05 Jul 2024
By Paula Fraser, Head of Private Client, AAB
What does this historic election result mean for UK taxpayers?
The result of the 2024 General Election will come as no surprise to pollsters, with Labour securing 412 seats - a landslide majority ending 14 years of Conservative rule. Inevitably taxpayers will be considering how this sweeping change in the political landscape will affect them.
During the campaign, Labour did not provide particularly detailed tax proposals, keeping their cards close to their chest. However, there is one cast-iron certainty: reliance on organic economic growth and fiscal drag, inherited from successive Conservative governments, will not be sufficient to fund Labour’s wider plans, and so changes to the current tax regime are inevitable.
The changes we know about, and the ones we don’t
Prime Minister Keir Starmer and Chancellor Rachel Reeves have confirmed Labour will not make any changes to the rates of Income Tax, National Insurance Contributions or Corporation Tax in this Parliament. There has, however, been widespread discussion of two of their headline tax policies: ending tax breaks for private schools, including exemptions from business rates and VAT on school fees, and potentially raising the rate of tax on ‘carried interest’ from Private Equity Funds. The new Labour government will be subjecting more of this to income tax rates, but how this will work in practice is yet to be determined.
We anticipate that Rachel Reeves will be pressing ahead with the non-domicile (‘non-dom’) plans of her predecessor, Jeremy Hunt, as this was originally a Labour proposal. However it’s worth noting that Labour’s commentary during the election campaign has suggested they may go even further than the changes already proposed in the Spring Budget.
It will come as no surprise that as well as targeting non-domiciled individuals and Private Equity the new Labour Government have not ruled out increasing other capital taxes such as Inheritance Tax (IHT) and Capital Gains Tax (CGT) and scrapping or capping certain reliefs such as Business Relief (BR). While prospective plans surrounding these changes have not been explicitly outlined, a Labour-led Government may look to target reliefs and taxes used mostly by the wealthy.
No need for panic, but planning is prudent
Without certainty in this area, it would be premature to start making major structural changes to your financial position. That being said, those currently benefitting from ‘BR’ should consider the potential impact of changes in legislation, and seek advice as soon as possible. Similarly, it may be prudent to accelerate any current IHT or CGT planning ahead of the first Budget.
Of course, timing is everything. The new Chancellor has ruled out a snap Budget or fiscal statement, remaining committed to waiting for an independent forecast from the Office for Budget Responsibility (OBR), which generally requires a 10-week notice period. This gives taxpayers a window until at least September, to utilise existing reliefs and plan for the inevitable changes coming their way. It’s important to take full advantage of this period to put effective plans in place, and as such we would recommend reviewing your overall tax position now with an experienced adviser.
Keep in touch
Follow our LinkedIn page for the most current commentary on how the new Government’s policies and plans will affect taxpayers.
In the meantime, if you would like any further information on the proposed tax changes and what they could mean for your particular circumstances, please don’t hesitate to contact Paula Fraser, Blair Hay, or your usual AAB adviser.
Accountants & Business Advisors | Audit, Tax & Recovery | AAB
