Ryan FowlerThe Green Party has proposed a series of significant tax reforms in their latest manifesto. These include the equalisation of Capital Gains Tax (CGT) and dividend tax, an increase in National Insurance contributions, and an overhaul of pension tax relief.
Under their proposals, National Insurance would increase to 8% for those earning £50,270 or more. This change would cost someone earning £55,000 an extra £284 a year, while someone earning £100,000 would pay almost £3,000 more annually. The Greens also propose introducing a flat rate of pension tax relief and reforming inheritance tax.
Laura Suter, director of personal finance at AJ Bell, commented on the personal finance announcements in the Green Party manifesto: “The Green Party clearly have their eyes on wealth taxes as a way to raise revenue to support the rest of their manifesto pledges. Put together, their plans to equalise certain taxes and levy a new wealth tax would hit both investors and business owners. It’s now over to Labour, who release their manifesto tomorrow, to outline any tax rises they believe are needed to fund their plans for the country ahead of the election.”
Capital Gains Tax
Suter explained that the Green Party plans to increase CGT rates to equalise them with income tax rates. This move, similar to a proposal by the Liberal Democrats, would likely affect many investors and business owners. The government’s estimates suggest that a significant increase in CGT rates could cost the government £2 billion by 2026-27 due to changes in investor behaviour, such as holding onto assets longer or finding ways to shelter gains from tax.
National Insurance changes
The Greens plan to increase National Insurance costs for anyone earning more than £50,270. Currently, the rate drops from 12% to 2% beyond this threshold for employed individuals. The Greens propose charging 8% on the entire salary over the Personal Allowance, representing a significant tax increase for middle and higher earners.
Taxing investment income
The Greens also propose equalising dividend tax rates with income tax rates. This would significantly impact self-employed people who pay themselves through dividends and pensioners who take an income from investments. The current gap between dividend tax and income tax rates would be closed, with the lowest dividend tax rate increasing from 8.75% to 20%.
Pension tax relief
Tom Selby, director of public policy at AJ Bell, highlighted the Greens’ proposal for pension tax relief. The party suggests a flat rate of 20% for pension tax relief, replacing the current system where tax relief is granted at the individual’s income tax rate. Selby noted that this change could lead to significant issues, including additional tax charges for public sector employees and potential unrest among key workers.
Selby also pointed out the fairness issues between generations. Baby Boomers have benefited from more generous pension provisions and higher rate pension tax relief. The Greens’ proposal would limit younger workers, who are less likely to be higher rate taxpayers today, from benefiting from higher rate relief in the future.
