General election 2024 - we have a new Labour government

It has been over 14 years since Labour were in power and now, with a pledge to get “Britain’s future back”, their first steps for change are to:

• Deliver economic stability by introducing tough spending rules while aiming to grow the economy without adversely affecting overall tax take and inflation.
• Create a publicly-owned, clean energy company, Great British Energy, which will be funded by extending the sunset clause in the Energy Profits Levy on oil & gas companies until the end of the next parliament, increasing the rate of the levy by three percentage points and removing the investment allowances that can reduce the levy.
• Cut NHS waiting time by offering 40,000 more appointments each week, funded by changes to the proposed taxation of currently non-domiciled individuals.
• Create a new Border Security Command to stop criminal gangs and people smuggling.
• Stop antisocial behaviour, by increasing the number of neighbourhood police, funded by ending wasteful contracts and creating new networks of youth hubs.
• Recruit 6,500 new teachers paid for by removing several tax exemptions for private schools.

Additional Labour Party policies you should be aware of

• Labour have pledged that they will not raise the rate of Income Tax.
• Labour will increase the Stamp Duty surcharge for non-UK residents from 2% to 3%. They will also support struggling first-time buyers with a new mortgage guarantee scheme.
• Labour will keep the triple lock on pensions and will increase the state pension by the highest of inflation, average earnings or 2.5%. 
• Despite pledging to reinstate the Lifetime Allowance, Labour has now backtracked but has said they will review the pension landscape.
• Labour will look to create a stable business tax environment and cap the main rate of Corporation Tax at the current 25% through the next five years.  They have committed to publishing a business tax roadmap covering this period.
• Labour is committed to retaining permanent expensing but has not commented on the details of extending it to leasing when fiscal conditions allow.
• The sunset clause in the Energy Profits Levy will be extended to 2029 and the rate of the levy will be increased by 3%.
• Labour will reform the points-based immigration system so that it is fair and properly managed, with appropriate restrictions on visas, and by linking immigration and skills policy.
• Employers who flout the rules will be barred from hiring workers from abroad.
• Labour will end the long-term reliance on overseas workers in some parts of the economy by bringing in workforce and training plans for sectors such as health and social care, and construction.

What wasn’t included in Labour’s manifesto but could be reviewed in the coming months

• Inheritance Tax (IHT) – IHT is one of the smallest contributors to the UK tax-take and is often described as an optional tax as you can choose to give away assets to protect yourself against it. Could Labour review the proposal by the Office of Tax Simplification (OTS)  that the Capital Gains Tax (CGT) uplift on death should be removed for assets that qualify for relief from IHT? At present where the CGT uplift is given (as currently) on assets subject to IHT (whether relieved from IHT or not), there is an incentive to hold on to certain assets until after death, potentially creating capital allocation inefficiencies.
• At present, changes introduced by the Conservatives mean that pensions are instead going to be taxed on death, with the introduction of the Lump Sum & Death Benefit Allowance. However, beneficiaries of many pension death benefit funds have the option of retaining the funds in a beneficiary pension, only paying tax when they draw from the fund. It will be interesting to see if labour changed these rules, for example, to crystallise the tax charge on death, rather than being able to defer tax until drawdown, which in certain situations (for example non-UK residence) may not result in any UK tax (unless there is a civil service pension).
• Labour has pledged not to increase income tax, however, with rising inflation causing an increase in income, we’ve seen an increase in tax paid by the fixing of the thresholds, this is known as a stealth tax. While we may not see an increase in the headline rate, we have certainly seen more people paying tax so looking at how to protect your income from this tax exposure is important.

What planning you can do now

• We would always advise that you build long-term financial plans focused primarily on your objectives and avoid "knee-jerk" or pre-emptive planning as it is naturally hard to accurately predict what new legislation will be introduced and how. That being said, where planning and objectives have the potential to be impacted by such future legislative change, it would be remiss not to consider this and, where there is little downside risk to do so, you may consider advancing certain actions. In this regard, we are currently having conversations with clients about IHT planning and gifts they have been planning to make as well as reviewing certain actions in relation to pension assets.
• Labour has made it very clear that they are seeking to increase the tax take from changes to the non-domiciled rules.  The current proposals set out in March lacked detail so executing any planning is difficult so the action remains the same - if you are a non-domicile resident living in the UK you should review your existing strategy and consider how it meets your current and future objectives so that you can be ready to execute any changes as and when sufficient clarity is known such that you feel comfortable taking action.
• Labour has confirmed it will introduce a 20% VAT charge for Private School fees. To prepare we have set out some points for consideration.
• The Labour Party are reportedly considering a review of the Business Property Relief regime, which would impact family-owned and mid-market across the UK. The relief first introduced almost 50 years ago, has been an invaluable way for businesses to pass tax efficiently through generations, ensuring the continuity of business operations. With family-owned businesses being one of the largest contributors to GDP in the UK, this is an area that the government will need to get right to ensure businesses can continue to operate profitably, focus on the longer term and contribute to growth.

Get in touch

If you have any questions about how your personal or business circumstances may be impacted by the new change in government please do not hesitate to get in touch.

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