Green Party outlines plans for Consolidated Income Tax in manifesto

The Green Party has announced its new manifesto including a radical plan to merge National Insurance, Capital Gains Tax, Inheritance Tax, Dividend Tax and Income Tax into one Consolidated Income Tax.

Launching the manifesto at an event in London, the party’s co-leader, Jonathan Bartley, announced plans to instil a Universal Basic Income for everyone – set at £89 a week and paid regardless of income, employment status or age.

This handout, potentially worth £86.2bn, could particularly benefit women in unpaid caring roles, either for children or elderly or ill relatives.

Commenting on the plans for one Consolidated Income Tax, AJ Bell personal finance analyst, Laura Suter, said: “The Greens clearly want to simplify the tax system, and they say doing so will stop wealthier individuals from using tax breaks to game the system.

“This means anything you make in a year would be subject to the same tax rate, regardless of whether you’ve earned it through income, from investments or through inheritance.

“The Greens say the move will cost £22bn, but there is no detail on what that the rate of Consolidated Income Tax would be.

“If it’s set at the current basic rate of 20%, that would be a massive giveaway for high earners, cutting their tax rate from a maximum of 45%, and handing a big income boost. Conversely, if it’s set at a higher rate, say 40%, that would hit low income families with a whopping tax increase.”

The response from AJ Bell, the UK investment platform, highlighted that the Green Party’s plans would see investors facing higher taxes – if the capital gains tax allowance and dividend tax allowance were scrapped – meaning that up to £14,000 of investment earnings a year that are currently tax-free would instead be taxed.

The Green Party manifesto also revealed plans for a ‘reduction of tax-free drawdown on pensions to £40,000,’ which AJ Bell interpreted as limiting the tax-free cash that people are entitled to from the age of 55, at £40,000.

AJ Bell senior analyst, Tom Selby, added: “Given that a lack of pension provision remains one of the most pressing challenges facing society today, this retrograde step would risk damaging the retirement prospects of an entire generation.

“It would also be unfair on younger people whose ability to build up tax-free cash entitlement will be constrained in a way previous generations weren’t.

“Furthermore, we assume those who have already saved in a pension on the basis that 25% would be tax-free from age 55 would receive some sort of protection under the proposals. Failure to do this would cause untold damage to trust in pensions.

“If that is the case then the Green Party need to spell out how this transition, which would create extra complexity for savers and providers alike, would work from a practical perspective.”

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