The Conservative Party has launched its manifesto in a bid to woo voters ahead of July’s general election with a package of tax-cutting measures.
As well as another 2p national insurance cut, Rishi Sunak has pledged to protect pensions from tax and offer more help to first-time buyers, as he looks to build a broad coalition of voters.
We look at what the proposed policies would mean for your finances.
Rishi Sunak unveiled a package of tax-cutting measures in a bid to woo voters
Tax: An NI cut and no VAT or income tax rise
The Conservatives pledged to cut taxes for ‘earners, parents and pensioners’ and unveiled £12billion worth of tax cuts in the next parliament.
Top of the agenda is another 2p cut to national insurance, from 8p to 6p. It comes after Jeremy Hunt slashed NI contributions from 12p to 10p in the March Budget, just two months after another 2p cut took effect in January.
The Tory manifesto also pledged to abolish the main rate of self-employed NI contributions entirely, after scrapping Class 2 contributions in April.
The Tories said the move would be funded by welfare reforms and cracking down on the ‘unsustainable’ rise in working age welfare.
| Salary | Current annual NI | NI after 2% reduction | Annual saving |
|---|---|---|---|
| £20,000 | £594 | £446 | £149 |
| £30,000 | £1,394 | £1,046 | £349 |
| £40,000 | £2,194 | £1,646 | £549 |
| £50,000 | £2,994 | £2,246 | £749 |
| £60,000 | £3,211 | £2,457 | £754 |
| £70,000 | £3,411 | £2,657 | £754 |
Shaun Moore, tax and financial planning expert at Quilter said: ‘The headline figure is that someone earning £50,000 today will be £749 better off under the proposed rules set to be announced in the manifesto.
‘Similarly, someone on around the average salary in the UK of £35,000 will be £449 better off per year. Whether this turns the dial enough for a party that is lagging badly behind in the opinion polls is yet to be seen.
‘This may be a case of too little, too late. The reality is that many people are looking to the difficulties that public services are facing at the moment and wondering how such a tax cut like this will impact the NHS, schooling and other state support.
‘Balancing individual financial relief with the sustainability of public services will be key in ensuring this change benefits the broader society if the party has the chance to enact it.’
The change to national insurance will have no effect on pensioners who don’t pay the tax.
The party also promised to not raise income tax or VAT.
However, the decision not to end the freeze on income tax thresholds will continue the fiscal drag that has seen more income dragged into the tax net at the lower end and a record number now paying 40 per cent and 45 per cent tax rates.
Those earning more than £100,000 will continue to lose their personal allowance and pay a 60 per cent tax rate up to £125,140.
> Simon Lambert: Britain’s tax system is a mess – here’s how to fix it
Pensions: The triple lock plus
The Conservatives will hope that the ‘triple lock plus’ policy, which pledges that the state pension is never taxed, will sway pensioners.
In addition to the triple lock uprating the state pension, in line with the highest of inflation, earnings or 2.5 per cent, the tax-free personal allowance for pensioners will also rise to match the annual state pension.
The £12,570 personal allowance has been frozen since 2021, which means more pensioners are now paying income tax if they receive the £11,500 a year full state pension and some private pension income.
The pledge to retain the triple lock while continuing to freeze the personal allowance, meant the state pension was projected to surpass the basic rate tax threshold. The triple lock plus ends that.
The Conservatives claim that their policy will mean the average pensioner is forecast to see an increase in the state pension of £428 next year and £1,677 by the end of the parliament, reaching £13,200 annually.
They say pensioners will get an income tax cut of £95 next year, rising to £275 by the end of the parliament.
We explain how the Conservatives’ state pension triple lock plus plan would work.
The Tories have also promised to protect pension savers, stating: ‘Under our new Pensions Tax Guarantee, the Conservatives will not introduce any new taxes on pensions. We will maintain the 25 per cent tax free lump sum and maintain tax relief on pension contributions at their marginal rate. We will not extend National Insurance to employer pension contributions.’
All current pensioner benefits will remain in place, including free bus passes, winter fuel payments, free prescriptions and TV licences.
Housing: Stamp duty and Help to Buy
The Conservatives have pledged to unveil a £1billion package of support to help first-time buyers, admitting that it has become harder to buy a home.
The party says it would introduce government-backed mortgages to help first-time buyers get on the property ladder with a 5 per cent deposit.
The scheme, which is modelled on the Help to Buy equity loan scheme that ended last year, could be used for all home purchases of less than £400,000.
David Sturrock, senior research economist at the Institute for Fiscal Studies said: ‘A new Help to Buy equity loan scheme could help potential homebuyers to get onto the housing ladder by reducing the deposit they require and making repayments more manageable in the short-term.
‘The Conservatives’ proposed scheme would not only expand access to credit but also be a subsidy to the housing market because the equity loan is initially interest-free.
‘While the Government may end up making a profit on the scheme if house prices rise, experience from past schemes suggests that some of the subsidy will be captured by developers in the form of higher prices and profits and that some who buy would be able to do so without the scheme.
‘Any new scheme should seek to learn lessons from the past.’
Sunak also announced that the first-time buyers’ stamp duty threshold will be made permanent.
The temporary nil-rate threshold of £425,000 for first-time buyers, which was due to fall to £300,000 in April 2025, will be made permanent.
Elsewhere, a two-year scheme would allow landlords to sell homes to their tenants without paying capital gains tax and the party has pledged to build 1.6million new homes over the next parliament.
> Stamp duty calculator: How much you pay to move home
Child benefit: A rise to £120,000
The Conservative manifesto says they will raise the threshold for child benefit payments from £60,000 to £120,000 – and crucially assess income on a household basis.
Child benefit is currently £25.60 per week for the eldest child and £16.95 for additional children, but it is removed for higher earners.
Child benefit starts to be clawed back if one member of the household earns £60,000 and payments stop altogether at £80,000.
The thresholds for removal were raised in the recent Budget from the £50,000 to £60,000 bracket they had been stuck at since the child benefit high income charge was introduced by former Chancellor George Osborne.
> Should you claim child benefit? What it’s worth – and common traps
Child benefit removal is currently based on either parent’s individual income rising above the threshold, which penalises single earner or unequal earner families.
Currently, a family with two earners both on £59,000 would keep all their child benefit, whereas a household with just one earner on £80,000 would lose all of it.
The threshold at which parents will have to start to pay back the child benefit will now double to £120,000 and be assessed on household income. Child benefit will then be removed until household income reaches £160,000.
The Conservatives say this will benefit 700,000 families and save them an average of £1,500.
The party recommitted to ending the ‘unfairness’ of the current system, which the Tories themselves brought in 13 years ago, as it calculates the charge on one earner rather than total household income.
Economy: balancing the books
How will the Conservatives pay for these tax cuts?The party has positioned itself as the party of economic security, saying they have fully funded its £17billion per year of tax cuts, and a big hike in defence spending.
The party says it will reduce the projected welfare bill by £12billion, crack down on tax avoidance and evasion, as well as cut civil service numbers.
Some economists are sceptical that cracking down on these inefficiencies will deliver.
Paul Johnson, director of the Institute for Fiscal Studies said the party is ‘right to identify this as a challenge to address.’
However, it is very unlikely that it will be able to deliver £12billion in savings a year.
‘Some have already been announced and included in the official fiscal forecasts; others are unlikely to deliver sizeable savings on the timescale that the Conservatives claim.
‘The hope seems to be that, since spending on disability benefits is rising rapidly, one can simply ‘reform disability benefits’ and hold spending down.
‘But halving the number of people that successfully apply for disability benefits from its current level would not be easy and would need definite, clear policies that require difficult decisions. These are not stated.’
He also points to the lack of detail on the £10-20billion of cuts to spending on unprotected public services, which were implied in the latest Budget.
‘Indeed the billions of savings from cutting civil service numbers and the rest noted in the manifesto have been earmarked to fund the additional defence spending, and would come on top of those cuts.
‘This manifesto remains silent on the wider problems facing core public services – and if you think those civil servants, management consultants and quangos were delivering anything, these plans imply an even tougher time than set out back in March.’
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.