How will a new government affect my tax obligations?
How will a new government affect my tax obligations?
08/07/2024

The frenzy of the build-up to the general election has come to a conclusion, and the results are in. With the Labour party winning the popular vote and securing the necessary number of seats to form their own government, the question on everyone's lips is: how will a new government affect my tax obligations?

It is of course beyond the scope of our profession to make any kind of political commentary on the election, but we have laid out the salient facts of the changes below in a digestible manner to assuage any of your questions or fears - and of course, please feel free to contact us directly if there is anything specific that you'd like to discuss.

 

What sort of changes can we expect?

We will likely gain further nuggets of information in the coming weeks - however, based on the manifesto which Labour had campaigned on, we would predict the following changes:

 

Income Tax:

  • Rates: No increase to income tax rates.
  • Pensions: Planned reforms to the pension system, as of yet unspecified. Labour has promised to keep the 'triple lock' system introduced by the Conservatives, but have not stated whether they would match the 'triple lock plus' system that the Conservatives campaigned under.
  • Tax-free allowance: No mention of changes to the current allowance.

 

Corporation Tax:

  • Rates: The main rate of corporation tax will be capped at 25% for the next parliamentary term, applicable to companies with profits of £250,000 and above. While not specified, this leaves scope for a potential increase for companies benefitting from the small profits rate, or marginal relief.

 

Business Tax:

  • Confirmation: A detailed roadmap for business taxation is expected to be released soon.
  • What we do know: Both full expensing and the annual investment allowance will remain, with further details forthcoming to clarify qualification criteria.

 

Capital Gains Tax:

  • Rates and reliefs: No specific changes mentioned.
  • Loopholes: Certain loopholes, including the carried interest loophole - will be closed. This specific loophole primarily affects private equity executives who receive stakes in funds that they manage in lieu of conventional remuneration.

 

Inheritance Tax:

  • Rates and reliefs: No anticipated changes.
  • Offshore trusts: The use of offshore trusts to avoid inheritance tax will be prohibited.

 

Stamp Duty Land Tax:

  • Surcharge for Non-Residents: The existing surcharge on purchases of residential property by non-UK residents will increase from 2% to 3%.
  • Additional increases: While not stated either way, Labour's manifesto does not rule out the possibility of increases for UK residents further down the line.

 

NIC (National Insurance Contributions):

  • Employee NIC: Labour has promised not to increase National Insurance Contributions for employees.

 

When will we start to see changes in full force?

Not immediately. It is likely that Labour will issue an 'emergency budget' - and while we cannot accurately predict the date of this, we would predict that it will arrive some time in the early Autumn. The new chancellor Rachel Reeves has been clear that she would not deliver any fiscal event without a prior Office of Budget Responsibility (OBR) forecast - as they are allowed a statutory ten weeks to prepare their own independent forecasts based on any new budgets that are submitted, this would suggest an earliest possible release date of mid-September, although we would not rule out an October release date. We expect that a final date will be confirmed and announced soon.

 

What can I do to prepare for any changes?

We would be pleased to give you tailored advice for your individual situation - to learn more about how these changes may affect you, and what you can do to mitigate any ill effects, here's how you can get in touch:

  • Simply give us a call on 01634 394045 to speak to a member of our team 
  • Email our front desk at info@carley.co.uk
  • Contact us directly via the web and your enquiry will be promptly forwarded to the appropriate department 
  • If you are already a client, please feel free to ring your client manager directly! 

As your trusted advisors on all taxation matters, we are accountable for your success - and we will continue to keep you updated on any pertinent legislation so that you may plan appropriately. We wish you every success going forward!


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