London Daily

Focus on the big picture.
Monday, Sep 21, 2026

Tory leadership: Do rivals tax pledges add up?

Tory leadership: Do rivals tax pledges add up?

Promises to cut taxes have become the dominant theme so far of the race to succeed Boris Johnson as Conservative party leader. But how are the plans costed and do they make economic sense?

Under current government plans, the total tax burden is set to reach its highest level since the 1940s, according to official forecasts.

The Tory leadership candidates are promising to reduce it but haven't specified whether they would pay for any shortfall in government finances with extra borrowing or cuts to public spending, instead emphasising that they would spur growth and thus increase government revenues.

Lord Lawson - a former Conservative chancellor - has warned: "There is a danger that this leadership election is going to descend into a Dutch auction of tax cuts which are not necessarily affordable."


Corporation tax


This is a direct tax on the annual profits of businesses - essentially, a form of income tax for companies.

The tax rate is currently 19% but from next April - under a decision by former Chancellor Rishi Sunak - it is due to increase to 25%.


Who wants to change it?

The newly appointed Chancellor Nadhim Zahawi has promised to scrap next year's corporation tax rise.

Jeremy Hunt - former foreign secretary - has gone further, suggesting he would reduce corporation tax to 15% in the autumn budget, due in October.

Liz Truss has said she wants to "keep corporation tax competitive".

Economic analysis

The economic think tank, the Institute for Fiscal Studies (IFS), has been crunching the numbers. IFS economist Stuart Adam calculates that:

*  cancelling the rise from 19% to 25% would cost £17bn a year

*  reducing the rate to 15% would cost another £14bn a year

The IFS says though that this potential £31bn annual cost doesn't allow for whether the corporation tax cut could lead to increased investment in the UK, which could make the final bill "substantially lower - though not enough for the tax cut to pay for itself".


Income tax


The basic rate of income tax is currently 20p in the pound and is paid on earnings between £12,571 to £50,270.

This rises to 40p in the pound for earnings above £50,270 and 45p in the pound for earnings over £150,000.

Former Chancellor Rishi Sunak announced a reduction in the basic rate to 19p but not until 2024-25.

Who wants to change it?

Nadhim Zahawi wants to bring the income tax cut forward by one year, making it 19p in 2023.

He would then reduce it to 18p in 2024.

"That will give households back £900 a year on average," he claims.

Economic analysis

According to IFS economist Stuart Adam, bringing the income tax cut forward to 2023-24 would cost a "one-off" £6bn.

It's thought reducing it further would cost another £6bn.


National Insurance


National Insurance (NI) is a tax on earnings and self-employed profits - paid by all workers, until they reach the state pension age.

Since April, they have been paying more in NI - an extra 1.25p in the pound. The rise - announced by Mr Sunak - was to fund health and social care.


To try to ease the impact of the changes, Mr Sunak raised the threshold - at which people start paying NI - to £12,570. But some of his leadership rivals say this isn't enough.

Who wants to change it?

Ms Truss and Tom Tugendhat - chairman of the foreign affairs committee - want to scrap April's NI rise.

Economic analysis

Reversing the NI rise would cost about £13bn a year, according to the IFS's Stuart Adam.

Carl Emmerson, deputy director of the IFS, said cuts to personal taxes such as NI "certainly won't be paying for themselves". He said while such tax cuts would put "more money in people's pockets", they risked contributing to inflation.



Fuel duty


This is a tax - along with VAT - included in the price of petrol, diesel and other types of fuel.

The price of fuel has increased dramatically in the UK - following the war in Ukraine - adding to the cost of living pressures.


UK fuel duty is currently 52.95 pence per litre for petrol and diesel. In the 2022 Spring Statement, the government announced a temporary cut to fuel duty of five pence per litre.

Who wants to change it?

Mr Tugendhat has pledged to cut fuel duty by 10 pence per litre.

Trade Minister Penny Mordaunt has said she would cut VAT on fuel in half, from 20% to 10%.

Trade minister Penny Mordaunt has been MP for Portsmouth North since 2010.


Economic analysis

Fuel duty brings in a lot of money for the government - an estimated £26.2bn in revenue in 2022-23, according to the Office for Budget Responsibility (OBR).

The government said that April's five pence per litre cut would cost £2.4bn - so any further reductions would be in the billions.

Caroline Mullen and Greg Marsden, transport researchers from Leeds University, argue that cutting fuel duty would only benefit the wealthiest in society.

"In 2019, the highest income group in the UK drove an average of 4,893 miles per year, more than three times that of the lowest income group.

"If it is the least well off that the fuel duty cut is aimed at protecting, then the tax system or benefit adjustments would surely be more targeted and effective," they said.


VAT on energy bills


VAT is payable on goods and services. The standard rate is 20% but VAT on domestic energy bills is currently 5%.

When the UK was a member of the EU, this could not be reduced further. During the 2016 EU referendum campaign, Boris Johnson and Michael Gove said that "when we Vote Leave, we will be able to scrap this unfair and damaging tax". But this has not happened.

Who's proposing what?

Suella Braverman has called for VAT on energy bills to be cut further.


Economic analysis

Getting rid of the 5% tax would cost the government about £1.7bn a year, according to HMRC estimates.


What about the other candidates?


Rishi Sunak - the former chancellor - has launched his leadership bid, saying: "Once we have gripped inflation, I will get the tax burden down. It is a question of 'when', not 'if'."

He hasn't come out with detailed tax cuts yet but says he wants "radical reforms" to the way businesses are taxed.

Kemi Badenoch says "I'm committed to reduce corporate and personal taxes" but hasn't given any more details.

Newsletter

Related Articles

0:00
0:00
Close
British Museum Faces Questions Over Peter Thiel’s Private Bayeux Tapestry Viewing
Earl Spencer Memoir Excerpts Renew Public Debate Over Diana’s Death
Liberal Democrats Gather in Brighton for Autumn Conference
Mothercare Shares Plunge as Middle East Store Closures Threaten Long-Term Solvency
Kent Police Treat Folkestone Hotel Fire as Suspicious
Caribbean Governments Advance Reparations Campaign Seeking Engagement With Britain
Scottish Labour Leader Backs Rosebank and Jackdaw North Sea Projects
FCA Urges Young Adults to Trace £1.5 Billion in Unclaimed Child Trust Funds
UK Competition Regulator Opens Inquiry Into McCormick-Unilever Foods Deal
Public Inquiry Into Tees, Esk and Wear Valleys Mental Health Failings Set to Begin
Nigel Farage Looks to US Immigration Enforcement Model for UK Border Policy
Chiltern Railways Moves Into Public Ownership
Security Review Raises Concerns Over Sensitive UK Police Data Stored on Microsoft Cloud
Burnham Government Warns of Difficult Autumn Budget as Fiscal Headroom Narrows
Bank of England Holds Rates at 3.75% as Inflation Rises to 3.1%
Ed Sheeran Tour Faces Backlash After Macklemore Is Removed Over Pro-Palestinian Remarks
Vandalism of Traffic Cameras Intensifies Across Parts of England
Nearly 300 Evacuated as Fire Hits Grand Burstin Hotel in Folkestone
King Charles Warns AI Executives About Risks From Uncontrolled Technology
Church of England Apologises for Role in Historical Forced Adoption Practices
UK Debate Over Online Speech Intensifies After Arrest Figures Draw Scrutiny
Oxfordshire Village Holds Symbolic Independence Vote Over Asylum Accommodation Plan
Nigel Farage and Richard Tice Sue National Crime Agency Over Alleged Banking Data Leaks
Apple Introduces Stricter Age Checks for UK Accounts
BBC Cash Reserves Fall 66% to £125 Million as Broadcaster Restructures
McLaren Announces £500 Million UK Investment and Plans 1,000 Jobs
Green Party Wins Historic Gorton and Denton By-Election as Labour Falls to Third
Burnham Government Prepares October Budget Under Growing Fiscal Pressure
UK Energy Suppliers Pull Fixed-Price Deals as Wholesale Markets Turn More Volatile
Bank of England Holds Rates at 3.75% as Middle East Energy Shock Raises Inflation Risks
Addison Lee Founder Loses £20 Million UK Tax Tribunal Case
BrewDog Creditors Face Losses on About £190 Million of Debt
Harrods Seeks to Recover Abuse Compensation Costs From Mohamed Al Fayed’s Estate
Ed Davey Targets Reform UK as Liberal Democrat Conference Opens
Great Britain Retail Sales Rise 0.5% in August
NHS England Approves Life-Extending Treatment for Incurable Breast Cancer
Proposals to Limit NHS ADHD Diagnoses Draw Criticism From Patient Groups
Resolution Foundation Warns of Housing Cost Crunch for Low-Income UK Families
BBC Cash Reserves Fall to Decade Low as Annual Deficit Reaches £121 Million
Millisecond Software Error Triggered Major UK Air Traffic Control Disruption
Twenty Women Underwent Unnecessary Mastectomies During NHS Cancer Care
Sensitive UK Police Data Found Vulnerable to Access by Foreign Actors
British Steel Faces Renewed Pressure for a Long-Term Financial Plan
MPs Urge Government to End Thames Water Restructuring Talks With U.S. Hedge Funds
Andy Burnham Warns of Difficult UK Budget Choices as Inflation Returns to 3.1%
England Tightens School Food Standards With Restrictions on Deep-Fried and High-Sugar Foods
Oxfordshire Village Votes Symbolically to Leave UK Over Proposed Asylum Centre
Michael Marra Elected Leader of Scottish Labour
BBC Cash Reserves Fall Sharply as Financial Pressures Mount
George Osborne Calls for UK to Rejoin EU Customs Union
×