The 2010 General Election may have been and gone, but the hung parliament means it is still not clear just what the change of government will mean for take home pay. All the parties have policies related to taxation, and The Salary Calculator has tried to show you what their different policies may mean to you. Enter your salary details in the form below, and see how your annual take-home might be affected if the different policies come into law.
Note: These are estimated figures only, based on the limited information the parties have made available. More information below. If you can help provide more detailed information please let us know.
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The Election Comparison Calculator uses the information made available by the parties to estimate what the impact on you of those policy changes would be. In a lot of cases, not all of the details are available (for example, changes to tax bands or tax rates). The current rates and bands have been used, with the exception of National Insurance contributions which reflect the 1% increase already set out by the Chancellor to take effect from April 2011. Since tax bands usually increase in line with inflation, it should be expected that by the next budget these would change but this information is not yet available.
Not all of the parties have made specific policy statements about every area of income tax / national insurance / pensions. The Election Comparison Calculator assumes that if no policy statement on a subject has been made by the party, no change would be made by them in their next budget. This means that the blind person's allowance, marriage credit and student loan repayments are the same across the board, as well as the reduction of the personal allowance for those earning over £100,000. Details of the general information used by the calculator are on the page about The Salary Calculator. Party-specific details are below:
PAYE tax / NI contributions are not the only way that the government can gather revenue, and they are not the only ways in which the parties' tax policies differ. Inheritance tax, VAT, corporation tax and many other variables will be debated during the election campaign but they are not relevant to this calculator and are thereforee not included. This may mean that although you may think you would be better off under a certain party, other tax changes recommended by that party may have a negative effect on your total disposable income.
As the current ruling party, the Labour policy is essentially the same as the current tax / NI system. Alistair Darling announced plans to increase employee National Insurance contributions from 11% to 12% between the primary threshold and the upper earnings limit, so this change has been included in the calculations above.
Labour have also said that they will reduce the pension tax relief for those earning over £130,000 (currently, pension contributions are tax-free). These are not included in the calculations, however, as the reductions in tax relief are rather complex and Labour do not intend to do this as part of PAYE - all affected people would already be submitting a tax return, and this would be calculated at that stage.
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Although the Conservatives are usually not in favour of high taxes, they recognise that now, just recovering from a recession, is not the time to make drastic cuts to taxes. Temporarily at least, the 50% tax rate would remain. They are very much against Labour's increase in National Insurance but it appears they would not remove it immediately but instead work around it, by increasing the primary threshold at which you start paying NI and also increasing the upper earnings limit.
The Conservatives also say they will reward marriage in the tax system but no details as yet are available.
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The Lib Dems say they will increase the personal allowance to £10,000 - meaning those earning under £10k would pay no tax at all. This is a significant increase on the current limit for the under-65s of £6,475, but will not make much difference to those over 65.
Like Labour, they also say they will reduce the tax relief on pension contributions, but the Lib Dems say this will mean a restriction of tax relief to the basic 20% tax rate for all individuals, not just those earning over £130,000. This means that those in the 20% band will still get their pension contributions tax free, but those earning more will only save 20% tax, even if they are in higher tax brackets.
In the longer term, the Lib Dems say they will replace Council Tax with a local tax which is based on ability to pay (i.e., a further income tax). However, the details are not yet available and they would only begin piloting with select local councils in the second year of their Parliament if they come to power, so this is not included in the calculator.
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The Green Party's policy on pensions is to end tax relief on pension contributions entirely - therefore, pension contributions are made after tax, not before.
In the short term, they would change National Insurance so that the primary threshold at which you start paying NI is the same as the income tax threshold. They would remove the NI upper earnings limit entirely, meaning that there is no level at which NI contributions go from 12% to 1% - significantly affecting higher earners. Long term, they plan to merge NI and income tax together, but this is not included in the calculator.
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UKIP have the most radical but also the simplest approach to PAYE. They believe the current system is too complex and propose to replace it with a flat tax approach. A personal allowance of £11,500 would be tax free, after which a flat rate of 31% would be charged - to replace both income tax and National Insurance. It is not clear whether or not pension contributions would remain tax free, the calculator assumes not.
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