The recent election results have ushered in a new government under the Labour party. With this shift in power, changes to the tax landscape are anticipated, and understanding these potential impacts on your finances is crucial. Here’s what you might expect based on the Labour party’s manifesto and potential policy implementations.
Emergency Budget Expectations
Traditionally, new governments present their fiscal agenda through an emergency budget. While Labour has not confirmed the exact date, it is likely to be after the Office of Budget Responsibility (OBR) has had time to prepare independent forecasts, probably around September or October.
Potential Tax Changes
Income Tax:
Labour has assured that there will be no increase in income tax rates for working people. The use of the phrase “working people” is interesting and this could leave scope for increasing income tax in the future on investment income, including dividends or even pensions.
Planned pension reforms could introduce new dynamics in pension taxation, although specifics are yet to be disclosed.
National Insurance Contributions (NIC):
A commitment has been made not to increase the rate of NIC for employees.
Business Tax:
The introduction of a detailed business taxation roadmap is expected, which should provide clarity and facilitate planning for businesses.
Full expensing and the Annual Investment Allowance will continue, benefiting capital investment strategies.Corporation Tax:
The manifesto promises a cap on the corporation tax rate at the current main rate of 25% for companies with profits over £250,000 throughout the next parliament.
VAT:
No increase to the standard VAT rate has been planned.
However, VAT will be newly applied to private school fees, aligning with Labour’s educational funding reforms.
Capital Gains Tax (CGT):
While no changes to CGT rates have been directly mentioned, the party plans to close the ‘carried interest tax loophole’ which affects private equity executives.
Inheritance Tax:
Despite many rumours there have not yet been any significant changes announced, but there may be measures to prevent the use of offshore trusts for avoiding inheritance tax.
Stamp Duty Land Tax (SDLT):
The surcharge on non-UK residents buying residential property will increase from 2% to 3%, hinting at potential future changes for UK residents as well.
Navigating New Tax Policies
Neal Groves, Tax Partner at Beavis Morgan, comments: “The tax landscape is clearly poised for some significant changes under the new government. While the direction is favourable in terms of not raising major taxes, the introduction of targeted measures such as the VAT on private school fees and adjustments in corporate tax structures necessitates careful planning.”
Beavis Morgan is committed to guiding you through these adjustments. If you are concerned about how these changes might affect you or your business, please contact your usual Beavis Morgan partner or email info@beavismorgan.com.