With both the Labour Manifesto and secondary documents including the ‘Funding Real Change’ and ‘Fair Tax Programme’ having been released over the past weeks, we look at the key tax policies announced and highlight immediate planning points that arise.

Is it all high tax?

So how do the policies in the manifesto compare with what was in the 2017 Labour manifesto and the various announcements made since then? It is worth noting that while the manifesto contains very little real detail on tax policy, a fair few details are spelt out in the Funding Real Change document released at the same time. In addition, the ‘Fair Tax Programme’ document, released somewhat later than the previous two documents, contain further details, frequently with a focus on foreign investors and non-doms – read on for more…

As an aside, before setting out more detail, the policies clearly signal that a Labour government would herald a higher tax era. That of itself is hardly exceptional. It is to be hoped that some of the rather more dramatic sounding approaches to trusts, disclosure of beneficial ownership and tax planning take a reasonable approach, for while clearly everyone should pay their fair share and abusive planning is unacceptable, it is vital that taxpayers do not find the UK so uncommercial and so unwilling to allow entirely acceptable tax planning, that key individuals and companies choose to relocate elsewhere. At the risk of stating the obvious, in this case less tax will be raised to fund ambitious spending simply because there will be fewer taxpayers from whom to raise it.

Labour proposes an additional £82.9bn additional taxes a year. Where will this come from?

Income tax

As trailed, those earning over £80,000 will pay income tax at 45% (whereas under present rules this only applies to income above £150,000). Income above £125,000 will be taxed at 50%, courtesy of the ‘super rich’ rate – some might be inclined to argue the very name of the higher rate is intended to be provocative…

In addition, as part of the policy of treating earned and unearned wealth equally, income, dividend income and capital gains tax rates would be aligned, and the dividend allowance would be removed, with dividend income being taxed at the same rate as other income. For those earning over £125,000 therefore dividend income would also be taxed at 50%. Under present rules, dividend income is taxed at 32.5% for higher rate taxpayers (that is those earning between £50,001 and £150,000) and 38.1% for additional rate taxpayers (that is those earning over £150,000).

Planning points

Clearly, if sensible from other angles, it is worth considering accelerating income and dividend receipts and completing sales or other events giving rise to capital gains tax.

Inheritance tax

The manifesto promises to reverse inheritance tax cuts introduced by George Osborne, which appears to be targeted at the main residence nil rate band (‘RNRB’). This effectively allows the family home to be passed to direct descendants by conferring an additional £150,000 that can be passed on tax free to certain descendants, in addition to the standard £325,000 nil rate band. The RNRB is progressively reduced by £1 for every £2 that the value of an estate exceeds a £2m threshold.

Beyond this it is unclear whether existing reliefs will remain and whether the potentially exempt transfer rules will be amended.

However based on the manifesto it seems – for the moment at least – that the suggestion of abolishing IHT and introducing a lifetime gift tax is not an immediate action point.

Planning points

Tied into the proposed amendments to the potentially exempt transfer rules which were suggested by the Office of Tax Simplification (which is not affiliated to any political party) in the summer and focussing on simplifying IHT, that the rules should be amended (by reducing the survival period to five years but also by abolishing tapering relief) it would seem sensible for lifetime gifts to be made sooner rather than later.

Capital gains tax

As noted, capital gains tax is set to be aligned with income tax, so that those earning above £125,000 would also pay capital gains tax at 50%. It is trite to note this contrasts dramatically with the current 20% higher rate of capital gains tax (and 28% for some assets).

In addition, the current capital gains annual exemption of £12,000 will be reduced to just £1,000. Looking for some good news, it is worth bearing in mind that National Insurance doesn’t apply to capital gains…

In addition, Entrepreneurs Relief would be abolished, and there would be a consultation on ‘a better form of support for entrepreneurs’.

Planning points

Clearly, where sensible, it makes sense to realise gains now rather than later.

Property taxes

On the upside, the capital gains tax exemption for the sale of primary residence will be retained.

Aside from that, second home ownership would be more heavily taxed, with an annual levy equivalent to 200% of the current council tax bill, and investment in UK residential real estate by non-UK companies will be discouraged by the imposition of an additional 20% tax. This will sit alongside existing stamp duty.


In a generally expected move, VAT would apply to private school fees.


As anticipated, given John McDonnell’s statement that he would ‘abolish non-dom status’ in the first Budget under a Labour government, the ‘Fair Tax Programme’ sets out that the remittance basis would be done away with entirely, with a possible concession for temporary residents.

Given the technical complexities around the remittance basis it is to be hoped that proper consideration would be given to how to do this in practice, that there would be reasonable transitional provisions for remittance basis taxpayers, and that the treatment of existing protected settlements, which offer some tax deferral, would not be prejudiced by the changes.


At present the Trust Registration Service operates so that most trusts with a UK tax liability have to register, however there is no general public access to the register.

The Fair Tax Programme sets out that a public register would be introduced under which there would be much wider access, with no requirements to show a legitimate interest to gain access to details of a trust. Alongside this, details of every shareholder in a company would be publicly available. In addition, there would be an endeavour to introduce a public register of beneficial ownership applicable to the British Overseas Territories and the Crown Dependencies.

To add to all this disclosure, in a move no doubt inspired by certain Nordic jurisdictions, wealthy individuals would have to share their tax returns publicly.

This is clearly motivated by the conviction that structures such as trusts are a means to enable tax avoidance, whereas the reality is they are used for a range of reasons, of which tax planning is only one.

One does also wonder how such increased transparency interacts with certain rights enshrined in the Human Rights Act, such as the right to privacy. Further, it is far from clear how such extensive disclosure regimes could be imposed on the British Overseas Territories or the Crown Dependencies. However no doubt the intention of these policies is simply to discourage use of offshore jurisdictions, and onshore and offshore companies, with the details to be worked out when reality impinges on an attempt to draft the legislation.


We have become used – quite rightly – to there being a regular focus in Budgets on targeting tax avoidance.

Labour promises to go further and introduce a General Anti-Avoidance Rule –there is an existing General Anti Abuse Rule.

It is far from clear that this is needed – there are reams of statutory anti avoidance measures, together with an effective series of judgements which ensure legislation is construed purposively rather than technically where avoidance is in point.

The concern is that this would catch entirely legitimate planning – at what stage can a transaction be designated abusive and indeed how would guidance distinguish between acceptable planning and abusive planning? Given that the Fair Tax Programme states that ‘trusts are a key vehicle for tax avoidance…they are often used to avoid inheritance tax’ one wonders whether standard trust planning would be considered abusive.

Given the promise to launch a 9 month public inquiry to ‘investigate common tools of avoidance and evasion’ which will focus on areas including offshore trusts, and imposing potential withholding tax on distributions from trusts, there does at least appear a risk that trusts would be taxed in a draconian manner. It is – again – far from clear what this would achieve given that trust distributions are fully taxable unless there is a reason – such as the distribution being made to an exempt beneficiary (e.g. a charity) – for the distribution not to be. It is to be hoped that a better understanding of trust tax would lead to sensible enquiry results.

Corporation tax

Rather than continuing the trend of reducing corporation tax, rates would be increased to 26%, with the initial increase being to 21%. Alongside this the small profits rate would be introduced again, at 19% going up to 21% by April 2021, applicable to firms with a turnover under £300,000.

There is also the commitment to review corporate tax reliefs using January 2019 costings.

As noted in our earlier post on this, there would be a high earnings tax on companies where any employee earns above £300,000, resulting in a 2.5% charge and a 5% charge for earnings above £500,000, and finally 7.5% for earnings above £1m. In practice therefore those companies with highly paid employees would have a higher effective rate of tax than the headline (increased) corporation tax rates.

Financial transaction tax

Again, as expected, Labour would introduce a financial transaction tax applying to many derivative transactions at 50% of transaction costs, with a 1/3 discount for financial firms.

Inclusive ownership fund

Certain companies would be required to establish a structure under which up to 10% of shares would be owned by employees. That said it would be an unusual form of ownership under which dividends in excess of £500 a year would not go to the employees, with all dividends in excess of this going to the ‘climate apprenticeship fund’.