How will the election affect how much tax you pay?

Each political party has a different idea about tax and what should be changed. Tax itself is complicated enough, let’s break down what each party is saying.

The Conservatives

The Conservatives have previously talked about raising the higher-rate income tax threshold in England from £50,000 to £80,000.

At the moment, a 40% tax is charged on incomes between £50,000 and £150,00, however, this is only in England, Scotland and Wales set their own tax bands.

This would not be good news for higher-rate taxpayers, as they could end up paying more tax on their pension savings.

Tories have also suggested that they were considering scrapping inheritance tax. The current rates mean you can only inherit £325,000 tax-free, everything after that has a tax rate of 40%.

They have also said they will look at the pension tax rules for higher earners, including the lifetime allowance (£1.055 million) and annual allowance (£40,000). They will look at reducing the tapering allowance on pensions, reducing the tax-free amount that can be saved into a pension for those earning more than £150,000.

They have also said they have plans to raise the threshold for national insurance from £8,632 to £12,500. This means that if you earn less than £12,500 a year you will pay no national insurance contributions.

Labour 

The Labour party has proposed lowering the threshold of 45% income tax from £150,000 to £80,000 and have said they will apply a 50% tax rate to incomes of over £123,000.

They have pledged to scrap the current inheritance tax system and impose a lifetime cap of £125,000 that you can inherit tax-free.

The Liberal Democrats

The Lib Dems will retain the Triple Lock on the basic state pension so that it rises in line with the higher wages and prices.

They want to reform the current regressive system of pension tax relief and abolish employee national insurance payments on those contributions.

Will tax income from wealth and income from work in the same way in order to remove the incentive for the wealthy to shift employment income into other forms – such as capital gains or dividends – in order to pay less tax.

They would replace the inheritance tax with a system that would ensure the vast majority of people pay less tax on transfers of wealth and would prevent people from avoiding inheritance tax through pre-emptively gifting wealth or property to relatives.

It’s completely up to you the way that you vote, this election affects everyone’s future, and your vote counts. Come back for more on the General Election including how each party is dealing with transport, healthcare and more.