What a Labour Government Might Mean For Your Finances

What to Expect from Labour’s Economic Policies: A Review of Their Manifesto Promises

With Labour now set to govern the UK for the next five years, there’s considerable interest in what their policies will mean for personal and business finance. Although the full details of their fiscal plans will become clearer in the coming months, particularly with the anticipated Budget in the autumn, we can glean some insights from their Manifesto.

Taxation

Labour’s Manifesto has largely maintained the status quo regarding major tax rates, with no plans to increase income tax, National Insurance, VAT, or corporation tax. However, there is a strong emphasis on tackling tax avoidance, particularly through reforms aimed at modernising HMRC. This could involve heightened registration and reporting requirements, new technology investments, and a focus on ensuring large businesses meet their tax obligations.

Specific proposals include closing the loophole that allows performance-related pay in the private equity industry to be taxed as capital gains rather than income. Additionally, Labour plans to implement a time-limited windfall tax on oil and gas companies, with the proceeds earmarked for funding a publicly-owned clean power company.

For the property market, non-UK residents purchasing residential property will see a 1% increase in stamp duty. Meanwhile, VAT will be extended to private school fees, a move that might not take effect until 2025, though anti-forestalling rules could be introduced to prevent attempts to avoid this change.

Pensions

The Labour government has pledged to protect the state pension triple lock, ensuring that pensions continue to rise in line with inflation, earnings, or 2.5%, whichever is highest. They also aim to reform workplace pensions by consolidating funds to achieve greater scale, with the dual goals of delivering better returns for savers and increasing investment in UK businesses.

In a significant move, Labour plans to review the unfair surplus arrangements in the Mineworkers Pension Scheme, with the intention of transferring the Investment Reserve Fund back to the scheme’s members.

Trusts and Inheritance Tax

Labour has promised to clamp down on the use of offshore trusts to avoid inheritance tax, ensuring that everyone who lives in the UK pays their fair share of tax.

Summary

Labour’s approach appears to balance stability with targeted reforms. With a strong emphasis on growth and investment in UK infrastructure, they are positioning themselves as a party at the centre of the political spectrum, aiming for sustainable economic development without radical shifts in policy. The forthcoming Budget, expected in the autumn, will likely provide more clarity on how these ambitions will be realised. Until then, businesses and individuals should keep a close eye on how these proposals evolve and prepare for the changes ahead.

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