Labour has swept to power with a landslide general election victory and new prime minister Keir Starmer has immediately promised to rebuild Britain and its economy.
He used his first speech outside No. 10 Downing Street to promise “wealth created in every community”.
The new government has “multiple policies” that could have an impact on your wealth, said the i newspaper.
Labour has pledged not to raise income tax, national insurance or VAT, said MoneyWeek, but it “will have to raise money somehow to fund other pledges”, which means there will be winners and losers from its policies.
Here is how the Labour government could affect your finances.
Taxes
Labour may have said it won’t raise the main working taxes but it will still “rake in more regardless”, said ThisIsMoney.
This is because it plans to maintain the Conservatives’ freeze on income tax thresholds, which “pushes people into higher bands and drags more of their earnings into tax”.
There is a “widespread view”, said Fidelity International, that the tax take will have to rise eventually, which means there are other potential targets.
This has put capital gains tax “in focus”, added the investment platform. It’s currently charged at a lower rate than income tax and “alignment of the two is a possibility”.
Pensions
Much of Labour’s pension policy in this area is “yet to be shared”, said Pensions Age, but its general election manifesto did promise a review of how to “improve security in retirement”.
There is “one area of relief”, added the trade website, as Labour abandoned plans to reinstate the lifetime allowance.
Labour has also promised to keep the controversial triple lock measure to calculate state pension increases, said MoneyWeek. But without raising tax thresholds, “most pensioners will find themselves paying a higher tax bill in the years to come”.
Younger workers
Labour’s manifesto pledged to remove minimum-wage age bands, “so all adults are entitled to the same minimum wage”, said ThisIsMoney.
This effectively provides a pay rise to many workers across the UK.
Non-dom loopholes
The previous Conservative government had already unveiled plans to scrap the non-dom system, which allowed UK residents to avoid tax on overseas income, but Labour has said it will “go further”, said the i newspaper.
Chancellor Rachel Reeves wants to close an inheritance tax loophole to stop non-doms from transferring overseas assets to an “excluded property trust”.
However, there is a risk, warned Morningstar, that the proposed changes could “discourage wealthy individuals from living in the UK altogether”.
Private school fees
One of Labour’s main policy plans is to introduce VAT on private school fees.
The aim is to “raise funding from private school fees to spend elsewhere in education”, explained Stephen Gorard, professor of education at Durham University, on The Conversation. This could help with “reducing the segregation of students between schools according to wealth”.
But many families “forgo everyday luxuries” to pay private school fees, said the Daily Telegraph, and will now face the “tough dilemma” of finding thousands of pounds extra each year, or moving schools and putting more pressure on the state sector.
Property market
First-time buyers have been promised a Freedom to Buy scheme to support low-deposit lending.
This is another version of the Tories’ mortgage guarantee scheme, said Knight Frank, so is “unlikely to boost demand in a meaningful way”.
The Labour government has also said the first-time buyer stamp duty exemption limit will be returned, as previously planned, to £300,000 from April 2025, added the estate agent’s website, “which is probably not the news first-time buyers will want to hear”.
Meanwhile, landlords and renters should expect “more protections for tenants and new energy-efficiency targets”, said Investors’ Chronicle, with policies including a ban on Section 21 ‘no-fault’ eviction notices.
We will have to wait for the government’s first Budget for the “big decisions on the economy and personal finances”, added ThisIsMoney.
Reeves has ruled out a Budget before September and said “even then there will be no surprise tax changes”.