NI & stamp duty: What the Conservative manifesto means for you

Rishi Sunak has presented his party’s election manifesto promising to cut taxes for workers, landlords and home buyers, row back on green policies and protect pensioners from income tax. The Conservatives have also committed to cutting national insurance for the self-employed by the end of the next parliament, but little detail was given on how they would fund this.

Some of the party’s policies have already been announced during the last parliament, such as the British Isa. But here’s everything savers, investors and pensioners need to know about the election promises.

Taxes, spending and the economy

The Conservatives pledged again to reduce taxes for working people as part of their latest manifesto offering. The party plans to deliver another 2p cut to national insurance, with tax cuts partially funded by unspecified changes to the welfare system and a clampdown on tax avoidance. 

Another key offering is a new package of support for would-be homeowners. The Conservatives have pledged to permanently abolish stamp duty for first-time buyers on homes up to the value of £425,000, and introduce a new Help to Buy scheme. First time buyers currently pay no tax up to the same value, but this was due to expire next March. HT

A ‘prudent and fully costed programme’

In a BBC interview before the manifesto launch, Sunak rejected comparisons with Liz Truss, insisting that all tax cuts would be fully funded. According to the manifesto, there would be a £1bn cost to the exchequer over 2025-26, but in subsequent years the impact would be positive. Over the period to 2029-30, the Conservatives expect a reduction in borrowing of just over £2bn, “demonstrating that this is a prudent and fully costed programme”. 

A combination of high debt and slow economic growth over the past fourteen years leaves a difficult inheritance for the next prime minister. Paul Johnson, director of the Institute for Fiscal Studies think tank, warned that “whichever of the main parties forms the next government, it will need to cut spending or raise taxes or it will miss its own fiscal targets”. 

Over the longer term, the Conservatives hope to abolish National Insurance entirely to “end the unfair double tax on work”. On Tuesday, shadow health secretary Wes Streeting told the BBC that Labour would not match the 2p cut to national insurance because “the money simply isn't there”. HT

Tax rises are ‘hiding in plain sight’ – whoever wins the election

Research from the Resolution Foundation think tank suggests that while there are “material” differences between Labour and Conservative tax proposals, these will be dwarfed by the set of tax rises for the next parliament that have already been announced.

Policies such as freezing income tax and national insurance thresholds and planned increases to fuel duty, stamp duty and business rates are expected to increase taxes by over £20bn a year by 2028-29 – around £800 per household. The think tank said that since both the Conservatives and Labour are “implicitly committed to these”, the tax hikes were “hiding in plain sight”. The tax-to-GDP ratio has risen sharply since 2019, increasing from 33.1 per cent to 36.5 per cent. HT

How the Conservatives’ plans will affect stocks

Defence commitments

Defence stocks were understandably ummoved as Prime Minister Rishi Sunak promised, once again, to increase military spending to 2.5 per cent of GDP by 2030. Spending is currently at 2.3 per cent. As announced in April, this would be funded by “retuning the civil service to its pre-pandemic size”. A new addition is a campaign to convince the rest of Nato to hit 2.5 per cent as well, which would mean a “collective increase” of £140bn. AH

A slight upgrade to housebuilding ambitions

Plans for housing include a reintroduction of the Help to Buy scheme, plus a slight upgrade to housebuilding targets. The party pledged to build 1.6mn homes over the next parliament, which works out at 320,000 homes a year if a full five-year term is completed.

The current target is 300,000 homes a year, but delivery over the 14 years the party has been in charge has run well short of this, at under 180,000 a year. Other manifesto pledges include abolishing “legacy EU nutrient neutrality” rules, which the party claims would immediately unlock the building of 100,000 new homes. The Conservatives also pledged to fast-track planning for new homes on previously-developed land in the nation’s 20 biggest cities and create “locally-led urban development corporations” that would partner with private sector developers and investors. Away from cities, it vowed to “protect the green belt from uncontrolled development”.

Existing houses could also get a boost through a £6bn voucher scheme over three years to improve energy efficiency. MF

A back-up to renewable energy

The Conservatives have promised to build new gas-fired power stations to “back up renewables” in the term of the next parliament, and also to get two so-called small modular reactors (SMRs) approved in the first 100 days if re-elected. Onshore renewables will still be subject to veto by residents, although the manifesto said solar would be easier to install on brownfield sites and rooftops under a continued Conservative government. The government has stuck to ambitious offshore wind plans, with a goal for capacity to treble output. “These will make the UK a net exporter of electricity,” said Sunak. 

On energy networks, the manifesto repeated a plan for a technical change to “zonal networks”, as outlined by secretary for energy security Claire Coutinho earlier this year. This would reduce the impact of gas prices on wholesale electricity costs in some areas by abolishing the national market for power. “This would mean our energy system would be smaller and more efficient, and less energy infrastructure would be needed overall – leading to lower costs for consumers,” Coutinho said in a speech in March. AH

What the manifesto means for landlords, workers, savers and investors

The manifesto pledges another national insurance (NI) cut, which would be the third since last autumn. The Conservatives are promising to reduce employee NI from the current 8 per cent to 6 per cent by April 2027, and to abolish self-employed NI. The manifesto also reiterates the party’s “ambition” to fully abolish NI “when financial conditions allow”.

Employee NI stood at 12 per cent until last year, but chancellor Jeremy Hunt cut it by 2 percentage points in both his Autumn Statement and then the Spring Budget. Self-employed NI was reduced from 9 per cent to the current 6 per cent. A further 2 percentage points NI cut would save £349 a year for employees earning £30,000, and £754 for those on a salary of £55,000 or above.

The manifesto also repeats the Conservatives’ “triple lock plus” promise to increase the personal tax allowance for pensioners every year, so that it rises in line with the state pension. 

Since tax thresholds are frozen but the state pension increases every year by the highest of wage growth, inflation or 2.5 per cent, in the absence of policy changes pensioners could soon start paying back a portion of the state pension in income tax.

Sarah Coles, head of personal finance at Hargreaves Lansdown, noted that both tax pressures on working people and the risk of more state pensions being taxed stem from the freezing of income tax thresholds. 

“The frozen personal allowance hasn’t just damaged pensioners. Those on low incomes also face a horrible tax bill for the first time. Another NI cut would bring down the rate of tax they pay, but doesn’t unwind the fact they’re paying this tax in the first place,” she added. VC

New relief for landlords

The manifesto also made mention of a new landlord policy, suggesting the Conservatives would introduce a two-year temporary capital gains tax relief for landlords who sell to their existing tenants. Alongside this, the Party committed to its previous Renters Reform Bill such as scrapping Section 21 no-fault evictions. The Bill had been expected to be made into law but was cancelled when Parliament was dissolved. TL

No IHT cut

Those hoping for additional tax cuts were left disappointed and a much-mooted cut to inheritance tax, or a higher threshold before the levy is charged, were both absent from the manifesto. Chancellor Jeremy Hunt had previously called the tax "profoundly anti-conservative", boosting hopes that the IHT might be reformed in order to draw a distinctive line between the two main parties' tax policies. TL