What the Labour manifesto means for your finances

By June 19, 2024Client Zone, News

With Labour widely expected to take the reins of government on 4th July, savers and investors have been wondering if change is afoot. And while Labour has been drip-feeding policy proposals for months, the release of their manifesto was, theoretically, a key moment in understanding their planned approach to the economy.

However – as you are probably aware – Sir Keir Starmer’s ‘ming vase’ approach has meant that there have been few real surprises.

Furthermore, his ‘manifesto for wealth creation’ effectively states that economic growth is a prerequisite to additional state funding. Labour’s enthusiasm for engaging with business, along with policies such as ruling out increases in income tax, National Insurance, VAT, and corporation tax, mean that there are likely to be few seismic shocks in store.

Scratch beneath the surface, however, and there are a number of key developments that could well affect your finances.

What does the Labour manifesto mean for my money? Our top three takeaways

1. Labour has given up on bringing back the Lifetime Allowance (LTA)

We’ve always had a healthy degree of scepticism over Labour’s original plans to reintroduce the LTA, but we have of course been planning for all scenarios and ensuring our clients are in the best possible position.

The death of the LTA isn’t technically a manifesto commitment: Labour announced this development in the build-up. But the fact that the manifesto contains nothing about bringing the LTA back means the pensions industry can breathe a sigh of relief. For now, at least.

For our clients, it’s great news – thanks to our advice over the years as we have navigated an evolving landscape, they’ve avoided a potential 25% tax charge on their savings, and they are now free to draw their pensions in full without penalty.

A final word on this point: the LTA removal is a live issue, and you may miss out on the benefits of it if you don’t take the appropriate action first. If you have taken an NHS pension out in the last few years you could be missing out on up to over £100,000 of tax-free cash if you don’t act. We’ve broken down the details here.

2. It seems unlikely that Capital Gains Tax (CGT) will rise

As mentioned above, many forms of tax are set to stay constant – but CGT is conspicuous by its absence from Labour’s plans. This has generated some noise, as previous comments from Labour had appeared to signal that CGT would be untouched.

However, such a rise could be seen as unlikely. It would potentially interfere with Labour’s desire to grow the economy, and various party figures have repeatedly said it’s not necessary to their plans. Far more likely, in our view, is…

3. The gifting and inheritance landscape could change dramatically

The Conservatives have already announced plans to scrap the tax-free status enjoyed by non-doms, but Labour have since indicated they would go one step further and also adjust Britain’s inheritance tax regime to include foreign assets held in trusts. That’s potentially a major financial hit for those affected.

No plans have been announced in regards to the 40% rate of Inheritance Tax (IHT), but given the freeze in other tax types, it seems possible that this could change under a Labour government.

Whatever the outcome, our mantra is: ‘better safe than sorry’. We believe that now is the time to accelerate your plans around inheritance tax planning. Act fast, and you can ensure you can make the most of the status quo and pass on as much of your hard-earned wealth to your loved ones.

What should I do next?

If you think that any of the above changes might affect you, let’s have a conversation.

When it comes to investments, bad mistakes aren’t confined to poor stock picks, or exiting the market at the wrong moment: doing nothing can be just as costly, if not worse. Our decades of experience can prove the difference – and help you avoid costly missteps.

The best place to start is a 30-minute chat with one of our advisers. It’s a no-obligation, no-cost way to gauge if your finances are at risk.

Book a consultation