The ballot box breakdown: A post-election Financial Planning perspective

4 minute read

With Labour’s recent victory in the UK general election, individuals must carefully consider their financial plans in light of a new government. While Labour’s manifesto did outline some key policy shifts, there were no significant announcements following their victory that would necessitate immediate knee-jerk financial planning decisions.

New Chancellor Rachel Reeves has confirmed that there will be no budget until September at the earliest to give the Office for Budget Responsibility enough lead time, at which point more will be known about the direction of travel of this new government.

Reeves stated that all planned tax measures have already been announced, with no additional tax rises anticipated beyond those promised in the campaign (including the addition of VAT to private school fees and further tightening of the non-dom tax system). However, Reeves was tight lipped on Capital Gains Tax, and while there was no mention of plans to increase it, that doesn’t mean we won’t see some changes at a later stage.

Private School Fees

Labour plans to impose VAT on private school fees, which would eliminate current tax exemptions and raise an estimated £1.6bn annually; revenue earmarked to fund the recruitment of 6,500 new teachers and expand childcare.

The proposed VAT would likely be around 15% after deductions for goods and services. In anticipation of these changes, some private schools are offering schemes to pay fees in advance to avoid these increased charges. Although this may appear to lock in current VAT rules, it carries risks. Parents should be aware of the possibility of retrospective legislation or legal challenges, which could result in unexpected costs and, should a school fail, you could lose all your money in its possession.

Changes to the non-dom regime

From April 2025, non-UK domiciled individuals living in the UK for over four years will be taxed on worldwide income and gains as they arise. Labour will scrap transition-relief for foreign income and encourage repatriation of offshore assets. Additionally, the government plans to include foreign assets in UK inheritance tax. For those concerned about this change in regime, reach out to your Financial Planner, who can offer clear, professional advice.

Capital Gains Tax concerns

Labour’s manifesto lacked clarity on Capital Gains Tax (CGT), raising some concerns we may see changes in the future. Aligning CGT rates with income tax could significantly increase these rates, affecting many investors. Current CGT rates are 24% on residential property gains and 20% on other assets. This raises the potential importance for investors to employ financial planning strategies to mitigate CGT, such as transferring assets to a spouse, utilising ISAs, and for specific investors considering Enterprise Investment Schemes (EIS). However, it’s important to note that EIS investments carry significant risk and are not suitable for all.

As is always the case with a new government, there will be some opportunities to take advantage of and some obstacles to overcome. In the short term, it looks like Labour will not attempt to rock the boat too much as it settles into power.

Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited 11/7/2024.

Tax treatment varies according to individual circumstances and is subject to change.

The value of pensions & investments and the income they produce can fall as well as rise. You may get back less than you invested. You should only consider these products if you are willing to take some risk with your capital. We will consider whether such products are suitable for you before recommending an investment.

For ISA’s Investors do not pay any personal tax on income or gains but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA manager.

All references to clients’ examples in this article are fictitious. Quilter Cheviot Financial Planning is a trading name of Quilter Private Client Advisers Limited which is an appointed representative of Quilter Financial Services Limited and Quilter Mortgage Planning Limited, which are authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 06201261, registered address: Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Quilter Financial Services Limited and Quilter Mortgage Planning Limited is entered on the FCA register (https://register.fca.org. uk/s/) under reference 440703 and 440718.

Trusts, Estate planning, some Buy to Let Mortgage, Taxation and Inheritance Tax Advice are not regulated by the Financial Conduct Authority. The representative member of the VAT group is Quilter Business Services Limited. VAT registration number: 386 1301 59.