With Labour’s General Election victory now official, Katy Ward looks at what the new Government has in store for your money.
The UK has a new Prime Minister after Labour and Keir Starmer stormed to a landslide win in the 2024 General Election.
As with all incoming Governments, we won’t know Labour’s full plans for the economy until the next Budget, which will likely be in September.
However, the party's election manifesto did contain key pieces of information on its plans for taxes, pensions and energy markets.
In this article, we run through what we know so far, what is rumoured to be incoming and what this means for your finances.
NI and Income Tax: hikes unlikely, but allowance freeze remains
As part of its election manifesto, Labour promised that it would “not increase taxes on working people”.
If Labour is true to its word, this means we won’t see any increase to National Insurance or Income tax rates under the new Government.
As always, the devil is in the detail, and many will likely be paying more tax in the coming years regardless.
That's because the party seems likely to maintain the freeze on Income Tax thresholds.
At present, these stand at £12,571 for Basic Rate taxpayers, £50,271 for Higher Rate taxpayers and £125,140 for those in the Additional band.
If these remain frozen at their current levels, then more of us will end up paying Income Tax or being dragged into the Higher Rate tax band if wages or pensions rise.
Prior to the election, then Shadow Chancellor Rachel Reeves described a freeze on Income Tax thresholds as “picking the pockets” of ordinary people.
Yet despite that criticism, the thresholds look set to remain frozen until 2028.
Pensions triple lock safe
In welcome news for many retirees, Labour plans to retain the triple lock on State Pensions.
Under the policy, State Pensions increase every tax year in line with inflation, average wages or by 2.5% – whichever is greater.
As part of its manifesto, the party also announced plans to undertake a “review of the pensions landscape”, which would consider steps needed to improve financial security in retirement.
Likewise, Starmer has also promised to reform workplace pensions to “deliver better outcomes” for savers.
Despite early rumours, Labour has also confirmed that it will not scrap the 25% tax-free lump sum on pensions.
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Council Tax hikes possible
Although Labour did not mention the tax in its manifesto, there has been speculation that the party could introduce a stealth rise by reassessing existing Council Tax bands.
In effect, this could bring more households into the more expensive bands.
And conflicting messages from key party figures during the campaign have provided little clarity.
Several weeks back, then shadow treasury minister James Murray appeared to deny any plans for a reassessment on the policy on banding.
Shortly after, now prime minister Keir Starmer was less forthcoming on Labour’s plans when asked about the tax on LBC Radio, claiming that he was not prepared to draw up budgets for the next five years.
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Energy bills: hard to say
At the core of Labour policy on energy are its plans to create a publicly owned clean energy company, which will be known as Great British Energy.
Within its manifesto, the party claims that the system will save £93 billion for UK households and deliver 100% clean energy power by 2030.
Prior to the election, the party also announced plans for “a proper windfall tax on the huge profit the energy giants are making”.
Given the volatility in the energy markets and the challenges around delivering cheap green energy around the clock, it's difficult to say exactly what impact this might have on our bills in the coming years.
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VAT unchanged for most, but private schools to be hit
Before the election, both the Tories and Labour vowed not to increase the rate of VAT.
However, Starmer’s party has announced a key change surrounding the treatment of private schools, which proved to be one of the most talked-about points in the run-up to polling day.
Under Labour’s plan, the Government will charge private schools 20% VAT and end business rate relief for these institutions.
The move is expected to bring around £1.7 billion into the Government coffers.
However, the plan has attracted criticism from many within the private school sector who have argued that it will result in increased fees for parents.
Mortgages: possible guarantor scheme to help FTBs
As part of its election campaign, Labour pledged it would help 80,000 young people get on the property ladder over the next five years.
If these plans go ahead, the party will create A Freedom to Buy scheme to help people secure a mortgage.
Under the plans, the Government would act as a guarantor for young people who are unable to save a big deposit.
Labour also promised that local people would have “first dibs” on new property developments and that it would tax international investors who, it says, are currently pricing younger generations out of the market.
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Inheritance Tax hikes possible
Inheritance Tax (IHT) is another conspicuous absence from the Labour Party manifesto.
However, The Guardian reports that it has seen a memo in which the party outlined plans to increase the tax if it won the election.
According to the report, these changes could make it more difficult to gift farmland, which currently qualifies for 100% relief on IHT.
As such, this land is often snapped up by wealthy people keen to lower their IHT bill.
The Guardian claims that a consultation into reforms of IHT will launch in the autumn.
Capital Gains Tax hike possible
With Labour promising not to raise Income Tax, VAT or National Insurance, there has been a great deal of speculation over how the party will boost its tax take.
Much of this has centred on Capital Gains Tax (CGT), which is imposed on the sale of an asset that has increased in value.
At present, the tax is levied on most assets worth £3,000 or more, including business assets and second homes.
Under current estimates, CGT will bring in £19.5 billion during the current tax year.
However, the rates for CGT are currently lower than other comparable taxes such as Income Tax.
At present, Basic Rate taxpayers pay 10% on most possessions and 18% on residential property.
For Additional and Higher Rate taxpayers, this increases to 20% on most assets and 24% on residential properties.
There have been rumours that the party may up CGT rates and bring them more closely in line with other taxes.
Pledge to reduce wasted expenditure
With squandered taxpayer money being a bugbear for many, Labour’s proposed Office for Value for Money no doubt won favour with many voters.
As the name suggests, the purpose is to ensure that public funds are spent wisely.
Be aware, the proposal is nothing new. Back in 2021, Starmer told attendees at the CBI conference that his goal is to “chase down every penny we spend”.
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