Throughout the election campaign, Labour and Sir Keir Starmer have set out plans for the future of Britain’s industries and healthcare, and the creation of sustained economic growth. This undoubtedly means change, though the specifics of this change are still unknown and likely to remain so for the coming weeks. However, by studying the Labour manifesto and considering what party representatives have – and haven’t – commented on in recent months, we can make some guesses.

First, though, what won’t be changing? Labour has already stated that the party won’t be raising rates on income tax, VAT or National Insurance in a bid to protect the income of Britain’s workers. It’s also pledged that for the duration of its parliament, it will cap the headline rate of corporation tax at the current 25%.

While these areas are set, the new Prime Minister has left the door to others wide open. Labour has warned that its pledge to create economic stability and grow the economy will come with ‘tough spending rules’. It’s likely that larger corporations and wealthier business owners will be asked to bear the burden when it comes to tax. Though nothing is set in stone, and everything here is cynically hypothetical, we could see the following changes…

Income Tax

Yes, Labour won’t be changing income tax rates, but it could still use the system in other ways. That’s because if rates remain fixed but bandings are revisited, your income tax bill can still change. This happened back in 2021, when the Conservative government froze income tax thresholds – meaning that due to rising wages, workers were paying tax on a larger proportion of their earnings. The same could be true for the personal allowance, which currently stands fixed at £12,750, despite inflation and higher earnings. If Labour keeps these thresholds on ice, it’s likely to result in a higher overall tax bill.

VAT

Again, though VAT rates have been protected, there could still be other changes to come. It’s likely that Labour could redefine what VAT does and doesn’t apply to. Private school fees are an obvious candidate here (more on this later), but it may affect other goods and services too. There’s been online talk of VAT being introduced to dentistry, but we haven’t found any credible evidence of this yet.

Capital Gains Tax

With a pressing need to raise money, it’s very likely that Labour will choose to increase Capital Gains Tax (CGT). This relates to any profit made through the disposal of assets, including property and business assets. The current rate is lower than it has been historically, so it’s probably fair to assume this will change; particularly as it’s one area that Labour has been notably refusing to comment on so far.

If you think this might affect you, do let us know – there may be steps we can take ahead of changes.

School fees

Labour’s decision to apply VAT to private school fees became one of the hot topics within its manifesto. This means that fees – currently tax-exempt as education – will soon be subject to 20% VAT. The business rate relief will also end for these schools, further increasing costs in a way that may trickle down to parents. Some schools and parents have attempted to get around the coming changes by allowing lump-sum prepayments, but rules may well be introduced to close this loophole. And of course, nobody will be able to claim this VAT back as it’s not a business expense.

Pension caps

The good news is that under Labour, the state pension “triple lock” will ensure the state pension rises in line with whichever is highest: inflation, average earnings growth, or 2.5% each year. On the other side of the coin, tax is likely to increase too. Labour has previously said it will bring back the now-abolished Lifetime Allowance, which caps how much money people can save into their pensions before facing tax charges. The annual cap (which sets the tax-free threshold for the year) rose last year from £40,000 to £60,000, so there’s also a chance that this will revert, or be set even lower.

HMRC

The heavily criticised HMRC is now set for modernisation. Labour states that it will ‘increase registration and reporting requirements, strengthen HMRC’s powers, invest in new technology and build capacity within HMRC.’ It’s also vowed to crack down on tax avoidance schemes, meaning that wealthy businesses and their owners will generate greater tax revenue.

Inheritance tax

There was much talk of the Conservatives pledging to end inheritance tax – though this never actually materialised. Under Labour, there’s potential for reforms of the system, though this is probably a low priority in the short term. If it does happen, it may be within the four years of this parliament; or even in the next one.

NHS dentistry

And finally, with NHS dentistry undoubtedly in crisis, the Labour manifesto announced the creation of a Dentistry Rescue Plan. This includes aiming to create 700,000 more urgent dental appointments to tackle immediate pressures, while also recruiting new dentists to areas with the greatest need. And, as disillusioned NHS dentists continue to leave the system, the party states it ‘will reform the dental contract, with a shift to focusing on prevention and the retention of NHS dentists.’ It’s hard to know what this will mean in practice, but we’ll be keeping a close eye on changes as they unfold.

When will we know?

With Labour’s new Chancellor Rachel Reeves pledging long-term stability, the new government won’t want to rush into any financial decisions. A new Budget will be announced in the autumn (the precise date to be confirmed before the summer recess), with some changes probably being rolled out from that date, while others will apply only from 6th April 2025.

As ever, we’ll be sure to keep our clients proactively updated on any changes. If you’d like to improve your financial position before the new Budget hits, contact us to see how we can help.