General Election 2024: Lib Dems propose increases in taxes on banks, flights and capital gains

The party’s revenue-raisers (with anticipated revenues for 2028-29, the likely final year of the next Parliament) are –

Reforms to capital gains tax	£5,210 million
Restoring the bank surcharge and bank levy to 2016 levels	£4,250 million
Increases to taxes on flying targeting frequent flyers and private jets	£4,000 million
Changes to energy profits levy including scrapping investment allowance	£2,120 million
Increase to Digital Services Tax	£2,090 million
Tax on share buybacks	£1,420 million
‘Sewage Tax’ on water company profits	£260 million
Tobacco company profits levy	£290 million
Tackle tax avoidance and evasion	£7,230 million

The manifesto is available here and the Lib Dems have published their costings here. A fuller list of tax and related proposals from the party is set out below.

Key spending proposals include an £8 billion package to support health and care services in England, £7 billion to increase troop numbers and international development spending and £4 billion of social security changes.

The manifesto, titled ‘For a Fair Deal’, is based around five key themes –

• A fair deal on the economy – businesses and entrepreneurs should be supported to create worthwhile jobs in every part of the UK.
• A fair deal on public services – stressing the importance of a “strong NHS” which is open to all as well as education investment as “every child deserves the best possible start in life.”
• A fair deal on the environment - the party pledges to hold big companies to account by giving them a duty to protect the environment.
• A strong United Kingdom and a fair international order - the Lib Dems would move to conclude a new comprehensive agreement with Europe which removes as many barriers to trade as possible.
• A truly fair democracy - the manifesto commits to introducing proportional representation for electing MPs and local councillors in England, and capping donations to political parties.

Lib Dems’ tax and related proposals

(NB. This section generally uses the party’s own wording, though in places text may have been abridged or truncated. All characterisations of proposals or suggestions of their impacts are the party’s own.)

Personal taxes

• Fairly reform Capital Gains Tax: Under our plan, there would be three rates of Capital Gains Tax, like there are for income tax: 20% (for gains up to £50,000), 40% (between £50,000 and £100,000) and 45% (over £100,000). Unlike now, where your Capital Gains Tax rate is determined by adding together your income and capital gains, the rate would be based solely on your gains.
  • The capital gains tax-free allowance would go up from £3,000 to £5,000, and crucially, we would also introduce a new “inflation allowance”, so that any gains that are purely the result of inflation are not taxed at all. There would also be a targeted relief for small businesses.
  • We estimate that these reforms would raise £5.2 billion a year in 2028-29, to invest in our NHS and improve local health services for everyone.
• End retrospective tax changes such as the loan charge, and review the government’s off-payroll working IR35 reforms to ensure self-employed people are treated fairly.
• Priority for tax cuts, when the public finances allow, would be to cut income tax by raising the tax-free personal allowance, benefitting the vast majority of families and taking more low-paid workers out of paying income tax altogether.

Business taxes

• Reverse Conservative cuts to bank taxes: Reverse Conservative tax cuts for the big banks, restoring Bank Surcharge and Bank Levy revenues to 2016 levels in real terms.
• A proper windfall tax on oil & gas super-profits: Scrap the ‘investment allowance’ loophole, increase the headline rate and extend it to profits since October 2021 when Liberal Democrats first called for its introduction.
• Raise the Digital Services Tax on tech giants: Increase the Digital Services Tax on social media firms and other tech giants from 2% to 6%.
• Introduce a 4% tax on share buybacks: Introduce a 4% tax on the share buyback schemes of FTSE-100 listed companies, to incentivise productive investment, job creation and economic growth.
• Sewage tax on water company profits: Apply an additional 16% tax on water company profits.
• Tobacco company profits levy: Set up a new levy on tobacco company profit margins with an inbuilt anti-avoidance mechanism.
• Replace business rates: Boost small businesses and empower them to create new local jobs, including by abolishing business rates and replacing them with a Commercial Landowner Levy to help our high streets. (This appears to be a revenue neutral change.)
• Gambling levy: Combat the harms caused by problem gambling by introducing the planned compulsory levy on gambling companies to fund research, prevention and treatment.

Tax compliance

• Tackle tax avoidance and evasion: Narrow the £36 billion annual tax gap by investing an extra £1 billion a year in HMRC to improve customer support and boost compliance and anti-avoidance activities.
• Work with partners in international forums, including the OECD and the UN, to tackle international corporate tax avoidance for the benefit of all countries and make the case for increasing the global minimum rate of corporation tax to 21%.

Economy

• Manage the public finances responsibly to get the national debt falling as a share of the economy and ensure that day-to-day spending does not exceed the amount raised in taxes, while making the investments our country needs.
• Protect the independence of the Bank of England and keep the inflation target of 2%.
• Ensure that all fiscal events are accompanied by independent forecasts from the Office for Budget Responsibility.
• Introduce a national financial inclusion strategy and require both the Financial Conduct Authority and the Prudential Regulation Authority to have regard to financial inclusion, such as protecting access to cash, especially in remote areas, supporting banking hubs, expanding access to bank accounts, delivering Sharia-compliant student finance and supporting vulnerable consumers.

Business and jobs

(See also Business Taxes, above)

• Re-establish the Industrial Strategy Council and put it on a statutory footing, to ensure vital oversight, monitoring and evaluation of the industrial strategy for the long term.
• Aiming for at least 3% of GDP to be invested in research and development by 2030, rising to 3.5% by 2034.
• Unlock British businesses’ global potential, including by ensuring that all information small and medium-sized enterprises need on trade is readily available from a single point of contact, with tailored support for those who need it.
• Support the whisky industry by reviewing the UK excise duty structure to better support whisky exports.
• Require all government agencies and contractors and companies with more than 250 employees to sign up to the prompt payment code, making it enforceable.
• Replace the apprenticeship levy with a broader and more flexible skills and training levy.
• Modernise employment rights to make them fit for the age of the ‘gig economy’, including by:
  • Establishing a new dependent contractor employment status in between employment and self-employment, with entitlements to basic rights such as minimum earnings levels, sick pay and holiday entitlement.
  • Reviewing the tax and National Insurance status of employees, dependent contractors and freelancers to ensure fair and comparable treatment.
  • Reviewing rules concerning pensions so that those in the gig economy don’t lose out, and portability between roles is protected.
  • Shifting the burden of proof in employment tribunals regarding employment status from individual to employer.

Energy, environment and transport

• Introducing a new subsidised Energy-Saving Homes scheme, with pilots to find the most effective combination of tax incentives, loans and grants, together with advice and support.
• Helping people with the cost of living and their energy bills by implementing a proper, one-off windfall tax on the super-profits of oil and gas producers and traders.
• Support British industry to cut emissions, including by implementing the Carbon Border Adjustment Mechanism for high-emission products, protecting UK businesses from unfair competition.
• Tackle the national scandal of sewage-polluted rivers, waterways and beaches with measures including a Sewage Tax on water company profits.
• Create a nature-positive economy, tackle plastic pollution and waste, and get Britain recycling by introducing a deposit return scheme for food and drink bottles and containers, working with the devolved administrations to ensure consistency across the UK, learning the lessons from the difficulties with the Scottish scheme.
• Make it easy and cheap to charge electric vehicles by cutting VAT on public charging to 5%.
• Reduce the climate impact of flying by:
  • Reforming the taxation of international flights to focus on those who fly the most, while reducing costs for ordinary households who take one or two international return flights per year.
  • Introducing a new super tax on private jet flights, and removing the VAT exemptions for private, first-class and business-class flights.

Health

• Take action to prevent tooth decay by scrapping VAT on children’s toothbrushes and toothpaste.
• Introducing a new levy on tobacco company profits to help fund healthcare and smoking cessation services.
• Extending the soft drinks levy to juice-based and milk-based drinks that are high in added sugar.

Education and families

• Review further education funding, including the option of exempting colleges from VAT.
• Establishing a review of higher education finance in the next Parliament to consider any necessary reforms in the light of the latest evidence of the impact of the existing financing system on access, participation and quality, and make sure there are no more retrospective raising of rates or selling-off of loans to private companies.
• Give parents genuine flexibility and choice in the crucial early months by doubling Statutory Maternity and Shared Parental Pay to £350 a week and introducing an extra use-it-or-lose-it month for fathers and partners, paid at 90% of earnings.
• Make all parental pay and leave day-one rights, and extend them to self-employed parents.
• Introducing a ‘Toddler Top-Up’: an enhanced rate of Child Benefit for one-year-olds.

Pensions and safety net

• Tackle child poverty by removing the two-child limit and the benefit cap.
• Support pensioners by protecting the triple lock so that pensions always rise in line with inflation, wages or 2.5% – whichever is highest.
• Reduce the wait for the first payment of Universal Credit from five weeks to five days, and restore the full rate of UC for all parents regardless of age.
• Set a target of ending deep poverty within a decade, and establish an independent commission to recommend further annual increases in Universal Credit to ensure that support covers life’s essentials, such as food and bills.
• Increase Carer’s Allowance and expand eligibility for it by raising the amount carers can earn and introducing an earnings taper to end the unfair cliff-edge.
• Give everyone the chance to enjoy a decent retirement by:
  • Developing measures to end the gender pension gap in private pensions and ensure working-age carers can save properly for retirement.
  • Improving the State Pension system by investing in helplines to ensure quicker responses to queries and resolution of underpayments.

Local government and housing

• Give local authorities new powers to control second homes and short-term lets in their areas by allowing them to increase council tax by up to 500% where homes are being bought as second homes, with a stamp duty surcharge on overseas residents purchasing such properties.
• Help motorists in rural areas who face higher fuel costs by expanding Rural Fuel Duty Relief.
• Trialling Community Land Auctions to ensure that local communities receive a fair share of the benefits of new development in their areas and to help fund vital local services.
• Encouraging development of existing brownfield sites with financial incentives and ensuring that affordable and social housing is included in these projects.

Political reform and international

• Removing the ability for the UK Parliament to unilaterally change the powers of the devolved parliaments or pass laws in their areas of responsibility.
• Allocate to the Scottish Parliament all the powers set out in the Scotland Act 2016, many of which have already been used by the Scottish Parliament, with others delayed at the request of the Scottish government.
• Complete the next stage of devolution in Wales by implementing the remaining Silk proposals, substantially reducing the number of powers reserved to Westminster, and increasing borrowing powers, as well as devolving Air Passenger Duty to put Wales on a fair playing field with Scotland and Northern Ireland.
• Fix the UK’s relationship with Europe and move to conclude a new comprehensive agreement which removes as many barriers to trade as possible.
• Put a stop to oligarchs from corrupt regimes channelling their money through the UK, including by closing the loopholes in economic crime legislation.