How the Recent Election Results Might Impact Your Finances
Following the recent election on the 4th of July, the newly elected government’s proposed tax reforms could significantly affect personal finances, potentially altering income tax rates, deductions, and credits. Here’s a breakdown of what may happen during Labour’s time as our elected government.
Changes to pensions
Due to the value of the funds held within pension schemes election winner Labour could be looking to use these assets to aid economic growth. Whilst they have mentioned sustainable retirement incomes, they haven’t given much information on savings or contribution rates.
Pension freedoms are likely to be revisited and there is talk that changes could include a minimum secure income before individuals can access additional cash.
Election promises
Labour consistently declared they would not raise income tax, National Insurance Contributions (NICs) or VAT. Taken from the Labour website, they aim to “make the tax system fairer” by:
- Ending tax breaks for private schools, which exempt them from VAT and business rates.
- Closing the loopholes which allow some ‘non-domiciled’ people who live in the UK to avoid paying tax.
- Introducing a proper windfall tax on the huge profits the energy giants are making.
Ending tax breaks for private schools could be the equivalent of adding a 15% increase to current school fees. However, this figure does not include the impact of additional business rates. This could affect between 40,000 to 100,000 pupils who would then be unable to afford the increase in their fees.
Capital Gains Tax (CGT) and Inheritance Tax (IHT)
CGT is expected to raise an extra £4.5bn this year compared to last. Due to it being a lower rate than income tax, it could well be a target for our new government and the treasury. This route does have some pros and cons but could have a negative effect on the economy.
IHT could also be used to increase tax revenues as opposed to raising income tax, although it will be very unpopular if they go down this route. IHT increases could be high on the list of ways to raise revenue without affecting the economy.
Businesses and taxes
A hike in corporate taxes might sound concerning to business owners, however, increased public investment and consumer spending could drive overall economic activity.
Cost of living
With an increase in public spending on healthcare, education and social services we should see a reduction in personal expenses in these areas.
Summary
Only time will tell what changes our new government will make to enhance the UK economy. If you have any questions or concerns about your finances please give us a call on 01733 55120. Alternatively, fill in the contact form to the right and we will be in touch.
Disclaimer
The above comments are speculation and opinions only and are not meant to be taken as advice.
We recommend seeking professional advice before making any financial decisions.
Tax planning is not regulated by the Financial Conduct Authority.
Sources:
https://www.lbc.co.uk/news/labour-hike-inheritance-tax-adviser-admits/
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