When, on 22 May, Rishi Sunak called a general election, headlines predicting a Labour win quickly followed. Today, after a short but intensive period of campaigning by all parties, it has now been confirmed that the Labour party will form the next Government with a significant majority, following the results of the General Election on 4 July 2024.
We already have some indication of the new Government’s intentions from the party’s pre-election statements and manifesto, and so what follows is a ‘first take’ on what some of these may mean for the country.
On the economic side, Labour has reiterated its commitment to strict fiscal rules. These will reduce the opportunity for major changes on taxation or spending, although some changes should be expected.
Labour had planned to do away with the ‘non-dom’ tax status, but the Conservatives announced the policy themselves at the Spring Budget. As a result, from next April ‘non-dom’ status will be replaced with a new regime reduced to four years, rather than the current 15.
Tax thresholds for income tax are frozen until 2028, and Labour has promised it will not raise rates of income tax, NI, VAT or corporation tax, while also saying it will replace the business rate system to incentivise investment.
The party has ruled out implementing any form of wealth tax, although a recent article in The Guardian revealed Labour has been exploring its options to raise money through extra wealth taxes, including with changes to Inheritance Tax and Capital Gains Tax.
Whilst on the subject of tax, many fee-paying families will be waiting to see when and how the manifesto commitment to add VAT onto private school fees might be delivered. Labour has indicated that it would like to use the funds raised by doing so to improve the maintained sector although the exact policy details are not clear. There is also the prospect of a VAT reclaim by the schools affected and the possibility of a human rights challenge.
Our Private Client team are on hand to answer any questions that you may have around Tax and Wealth Planning.
Labour has also proposed a number of policies that will impact employers, including plans to strengthen the minimum wage and end “one-sided flexibility” and “exploitative” contracts to provide more security and predictability for workers. These changes are likely to increase costs for employers, so our Corporate and Commercial and Employment teams will be interested to see what detail comes out over the next few months.
In the property sector, Labour has pledged to build 150,000 new social homes a year. This will involve substantial public investment and fundraising but longer term, an increase in supply could help to reduce rent increases in the private market. Labour has committed to implement a full ban on Section 21 “no-fault evictions” as one of its priority agenda items, and there is the question of whether the new Government will revisit other areas of renters’ reform. Our Property Litigation team will be watching developments in this space closely.
Meanwhile, many people – including our Landlord & Tenant team will be waiting to see what further changes are coming down the track for leasehold, where Labour has committed to abolishing leasehold ownership and implementing all of the changes recommended by the Law Commission.
As we await confirmation of the cabinet and key ministerial positions, whatever follows, we are certainly set for interesting times ahead – watch this space…
05 July 2024
