Wondering how the new government will affect your personal financial situation? Read on for our quick guide to everything you need to know about Labour’s economic plan
On 4th July 2024, the UK electorate went to the polls and The Labour Party won by a landslide majority of 174.
Prime Minister Keir Starmer appointed Rachel Reeves as Chancellor, but we won’t find out the details of her first budget until September at the earliest. In the meantime, the new government’s manifesto and election pledges can give us some important clues about their immediate plans for the economy.
But how will the new Labour government impact your personal finances? Let’s explore what we know so far:
Tax
While Labour isn’t expected to raise taxes immediately, that doesn’t mean you won’t end up paying more. On the campaign trail, Labour promised not to raise taxes on working people, a pledge that extends to income tax, National Insurance, and VAT.
However, the government has said that it intends to freeze income tax thresholds. In practice, this means if your salary rises to keep up with inflation, you could find yourself in a higher tax band with more of your paycheck going straight to HMRC.
For business owners, you might be relieved to learn that the Labour government plans to cap Corporation Tax at its current rate of 25%.
Non-doms (people who live in the UK but have a permanent home elsewhere for tax reasons) might not be so happy; Labour supports a ban on nom-dom status and the party has also pledged to close an inheritance tax loophole that allows non-doms to transfer overseas assets to an excluded property trust.
Pensions
The golden years still look good for pensioners as the new government has committed to maintaining the triple lock.
Under the triple lock, the state pension will rise every year by whichever amount is the highest of these three measures:
- The average growth in earnings
- Inflation
- 5%
If you’re still working and employed by someone else, you likely have at least one workplace pension. Labour is proposing making that system much simpler by focusing on building lifetime pensions instead. This could eliminate the need to switch provider every time you change job and track down multiple pension pots once you reach retirement age.
Work
Since the minimum wage was introduced in 1999, younger people in the workforce have had their earnings capped. The Labour government intends to eliminate the minimum wage age bands so that everyone will be eligible to earn the same rate. If you’re aged 18 to 21 years old, this could increase your salary by £2.84 an hour – an impressive £5,000 more each year if you work 35 hours a week.
Housing
Getting on the housing ladder is increasingly seeming like an impossible dream. Labour has touted the possibility of helping first-time buyers by introducing a Freedom to Buy scheme to support low-deposit mortgage lending.
On the other hand, the stamp duty exemption limit for first-time buyers will be set at £300,000 from April 2025 (falling from £425,000).
If this means you’ll need to stay in rented accommodation for a while longer, the good news is that the government is also looking to eliminate no-fault evictions.
Education
One of Labour’s most publicised pledges prior to the election was its proposal to introduce VAT on private school fees. The idea is that this extra money will be funnelled into the public school system, reducing the disparity between private and state-run schools.
While some private schools may offer to absorb some of this extra cost, a parent paying £18,000 a year (the average annual private school fee) could see that bill increase to more than £21,000.
Savings
A policy that could help UK-based businesses and encourage investment is the proposed introduced of the UK ISA. This would be a new type of savings account that would increase your annual ISA allowance by £5,000, but this money would be ring-fenced for investment in domestic companies.
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