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The General Election: Labour with the win

  • 4 min read
  • 5 Jul 2024
general election blog

The results are in folks and Labour has dethroned the Conservatives after 14 years in at the helm! What a shock… or not. Keir Starmer is now the new Prime Minister – the third one in the past two years. 

So, what do the new changes have in store for you, you ask? We’ll do our best to demystify the taxes mentioned in the Labour manifesto and what it could mean for your pockets. 

A 360 tax overview

The new government have made a few general tax-related promises to the people. Here’s what we’ll discuss:

  • Personal taxes
  • Business taxes
  • Other general tax measures 

Let’s find out if your pockets fill up or feel empty under this government?

Income Tax

Headline: no increase in Income Tax rates and the thresholds frozen until 2028

Although there were talks about not increasing Income Tax rates, there were no proposals to increase or change the tax bands themselves.

Here’s a reminder of what the current UK income tax bands for 2024/25 are:

Annual salaryTax rateTax bands
Up to £12,5700%Personal Allowance
£12,570 – £50,27020%Basic rate
£50,271 – £125,14040%Higher rate
£125,140+45%Additional rate

The tax rates and bands listed above aren’t due to change under Labour until at least 2028, which means if you earn more, you’ll get pushed into a higher tax bracket. 

There’s also mention of no increase in National Insurance Contributions for people.

Capital Gains Tax

Headline: no changes mentions other than a reform of the private equity interest loophole

So, what’s the private equity interest loophole? Basically, it allows private equity fund managers to claim millions of pounds in bonuses as “carried interest”. Carried interest is only taxed at a special 28%. 

Realistically, the bonuses should be taxed as income, at a special additional rate of 47%.

It’s reported that only about 3,000 people carry interest per year, so while it’s a small portion of people, the Labour party claims it could raise £565 million a year by tax year 2028-29 after the rules re changed.

No other Capital Gains Tax changes were specifically mentioned, but it’s reported that Labour will look to CGT to increase rates to raise tax revenues in the future.

Inheritance Tax

Headline: all assets in offshore trusts to be subject to Inheritance Tax

Again, no specific mentions in the manifesto in regards to Inheritance Tax, although Labour will make sure all assets in offshore trusts cannot evade tax and will be liable to pay Inheritance Tax.

Once again, there are reports that if tax funds need to be raised in the future, changes to Inheritance Tax overall, as well as on lifetime gifts would be inevitable. Any reforms will mostly likely go through the Office for Budget Responsibility for analysis first, since this is an extremely sensitive subject (probably one of the most-hated taxes, yikes).

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Business taxes

Corporation Tax

Labour didn’t mention any changes to Corporation tax rates.

They did pledge to maintain the £1million Annual Investment Allowance and provide a business tax “road map” for the Parliament within 6 months. 

Levies and Windfall tax

Labour plans to extend and increase Energy Profits Levy (oil and gas) and Electricity Generators Levy. They’re due to expire in March 2029. They’ll also increase the rate by 3%.

Business rates and investments

Labour will suggest a system to replace the current business rates system to keep all businesses on an equal playing field.

In terms of business investments, they want to boost investment in UK R&D (research and development), with no mention of changing the current R&D reliefs. 

There are also a load of other pledges made in regards to growing and creating wealth.

Other general tax measures

Pensions

While previously the Labour party mentioned reintroducing the lifetime allowance charge, that plan was dropped during the election. That probably means other changes to pensions tax reliefs are more likely in future.

High earners are recommended to increase their pension contributions while they can… it might not be so easy in the future!

Non-dom loophole

Previously proposed by the Conservatives, Labour is adamant that they’ll be closing the non-domicile, or non-dom, loophole.

Specifically, all foreign assets within trusts would be liable to UK Inheritance Tax. 

Stamp Duty Land Tax

When overseas national buy UK residential property, they pay a SDLT surcharge of 2%. Labour will look to increase this by 1% so the total surcharged that will be paid will be 3%. 

Value Added Tax (VAT)

Labour have promised not to increase the main rate of VAT. However, when it comes to VAT on private school fees, a subject that has been heavily discussed recently, Labour has confirmed they will move forward with imposing it.

The verdict: drumroll please🥁

So, what’s the verdict? Will your pockets feel heavier now?

Well, it’s too early to tell. In theory, the changes won’t have an effect within the next few months. You’ll have a while to understand what’s what. 

In the meantime, let’s see what this new era bring for the UK government.

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