If you don’t want to read any further – whoever gets elected, there’s a good chance you’ll pay more tax.
But if you’re interested, and you should because it’s your money on the line, here’s a closer look at the Conservative and Labour pledges, what it means for your taxes and how you could reduce your tax bill.
This isn’t personal advice. If you’re unsure about a certain course of action, take financial advice. ISA, Pension and tax rules can change, and their benefits depend on your circumstances.
You might pay more tax
This isn’t just because of how the maths stacks up on the pledges both main parties have given.
It’s also because so many spending cuts have been built into assumptions. So, unless we get particularly robust economic growth in the near-term, sticking with the fiscal rules could leave the government with a difficult choice between incredibly uncomfortable cuts or painful tax rises.
Neither of the main parties have pledged to tackle frozen income tax thresholds. That means, regardless of who’s elected, anyone who gets a pay rise is likely to face a bigger income tax bill – this is called fiscal drag.
However, the Conservatives have made additional pledges on National Insurance (NI). This would unwind the impact of those frozen thresholds for middle earners and self-employed people, who’ll be better off than if the tax freezes and NI cuts had never happened.
They’ve also pledged to raise the personal allowance for pensioners. While this might spare most of those who don’t get any income on top of the State Pension, pensioners paying basic-rate tax will still be paying more tax on their income.
Even if you’re better off when it comes to income taxes, you could find it very quickly unwound by other tax rises.
Savers and investors may be worried about more potential tax, because Labour hasn’t ruled out changes to capital gains tax and dividend tax.
Meanwhile, neither party has confirmed they’ll definitely be keeping the personal savings allowance.
Similarly, while nobody has proposed changes to pensions tax relief or tax-free cash, the Conservatives have ruled it out, but Labour haven’t.
Once we get into the realms of things that haven’t been categorically denied, the potential tax costs grow.
What you need to know about income tax
The biggest hit to tax would come from the frozen tax thresholds.
Someone earning £30,000 and getting pay rises of 4% a year will pay £620 more in tax between this tax year and the end of the freeze in 2028 than if the thresholds had risen.
The Conservatives have made some promises to offset this for some people.
They pledged to increase the personal allowance for pensioners in line with the triple lock, to cut the NI main rate by 2p, and axe the 6p NI rate for self-employed people.
The IFS calculates that adding these changes to frozen thresholds means employees earning between £24,000 and £62,000, and almost all self-employed people would pay less tax.
An employee on £35,000 would pay £260 less tax by 2028/29 and a self-employed person making the same would pay £1,230 less tax.
However, an employee working full-time on the minimum wage would pay £240 more tax thanks to the changes.
Despite the proposed change in the personal allowance for pensioners, once you factor in the impact of frozen thresholds so far, those paying basic-rate tax would still be paying £490 a year more tax overall.
Council tax bands
Both Labour and the Conservatives have pledged not to change council tax bands, and the Conservatives wouldn’t change discounts.
However, council tax is still likely to rise – if it goes up 7% a year, it would add £675 a year to the average Band D bill by 2029/30.
Capital gains tax
The Conservatives have ruled out raising capital gains tax (CGT), and are highlighting the fact that Labour won’t do the same.
However, you don’t have to raise the rate of tax to force people to pay more.
Cutting the tax threshold from £12,300 to just £3,000 over the past two years in all probability has meant more people paying more of this tax, without the rate changing.
Likewise, the freezing of the income tax thresholds has pushed more people into the higher-rate tax band, where they pay a higher rate of CGT too.
Labour haven’t proposed raising this tax. If they were to do it, they’d have a wide range of options, and we don’t know which they’d pick.
However, if they decided to equalise CGT with income tax, it would cost a higher-rate taxpayer with an £30,000 investment gain, £5,400.
Get our latest insights on what the General Election could mean for you and your money.
Dividend tax
This hasn’t merited a mention by either party – and changes haven’t been proposed or ruled out.
However, we know from how the Conservatives cut the dividend tax allowance that dividend tax can be raised by any government.
We could see any number of changes. But just to take an example, if they equalised dividend tax with income tax, someone making £5,000 in a year in dividends who pays basic-rate tax on it all would pay £506 more than they currently would. And someone paying higher-rate tax on it all would pay £281 more.
Pensions tax relief
Labour haven’t proposed changes to pension tax relief, and it was a long time ago that Rachel Reeves floated the idea of a flat rate of tax relief – and hasn’t mentioned it since.
It means we might not see any quick changes to pensions tax relief.
However, if a flat rate of 33% was introduced let’s say, a higher-rate taxpayer earning £95,000 and putting £40,000 into their pension would lose £2,800 of tax relief a year.
It’s important not to base your plans on guesswork, but if you’re intending to put money into your pension this year, and you have it available now, it might make sense to do so sooner rather than later. That way you know exactly where you stand.
Tax free cash
The 25% tax-free cash on pensions has been guaranteed by the Conservatives, but not Labour. They haven’t made any suggestion they will touch it, but won’t be pressured into making any assurances.
Fear of a change shouldn’t drive you into any sudden decisions. Withdrawing money from somewhere tax-efficient, where it has real growth potential, isn’t something you rush into.
Changes to tax-free cash would come at a cost.
Someone with a £500,000 pot can normally currently take up to £125,000 tax free. If tax free cash was cut to 20%, they could take £100,000. If the other £25,000 was taxed at basic rate over the course of their retirement, it would cost them £5,000. If it was all taxed at the higher rate, it would cost £10,000.
Tax on savings
Neither party has pledged to keep the personal savings allowance.
It would be politically difficult, because it’s such a popular tax relief, but it’s a relatively new one and nothing is set in stone.
Losing the allowance would cost someone with £1,000 in interest, £200 a year – assuming they don’t get the starting rate for savings and they’re not an additional-rate taxpayer.
It’s another reminder that tax allowances are never set in stone, so the best way to shelter your savings from tax is to consider a Cash ISA.
Stamp duty
The Conservatives have pledged to make the stamp duty holiday permanent for first-time buyers on the first £425,000 of the property value.
This is worth up to £6,250 compared to what they’d pay if the temporary holiday ends as scheduled.
We know from previous tax holidays that this risks pushing prices up, unwinding the saving.
What can investors and savers do about it?
We don’t think anyone should be making hasty decisions. But ISAs and pensions are great to make sure you don’t pay more tax than you need to, while saving and investing for your future.
Pay no UK tax on interest
Nothing to declare on a tax return
Save for a rainy day or for shorter-term goals
Inflation reduces the future spending power of cash.
Pay no UK income, dividend, or capital gains tax
Nothing to declare on a tax return
Invest for long-term goals – more growth potential over the long term compared to saving in a Cash ISA. But there are extra risks, including getting back less than you put in when investing in the stock market
Get tax relief on anything you put in – up to 45% (46% for Scottish rate tax payers)
Pay no UK income, dividend, or capital gains tax
Take up to 25% tax-free when you turn 55 (rising to 57 from 2028) with the rest taxed as income
Invest for retirement
Pay no UK income, dividend, or capital gains tax on investments held within one
Government bonus of £1 for every £4 you put in, capped at £1,000 each tax year
Withdraw without penalty to purchase an eligible first home after the account has been open for 12 months or after you turn 60.
Other withdrawals will usually mean a 25% government charge, so you could get back less than you put in. Using a Lifetime ISA for later life can also complement a pension, although it can impact your entitlement to means tested benefits.
Can open from age 18-39, can carry on adding money until your 50th birthday
Want to stay updated with the latest on the 2024 general election?
Sign up to our editor’s choice email and we’ll send you our top stories from the week, every saturday morning – including all our latest insights on the 2024 general election and what it means for your money.