Business groups seek more tax reassurances as Labour targets economic growth
The manifesto confirmed Labour would cap corporation tax at 25% until the next Parliament.
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Your support makes all the difference.Labour has put economic growth at the heart of its manifesto, but experts and small firms have raised fears over the absence of pledges on some key taxes.
The manifesto confirmed Labour would cap corporation tax at 25% until the next parliament as it looks to cement its pro-business stance.
It also unveiled a raft of plans to support small firms, including reiterating aims to overhaul business rates and help level the playing field between online and high street retailers.
But experts said the lack of any promises not to increase capital gains tax (CGT) has fuelled speculation that it may be in line for a hike if Labour wins the election, in what would be a blow to entrepreneurs.
Rachael Griffin, tax and financial planning expert at Quilter, said: “The conspicuous lack of confirmation from the Labour manifesto that it would not raise CGT will spark significant concern among entrepreneurs and investors in the UK.
“Both shadow chancellor Rachel Reeves and Sir Keir Starmer have in recent interviews doubled down on the fact they have ‘no plans’ to increase CGT rates without completely ruling it out.
“However, in its manifesto Labour has explicitly ruled out increases to income tax, national insurance, VAT and corporation tax, but make no mention of CGT.”
Jason Hollands, managing director at wealth management and professional services group Evelyn Partners, added: “The big three tax pledge – vowing not to raise income tax, national insurance or VAT – is a doubled-edged sword because in attempting to head off fear of higher taxes by explicitly ruling these out, it inevitably creates suspicion about which other areas could be vulnerable.
“Capital gains tax, inheritance tax and the tax-preferential treatment of pension saving have all featured in speculation around possible targets for a Government that needs to raise revenues down the line.
“No party set for government would for instance pre-announce a rise in capital gains tax as it would inevitably lead to a rush by some investors to dispose of assets.
“So, all eyes now are not just on the General Election, but also on the next government’s first big fiscal statement, which is likely to be an autumn budget.”
The opposition party’s manifesto also reiterated Labour’s pledge to “replace” the current business rates system of property tax to “level the playing field between the high street and online giants”.
Kate Nicholls, chief executive of UKHospitality, said “It’s clear that Labour has listened and acted on UKHospitality’s policy recommendations, which will enable hospitality to continue to create places where people want to live, work and invest.
“We are delighted to see a commitment to replace the broken business rates system and reduce the burden on high street businesses.”
Simon Dodds, chief executive of pub firm Young’s, said: “It is painfully clear that the current business rates system is in dire need of reform and we are encouraged that this is being recognised by political parties in their manifestos.
“Action is vital to secure the long-term futures of businesses and livelihoods across the country, including pubs and the wider hospitality sector, which employs millions and drives economic growth.”
Tina McKenzie, policy chair of the Federation of Small Businesses, said firms are looking for more reassurances over tax.
“As questions swirl around tax in this election, the UK’s 5.5 million entrepreneurs – who generate the jobs and growth that should be at the core of Labour’s mission – will want to hear more reassurance from the party on the huge taxes small firms already pay at every stage of running their businesses,” she said.
Meanwhile, the Confederation of British Industry (CBI) said Labour’s industrial strategy and proposals to streamline planning processes could support UK businesses.
Its chief executive Rain Newton-Smith said: “Commitments to implementing an industrial strategy, a business tax roadmap, and improvements to speed up the planning system can all provide the certainty needed to unlock investment.
“Reassurances that Labour will not increase corporation tax and will look at wholesale reform of the business rates system are especially welcome.”