With just days to go until the general election, the UK’s main political parties have laid their policy cards on the table. Finance chiefs will be watching the polls closely, as the outcome of the election could have significant impacts on tax obligations, regulatory requirements, employee pension schemes and international trade.
Labour’s 133-page manifesto emphasises economic growth as a “number-one priority”, promising to cap corporation tax at 25%, enhance research and development and introduce a National Wealth Fund to support the green transition. The Conservatives offer a mix of tax relief and support measures for small businesses, with a focus on reducing regulatory burdens.
Both parties have committed to cracking down on tax dodging – a common theme across all of the UK’s main-contender manifestos.
“Frustratingly, there is very little to help business in any of the major party manifestos,” says David Ferriday, chief financial officer at manufacturing firm PP Control & Automation. “Companies, especially SMEs, have gone through significantly challenging times since the announcement and subsequent implementation of Brexit in 2016 – a systemic shock that was followed up by the pandemic, global supply chain issues, skyrocketing energy prices and two global conflicts.
“Exporting to and importing from the EU is now more difficult and there is no sign of improvement. Corporation taxes have risen and the UK is no longer as attractive to overseas investors as we once were, especially now that we are sitting outside of the EU market.”
Here are the key finance-related pledges from the UK’s political manifestos.
The Labour Party
Tax
The party tipped to form the next government has ruled out increases on income tax, national insurance and VAT, but has left its options open on capital gains tax and pension tax relief.
Labour has committed to tackling tax avoidance by closing the loopholes in Sunak’s non-domicile plan and cracking down on tax dodgers. The manifesto addresses this by proposing a wider range of tax schemes to be reported to HMRC and strengthening the department’s powers to enforce payment of tax in investigation cases.
The party has committed to capping corporation tax at 25% and to retaining a permanent full-expensing system for capital investment and the annual investment allowance for small businesses.
Labour says it will publish a roadmap for business taxation for the next parliament. The exact details are yet to be revealed, but it promises to “level the playing field between the high street and online giants,” according to the manifesto.
The party has committed to always subjecting fiscal events that make significant changes to taxation or spending to an independent Office for Budget Responsibility (OBR) forecast. They have also committed to only one major fiscal event a year, much to the relief of finance professionals.
Investment and fiscal support
There is a strong emphasis on fostering innovation through enhanced research and development (R&D) credits, which Labour says will incentivise businesses to invest in new technologies and processes.
The party has also outlined a proposal for a National Wealth Fund, which will invest £7.3bn in projects that stimulate the economy and accelerate the transition to a more sustainable future.
The manifesto also suggests reforms to the British Business Bank, including a stronger mandate to support growth across the whole country and make it easier for SMEs to access capital.
Green finance
Labour has promised to “make the UK the green-finance capital of the world,” mandating that UK-regulated financial institutions – including banks, asset managers, pension funds and insurers – and FTSE 100 companies develop credible transition plans that align with the climate goals of the Paris Agreement.
But there are still lingering questions around the scope and detail of transition plans, as well as the enforcement of such mandates. Namely, whether or not there will be penalties for those who fall short of climate goals remains an open question.
Regulatory environment
Labour wants to introduce a new Regulatory Innovation Office, linking up existing regulatory functions across government as part of a plan to create a “pro-innovation regulatory framework”. This office will help regulators to update regulation, speed up approval timelines and coordinate issues that span existing regulatory boundaries.
The manifesto makes no reference to the audit reform previously proposed by the Labour Party, which would establish a new regulatory body to oversee the audit sector and increase transparency and trust in financial reporting.
Wages and pensions
Labour has committed to extending the National Living Wage – which applies to workers aged 21 and over – to cover workers aged 18 to 20. It will also remove the discriminatory age bands, so all adults are entitled to the same minimum wage.
The party also promises to ensure that minimum wage is a “genuine living wage” and will expand the remit of the independent Low Pay Commission to account for changes in the cost of living.
Labour has also promised to undertake a review of the pensions landscape and adopt reforms to workplace pensions to improve pension outcomes.
International trade
Labour’s manifesto stresses the need for an overarching trade strategy, which, it says, will give UK businesses better access to international markets.
The party has pledged to keep the UK out of the EU, its customs union and its single market. However, Labour insists it will “make Brexit work” by seeking to “improve the UK’s trade and investment relationship with the EU by tearing down unnecessary barriers to trade”.
Moreover, it promises to “secure a mutual recognition agreement for professional qualifications” with the EU, which will “help to open up markets for UK service exporters”, according to the manifesto.
The Conservative Party
Tax
Unlike Labour’s manifesto, the Tory document promises no new taxes on pensions and no increase to capital gains tax. It focuses on tax cuts, which include abolishing the main rate of National Insurance for the self-employed and reducing the rate for other employees.
As part of a plan to encourage growth for smaller businesses, the VAT registration threshold is set at £90,000, removing 28,000 small businesses from the obligation to pay VAT altogether.
Investment and fiscal support
There is a commitment to local growth and investment in the manifesto. It emphasises the need to provide SMEs with more financing options by expanding open finance and exploring the creation of regional mutual banks.
The party would introduce a £4.3bn support package for business rates over five years, reducing the financial burden on high street, leisure and hospitality businesses, which have faced significant challenges in recent years.
The Conservatives have pledged to increase public spending on R&D, from £20bn to £22bn, in the next Parliament. According to the manifesto, this will foster innovation across various sectors, ensuring the UK remains competitive on the global stage.
Regulatory environment
A central aspect of the manifesto is its focus on reducing regulatory burdens. The Conservatives propose lifting the employee threshold for reporting requirements, which, it says, will save small businesses struggling with extensive compliance demands at least 1 million hours of administrative work per year.
The Conservatives said they would promote digital invoicing and improve enforcement of the Prompt Payment Code.
The party also plans to remove or reform more than half of the EU laws inherited by the UK by July 2026. This will save businesses £1bn in administrative costs, according to the manifesto.
Green finance
The Conservatives remain committed to achieving net zero emissions by 2050, but will do so in a “pragmatic and proportionate” way that “eases the burdens” on businesses.
The party guarantees no new green levies or charges so businesses can manage their operating costs effectively while contributing to environmental sustainability.
Wages and pensions
Unlike Labour, the Tories want to introduce the pensions triple lock, guaranteeing that pensions rise every year. This will boost the state pension to £13,200 a year in five years’ time, according to predictions in the manifesto.
To address the talent gap in the labour market, the party has pledged to end “low-quality” university degrees and create 100,000 new apprenticeships in England by the end of the next parliament.
Best of the rest
The Liberal Democrats are committed to bringing the UK back into the EU’s single market. The Liberal Democrat manifesto also sets out significant changes to corporation tax, aiming to raise levies on banks and reform capital gains tax.
The party would also introduce a national financial inclusion strategy and require both the Financial Conduct Authority and the Prudential Regulation Authority to better account for financial inclusion measures, such as delivering Sharia-compliant student finance and supporting vulnerable consumers.
The Greens promise £40bn a year of green investment and a carbon tax to accelerate the transition to a green economy. The party promises not to raise the main rates of corporation tax and says it would continue a windfall tax on energy companies. It would also introduce a similar tax on banks, which have benefited from high interest rates.
Reform UK’s manifesto focuses on high wages and a low-tax economy. It outlines “critical reforms” in the first 100 days that include: freeing more than 1.2 million SMEs from corporation tax; abolishing IR35 rules to support sole traders; and raising the VAT threshold to £120,000.
