A new Government with a five-year mandate usually means a major change to the way the UK is governed.
So, what can we expect to see happening now that Labour is in power?
During their campaign, they voiced various plans to change some of our tax policies, from increases to Inheritance Tax (IHT) to implementing VAT on private school fees.
What has been confirmed?
Obviously, change can’t all happen in one day, but what we do know is that there are some tax rates they don’t plan to touch.
Personal tax rates will remain the same for the next five years as they promised, meaning there will be no increase to National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.
They have also confirmed that Corporation Tax will remain unaffected, so the headline rate will stay at 25 per cent, the lowest in the G7.
The potential tax policy developments
While the Labour Party have confirmed that personal tax and corporation tax will stay untouched, there are still many suggested policies that were highlighted during their campaign that we are yet to see addressed.
One of their more controversial proposals is to charge VAT on Private School fees as a way to fund the training for more teachers.
Some people are arguing that it is a reasonable way to raise revenue, while others think it’s an unfair charge that will fall on parents.
With only seven per cent of all students attending a private school, it’s not surprising that this policy polled well.
Labour made no promises on Capital Gains Tax (CGT) in its manifesto, so Starmer’s refusal to rule out raising CGT could mean that given the fiscal pressures, we could likely see an increase implemented quickly.
However, Keir Starmer did say in his election campaign that people selling their main home “would not pay capital gains tax”.
With the promises of personal taxes staying as they are, this does leave Inheritance Tax (IHT) with possible changes to Principal Private Residence Relief or even restrictions on lifetime giving and pension tax reliefs vulnerable, with the current £60,000 pension relief subject to reduction.
Possible reductions in the ISA £20,000 annual investment allowance or capping all ISA at say £100,000 in total.
The abolition of non-dom status in the UK was announced in the Spring Budget and was due to have a transitional process in place from April 2025. However, the transitional arrangements will not be retained under Labour’s plans.
Labour hasn’t been shy in outlining where these efforts will be focused, saying that it wants HMRC to have a “renewed focus on tax avoidance by large businesses and the wealthy, so we could potentially see a wealth tax introduced.
While we can not confirm if any of these developments will come into play, we can promise that we will be closely monitoring them and their potential implications for our clients.
Labour’s policies should become clearer, and we should have a date for the next budget following the King’s Speech on 17 July, so keep an eye out for more updates soon.
Last Conservative Legislation change to Holiday Lets
Before Parliament was dissolved for the election the last Conservative Finance Act removed Holiday Lets as a business activity from 5th April 2025, so any gifts to children or grandchildren of holiday lets to still qualify for Hold-Over Relief for capital gains tax will need to be undertaken before 5th April 2025
