Labour manifesto leaves open a possible rise in employers’ NICs, says expert

The manifesto, which was published this week, also includes new proposals to disincentivise excessive pay, charging companies a 2.5% levy on earnings above £330,000 and 5% on those above £500,000. This levy will be in addition to the current employer's NIC of 13.8% on all pay, creating a tax rate of 18.8% at the highest end.

"A Labour government will guarantee no rises in income tax for those earning below £80,000 a year, and no increases in personal National Insurance Contributions or the rate of VAT," the manifesto said.

According to the manifesto, "95 per cent of taxpayers will be guaranteed no increase in their income tax contributions, and everyone will be protected from any increase in personal National Insurance contributions and VAT. Only the top 5 per cent of earners will be asked to contribute more in tax to help fund our public services".

However, if elected following the 8 June general election, the party has announced that income tax would increase to 45% for people earning over £80,000, and 50% for those on more than £123,000.

If elected, the party has pledged to reverse the cuts to the rate of corporation tax, increasing it to 26%. The current rate of corporation tax is 19%. However, it is due to reduce to 17% in 2020. In its Funding Britain's Future publication, Labour said that the rate would be increased to 21% from 2018-19, 24% from 2019-20 and 26% from 2020-21.

The manifesto confirms that Labour also proposes to reinstate the lower small profits rate of corporation tax. This was 20%, until it was abolished in 2015 when the main rate of corporation tax fell to that level. Labour proposes that this should be 20% from 2018-19 and 21% from 2020-21.

“Any increase in employers’ NIC contributions could place companies under more pressure. Coupled with an increase in corporation tax and the proposed levies on high earnings, it will start to slow growth and hiring,” Collins said.

“Cracks are already beginning to show- within some sectors, such as logistics and hospitality- following recent increases in the National Living Wage and introduction of the Apprenticeship levy,” he said

In the manifesto Labour said it would "take on the social scourge of tax avoidance through our Tax Transparency and Enforcement Programme, and close down tax loopholes". It said it would "give HM Revenue & Customs the resources and skills necessary to clamp down hard on those unscrupulous few individuals and companies who seek to avoid the responsibilities that the rest of us meet".

The party also said it would introduce a financial transaction tax (FTT) on derivatives and bond trading and share dealing, which would be an expansion of the 0.5% stamp duty that already applies to share transactions.