Lib Dems pledge to change rate of income tax

The Liberal Democrats party has published its manifesto for the upcoming General Election, which includes a promise to scrap the Capital Gains tax allowance, and to change the rate of income tax.

The party is supporting an extra 1p on all income tax rates – for the basic rate, the higher rate and also the additional rate of income tax – which it claims will raise more than £7bn at the end of the Parliament.

While leader, Jo Swinson, outlined the party’s hope is for the electorate to view this as an honest message to the public about the funding pressures for public services, the pledge leaves the Lib Dems as the only UK-wide party advocating basic-rate income tax rises.

Commenting on the manifesto’s personal finance policies, AJ Bell personal finance analyst, Laura Suter, said: “The Lib Dems say they want to level the playing field between how money earned from investments and from employment is taxed, and so will scrap the Capital Gains Tax allowance and tax gains as if they were income.

“This will be a hit to higher earners, who will see the tax on their investment gains increased from 20% to 40% or even 45%. The party will also increase income tax by 1p, to generate £7bn a year for the NHS and social care.

“The proposal to link stamp duty to the energy rating of a property feels like it has the potential to turn an already complex tax into a complete maze for homebuyers to navigate. Presumably you’d end up with different rates based on property values and also energy ratings, creating a nightmarish multi-tranche system.”

As part of the Lib Dems’ key promises in its manifesto, in terms of pensions, the party has vowed to ‘act on the pensions crisis’ that is ‘driving away the most experienced clinicians and worsening waiting times and the workforce crisis.’

Another particularly important pledge in this area is the promise to ‘retain the state pension triple-lock.’

Commenting on the party’s pension promise, AJ Bell senior analyst, Tom Selby, added: “Keeping the state pension triple-lock in place is an easy political win for the Lib Dems, who are understandably keen to shore up the all-important ‘grey vote.’

“But despite making political sense, this policy remains something of an oddity in the retirement landscape.

“Rather than increasing the real value of the state pension at random points in time – namely when inflation and earnings are low – it would be far more sensible to decide a ‘fair’ value for the state pension and then set a path to reach that point. This amount could then be pegged to earnings or inflation, so the value of the payment is protected.”

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