend on the details of implementation and whether it extends to personal service companies (PSCs).
For businesses, abolishing IR35 for sole traders would simplify the hiring process for freelancers and contractors, reducing the administrative burden and compliance costs associated with determining employment status and tax liabilities. This could encourage businesses to engage more sole traders, fostering greater flexibility in workforce management and potentially lowering operational costs.
Sole traders themselves would benefit from increased clarity and reduced compliance requirements, allowing them to operate more efficiently. This could result in higher take-home pay and greater financial stability for sole traders, making self-employment more attractive.
If the abolition of IR35 does not extend to PSCs, the distinction between sole traders and those operating through PSCs might create confusion and potential disparities. Businesses might prefer hiring sole traders over PSCs to avoid the complexities and risks associated with IR35 compliance, potentially disadvantaging those operating through PSCs.
Overall, while the proposal to abolish IR35 for sole traders aims to simplify tax and employment regulations, its effectiveness will depend on how comprehensively it is implemented and whether it addresses the needs of both sole traders and PSCs.
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Impact of Reducing the Entrepreneurs’ Relief tax rate to 5%
Reducing the Entrepreneurs’ Relief tax rate to 5% could significantly impact businesses by lowering the tax burden on business owners when they sell their businesses. This could encourage more entrepreneurs to start new ventures and existing owners to reinvest and grow their companies. The reduced tax rate would make the UK more attractive for entrepreneurs and investors, potentially leading to increased business formation, innovation, and job creation. However, the policy’s success depends on effective implementation and could impact government tax revenues.
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Business Impact of Abolishing the VAT tourist tax and reinstating the VAT refund scheme
Abolishing the VAT tourist tax and reinstating the VAT refund scheme could have several impacts on businesses and their activities.
For businesses, particularly those in the retail and hospitality sectors, this change could attract more tourists by making shopping in the UK more affordable. Increased tourist spending would likely boost sales, leading to higher revenues and potentially greater profitability. The anticipated influx of 2 million tourists could stimulate demand for a wide range of goods and services, benefiting hotels, restaurants, and attractions.
Additionally, businesses might see increased job creation to accommodate the higher demand from tourists, contributing to overall economic growth. Retailers, in particular, could invest in marketing and expanding their product offerings to cater to the tourist market.
However, the actual impact will depend on how effectively the scheme is implemented and promoted. If tourists are well-informed about the VAT refund scheme, it could enhance their shopping experience and encourage more spending. Conversely, if the implementation is inefficient or poorly communicated, the benefits might not be fully realized.
Overall, while the proposal aims to boost tourism and retail sales, its success will depend on effective execution and how well businesses and tourists adapt to the reinstated scheme.
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Business Impact of Raising the Minimum Income Threshold for Paying Income Tax
Raising the minimum income threshold for paying income tax from £12,570 to £20,000 a year and increasing the threshold for the 40% tax rate from £50,270 to £70,000 could have several effects on businesses and their activities.
For businesses, these changes could lead to increased disposable income for employees. Workers earning below £20,000 would no longer pay income tax, and those earning between £50,270 and £70,000 would be taxed at a lower rate. This could result in higher consumer spending, benefiting retail and service industries as people have more money to spend.
Higher disposable income might also improve employee morale and productivity, as workers feel financially better off. Businesses might see reduced pressure to raise wages, as employees effectively take home more pay due to lower tax liabilities.
However, these tax changes could impact government revenue, potentially leading to adjustments in public spending or other tax policies to compensate for the loss. If public spending is reduced, businesses that rely on government contracts or services might face challenges.
Overall, while raising the income tax thresholds aims to boost disposable income and consumer spending, the broader economic effects will depend on how these changes are balanced with government revenue needs and spending policies.
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Impact of Allowing married couples to transfer 25% of their tax allowance
Allowing married couples to transfer 25% of their tax allowance, so one person would not pay tax on the first £25,000 earned, could impact businesses in several ways.
For businesses, this policy could increase household disposable income, leading to higher consumer spending in retail, hospitality, and other sectors. This boost in spending could drive higher sales and stimulate economic growth.
Employees might experience improved financial well-being, enhancing morale and productivity at work. Businesses could find it easier to attract and retain talent if employees feel their household finances are more secure due to the tax savings.
However, this policy could also introduce complexities in payroll and tax administration, requiring businesses to manage and verify tax allowance transfers between spouses. Companies might need additional administrative resources or software to handle these changes efficiently.
Overall, while the policy aims to provide financial relief to married couples and boost spending, its actual impact will depend on effective implementation and management by businesses and tax authorities.
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