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What Labour’s election win means for your finances

05 July 2024

Trustnet looks at the party’s main policies relating to people’s money.

By Jonathan Jones,

Editor, Trustnet

The Labour party has won a huge victory in the latest UK general election. With a few results still yet to come in, the Keir Starmer-led government looks set to deliver a crushing blow to the Conservatives.

Widely anticipated by pollsters, economists and other experts, the new government has plenty of issues to contend with and a lot of pre-election manifesto promises to keep.

Below, Trustnet rounds up some of the key ways the new Labour government is expected to tackle issues relating to personal finance, from taxes to pensions and the UK ISA.


Capital gains tax (CGT)

While Starmer and shadow chancellor Rachel Reeves have said they have “no plans” to increase CGT rates, they have not completely ruled it out either.

Myron Jobson, senior personal finance analyst at interactive investor, said Labour’s manifesto “did little to dispel speculation that capital gains tax could rise if the party comes to power”.

Currently, higher-rate taxpayers face a 24% CGT on residential property gains and 20% on other chargeable assets, but this could rise, potentially being brought in-line with income tax thresholds.

Rachael Griffin, tax and financial planning expert at Quilter, said: “Those who face CGT in the UK – primarily higher rate taxpayers and entrepreneurs who realise gains from the sale of residential property, investments and other chargeable assets – have already seen their annual exempt allowance slashed by the current Conservative government to just £3,000 a year.

“If Labour is to win the general election and then increase rates, it would serve as a double whammy with higher rates and lower exempt allowances considerably increasing the capital gains tax take.”

Jobson noted that whether CGT is raised or not, making the most of tax-efficient ISA and SIPP wrappers, which protect interest, dividends or capital gains, “remains a good strategy”.


Income tax

Although Labour pledged no increases to income tax in its manifesto, Laura Suter, director of personal finance at AJ Bell, said it is “allowing an increase in by the back door on day one” by declining to unfreeze thresholds.

“They can claim that people are bearing the brunt of Tory policy, but they have opted not to reverse that policy. Had income tax bands not been frozen, the personal allowance would be just over £15,000 this year and the higher-rate threshold would sit at just over £60,000. As it is, people are paying more tax than they otherwise would have thanks to the freeze,” she explained.


The pension triple-lock

Labour has committed to the triple-lock system currently in place, something Jon Greer, head of retirement policy at Quilter, said was “sensible” to win votes but also “fraught with problems”.

“The triple lock, which guarantees that the state pension increases annually by the highest of CPI inflation, average earnings growth or a baseline of 2.5%, has served to safeguard against poverty for retirees. However, it presents a significant fiscal challenge that no party has been willing to fully address,” he said.

The Labour party now has a “critical opportunity to re-evaluate the triple lock’s long-term viability”.

Suter added pensioners will continue to get meaningful increases to their income, with the full new state pension set to hit almost £12,000 next year.  If maintained, retirees could get a state pension of £13,250 by 2030.

But it is not all good news. “While pensioners will continue to get decent increases to their state pension they may face more tax,” she said, as Labour has not promised to shield the state pension from income tax.


Pensions lifetime allowance (LTA)

The new government backtracked on its pledge to bring back the pensions lifetime allowance during the election campaign, ultimately discounting it from the party’s manifesto.

Greer said at the time that the pension industry “can breathe a sigh of relief”, as a reintroduction would have “created huge unintended consequences”.

“Following the bombshell policy announcement in March last year from the Conservative government and the subsequent short time frame for the implementation of removing the LTA framework, the industry has been working overtime to try and make it a reality,” he said.

“For Labour to then reverse it would have not only been technically complex but could have created an environment where people make knee-jerk decisions to retire under the current rules.”


Pensions review

Despite the above, the new government has pledged to undertake a pensions review, something Alice Guy, head of pensions and saving at interactive investor, said was “great news”.

“Many workers aren't saving enough for a comfortable retirement and that's a ticking time-bomb for the future. There are also big problems with pension savers building up multiple pots over their working life, which makes pensions unnecessarily complex and confusing,” she said.

Greer noted improvements may include adjusting minimum contributions and the age threshold for eligibility. It could also “explore avenues for productive investment”, with pension funds forced to invest more in UK businesses.


Minimum wage

Labour pledged to extend the minimum wage to those aged between 18 and 20, giving an income boost to the youngest and lowest paid workers in the UK.

Suter said Labour would be continuing the work of the Conservatives, who brought in “meaty increases” to the minimum wage, taking it from £9.50 an hour two years ago to £11.44 an hour today and extending the full minimum wage to 21-year-olds (previously the cut-off was 23).

“But Labour wants to go one step further and give those aged 18 and above the full wage”, she said, which would represent a £2.84 an hour increase to the salary of an 18-year-old, or £5,000 per year based on a 35-hour week.



The UK ISA policy mooted by former Conservative chancellor Jeremy Hunt may well remain in place under Labour, with investors able to save up to £5,000 in the additional tax wrapper – providing it is invested in domestic businesses.

Suter noted: “Much of the detail has yet to be worked out, with Labour being left to grasp that particular nettle. The party didn’t make any mention of it in their manifesto and said it has ‘no plans’ to scrap the policy, although it hasn’t explicitly said it will continue with the reform either.”

The new government has supported ISA simplification in the past, with savers encouraged to make more use of the stocks and shares ISA, which may make the implementation of another option unviable.


Private school fees

For many parents, one of the most damaging policies will be the proposed increases in private school fees, with Labour planning to bring in VAT and end business rate relief for these schools.

Suter said: “It is expected to significantly increase the cost of private schooling. It’s expected that schools will absorb some of these cost increases, so there’s no clear rule about how much fees will increase by.”

Based on the average day-school fee of £18,064 a year per pupil, a family with two children would see their annual costs rise by just over £7,000 a year if the full 20% cost increase was passed on.

“While some parents will opt out of private school altogether in favour of the state system, others will absorb the price hike, make cuts to their budget elsewhere, or ask family for help with the higher fees,” said Suter.


The economy

Labour’s fiscal policy has been fairly close to the Conservatives when it comes to economic growth and fiscal spending, according to Lizzy Galbraith, political economist at abrdn.

“Labour will be looking to generate some fairly substantial economic growth over the short term (leaving taxes to one side). So, it is likely that the fiscal rules will shift at some over the next parliament,” she said.

“For example, using a metric such as public sector net worth rather than the current public sector net debt to measure performance may enable a little bit more fiscal wiggle room.”


The green agenda

Galbraith said Labour’s green industrial strategy is not just viewed by the party as route to decarbonisation and environmental benefits but as a “major economic opportunity”.

The party has emphasised its commitment to renewable energy, decarbonising homes, and upgrading the national grid, but is expected to lean on private sector funding.

“The party still plans to establish a £7.3bn national wealth fund to support these initiatives from the public side, aiming to attract three pounds of private investment for every pound of public funding”, she said.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.