Labour has won the General Election with a huge majority led by Keir Starmer – and immediately thoughts have turned to what it means for our money.
The new government has set out various pledges in its manifesto to make clear what it promises to do as a party in power which affect everything from wages to tax, National Insurance and pensions.
This is what we know about Labour’s financial plans for National Insurance, income tax and HMRC changes according to its manifesto.
Labour has promised not to raise National Insurance on people’s incomes. It will also not raise the basic, higher or additional rates of income tax on incomes either.
Its manifesto says: “We will ensure taxes on working people are kept as low as possible. Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”
Labour has also promised to abolish non-dom status, such as that enjoyed by Rishi Sunak’s wife. It says it will replace it with a ‘modern scheme for people genuinely in the country for a short period.’
Labour also plans to close offshore trust loopholes to stop people who avoid paying inheritance tax using the method.
Its manifesto states: “We will end the use of offshore trusts to avoid inheritance tax so that everyone who makes their home here in the UK pays their taxes here. Private equity is the only industry where performance-related pay is treated as capital gains. Labour will close this loophole.”
Labour has also set out plans for HMRC. It is planning to ‘strengthen HMRC’s powers’ to tackle tax avoision or evasion so that “everyone pays their fair share.”
It adds: “We will modernise HMRC and change the law to tackle tax avoidance. We will increase registration and reporting requirements, strengthen HMRC’s powers, invest in new technology and build capacity within HMRC.
“This, combined with a renewed focus on tax avoidance by large businesses and the wealthy, will begin to close the tax gap and ensure everyone pays their fair share.”
What Labour hasn’t pledged is to change the income tax Personal Allowance, or the rates at which each tax band start at, which has been frozen for many years, meaning more people could be dragged into paying tax in future in an effect known as ‘fiscal drag’, although there’s nothing to stop it making such changes later, it just isn’t a pledge to do so at this point.