Labour has won the general election and Sir Keir Starmer has become the UK’s new Prime Minister. The party has committed to one major fiscal event a year “giving families and businesses due warning of tax and spending policies’’. The first Budget, under new Chancellor Rachel Reeves, is likely to be in around ten weeks’ time, mid-September.
Labour’s key manifesto announcements on tax are targeted increases, aimed at wealthier voters, including:
- VAT and business rates applied to private schools
- Closing of non-dom tax loopholes
- Increasing stamp duty on purchase of residential property by non-UK residents by 1%
- Ending the use of offshore trusts to avoid inheritance tax
- Private equity bosses will lose their ‘carried interest’ loophole
Proposed timings for these to be introduced are not yet clear. Perhaps the most headline-grabbing policy is the introduction of VAT and business rates for private schools; the practicalities around this mean that these may not come into effect until the new academic year in September 2025.
Labour has ruled out Income Tax, National Insurance and VAT increases, but has not made the same promise on capital gains tax. There is no commitment either on pension tax relief although the earlier stated intent to reintroduce the lifetime allowance was not included in the manifesto.
“Certainty” has been promised around corporation tax, with a cap at the current 25% rate through the next five years. The party has committed to publish a roadmap for business taxation for the next parliament, which will allow businesses to plan investments with confidence.
Changes to the current business rates system are expected. For small businesses, there is a commitment to the annual investment allowance and a full expensing system for capital investment. Labour has also pledged to give clarity around allowances to help businesses make informed decisions around investment.
Finally, a crackdown on tax avoidance is planned, hoping to recover £5 billion currently lost from non-compliance. This will require additional funding for HMRC which is currently plagued by unacceptably low service standards and a pressure to cut costs.