Keir Starmer won a landslide victory in the recent general election, bringing an end to 14 years of Conservative rule and wiping out many of their MPs in the process.
The Labour Party now has the biggest parliamentary majority since 1832, and the party has promised to deliver a manifesto of change and revitalise the country.
Naturally, you may be concerned about how any new policies could affect your wealth now and in the future.
Labour committed to maintaining the State Pension “triple lock”
As you plan for retirement, you will likely build savings in your private and workplace pensions to fund your lifestyle when you finish working. However, the State Pension can be a valuable supplement to your income because it rises every year.
The “triple lock” guarantees that the State Pension amount will rise by the highest of:
- Average wage growth
- The rate of inflation
- 2.5%.
Fortunately, the Labour government committed to maintaining the triple lock. This means that the State Pension payments will likely continue rising in the coming years.
During the election campaign, Labour also confirmed that they wouldn’t reintroduce the Lifetime Allowance (LTA).
Previously, the LTA capped the amount of wealth you could hold in your pensions without triggering an additional tax charge when you accessed the funds. The Conservative government removed the LTA charge in April 2023 before abolishing the LTA altogether in April 2024.
Labour has said it won’t reintroduce the charge because it would be too complex to adjust the rules again and the government wants to provide certainty to savers.
Finally, the government is expected to conduct a review of private pensions. However, the details on this are limited and any policy changes are unlikely to take place until the 2025/26 tax year at the earliest, depending on the outcome of the review.
The government won’t raise taxes on “working people”
The Conservative government presided over the highest tax burden in recent memory. This was largely because the Personal Allowance – £12,570 in 2024/25 – has been frozen since 2021/22. Meanwhile, average wages have increased, meaning you may pay more Income Tax.
Labour has not announced any plans to increase the Personal Allowance. That said, they have committed to not raising taxes on “working people”.
This means they won’t increase the rate of:
- Income Tax
- National Insurance (NI)
- VAT.
This may be welcome news but it’s important to note that, as the Personal Allowance remains frozen, the amount of Income Tax you pay could continue rising if your earnings increase.
Additionally, there is some speculation that the government might make changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT). That said, they haven’t announced any policies on CGT yet aside from ruling out applying CGT to the sale of primary residences.
Additionally, current changes to IHT relate specifically to “non-domiciles”. More on this next.
Planned changes to non-dom tax status will close tax loopholes
The tax rules for “non-domiciles” – or “non-doms” – came into question in 2022, when it was revealed that Rishi Sunak’s wife did not pay tax on overseas earnings. This was because she claimed non-dom status.
Critics argued that the system created an unfair tax loophole and Jeremy Hunt announced in his Spring Budget that the Conservative government would abolish non-dom status by 2025. This would mean that foreign nationals would pay Income Tax on their overseas earnings if they lived in the UK.
However, Labour believes that this policy doesn’t go far enough and there are still tax loopholes that foreign nationals might exploit. This is because individuals who lose their non-dom status will still be able to avoid paying IHT on assets placed in an offshore trust.
Labour plans to change the rules so these assets would be considered part of your estate for IHT purposes. As a result, your family could pay more IHT in the future if you hold wealth overseas.
You may need to consider ways to potentially mitigate IHT in the future if you’re likely to be affected by this policy. We can help with this.
The VAT exemption on private school fees will end
Currently, most education providers in the UK are tax-exempt, including private schools. This means that schools don’t have to charge 20% VAT on the fees that parents pay.
The Labour government plans to change this and end the exemption for private schools. As a result, if your children attend a private school, you will likely see an increase in your fees in the future as you’ll pay 20% VAT.
In their manifesto, Labour predicted that the policy could raise £1.5 billion in tax revenues. These funds will pay for more teachers in state schools, increased nursery places, and mental health provisions for children.
Additionally, Labour plans to end the business rates exemption for private schools, meaning that institutions will pay more tax in the future.
The creation of a new “Great British Energy” service could reduce your bills in the future
When Russia invaded Ukraine in February 2022, oil prices skyrocketed. As a result, energy costs around the world increased drastically, and this was a key driver of the cost of living crisis in the UK.
The Labour government aims to prevent a repeat of this situation, and work towards more clean energy production in the UK, by introducing “Great British Energy”.
The government says this publicly owned company will build infrastructure and deliver more affordable clean energy to everybody in Britain. To achieve this, they’ll invest £8.5 billion over the course of the parliament.
Only time will tell whether Great British Energy will be successful or not. However, if the government do achieve their aims, you may see a reduction in your energy costs in the future.
You may benefit from improvements to social care in later life, but details are lacking
The Labour manifesto also included a commitment to improving social care, though the details were lacking.
The government plans to create a “National Care Service” to deliver consistent results across the country. It will focus on delivering local services on a “home first” basis, aiming to keep people in their own homes for as long as possible.
This could mean that the way you receive social care in later life changes. However, the proposals don’t make any mention of changes to social care funding.
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For more information get in touch or email us at advice@mlifa.co.uk.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.