Given the wide margin of victory the new government has a broad mandate for change, which could set the stage for some important changes to taxes and personal finances.
The new government may need to raise money to fulfil spending plans. To that end it may make changes to taxes, allowances, investment schemes and rules that could hit the unwary. It’s a time to be on high alert regarding your personal finances.
While it would not be conventional, or indeed practical, for most changes to occur midway through the tax year, the Budget from Chancellor Rachel Reeves on 30th October should unveil more detail on what will change, and what might change in the future pending various reviews.
What could a Labour government mean for your money?

1. Income tax and National Insurance
Expectations already were low for any movement around currently frozen income tax thresholds, and Labour has confirmed they plan to keep the standard allowances frozen until 2028.
More positively for taxpayers, the party also has no plans to increase income tax rates, or national insurance. Yet with inflation and wages ratcheting up the band freeze effectively represents a gradual tax hike by stealth as a greater proportion of income falls into higher bands.
If you could be set to pay more tax it’s a good time to consider making the most of your tax-efficient ISA allowance.
Read more: Are voluntary National Insurance contributions worth it?
2. VAT on school fees
The government plans to introduce VAT on school fees from January, which will come at a difficult time for many parents. Fees have risen with high inflation over the past few years and some families may face difficult choices with a further increase in costs.
With some grandparents happy to step in and contribute, care must be taken around any inheritance tax consequences. There’s a standard £3,000 in IHT-free gift allowance each year for everyone, but anything over this is classed as a 'potentially exempt transfer'. This means it is only fully free from inheritance tax if the donor survives for seven years after making the gift.
There are some exceptions to this, notably gifts made from surplus income, which must not impact the giver’s standard of living, and require good record keeping. It’s worth speaking with a professional if this is an issue for you and your family.
Read more: Private school fees: a way to reduce your inheritance tax?
3. ISAs
Plans for a new British ISA were established by Jeremy Hunt in the Spring Budget. The idea floated offers investors an extra £5,000 ISA allowance, on top of the current £20,000, that can be used to invest in UK companies.
The Labour party has previously supported the idea of a British ISA and has made positive noises about the retail investor ownership of British businesses more widely, so they may decide to run with the idea, or some variant, subject to an ongoing Treasury consultation on the viability and design.
More broadly, Labour has signalled it might simplify the ISA landscape but hasn’t provided any details thus far. That appears to stand at odds to the concept of an additional British ISA on top of the host of current ISA types. A simplification would be welcome as the array of ISAs and rules surrounding them causes confusion with lots of savers and investors.
4. Pensions
Many people are not saving enough or sufficiently engaged with their pensions, so it’s encouraging the new government has started on the front foot in getting to grips with the issue.
The King’s Speech unveiled a Pension Schemes Bill that promises new rules and requirements for occupational pension schemes. It aspires to a system to enable small pension pots to be automatically combined in one place, a ‘value for money’ test, and the requirement to offer a retirement income solution, including default investment options, to members.
The government has also pledged to undertake a wider review of the pension and retirement landscape, which may mean that some of the big potential changes such as modifying pension tax relief or tax-free cash lump sums are parked while this takes place. For a government that says it is concerned about the adequacy of people’s retirement provision it would be an odd move to undermine these well-understood benefits.
It would not be a surprise to see some tinkering with the rules, though. With plans to scrap the reintroduction of the lifetime allowance (LTA) – the amount an individual can accumulate across their pensions without facing a tax charge – one facet likely to be looked at by a is the ability to pass pension pots on inheritance tax (IHT) free to nominated beneficiaries.
What about the State Pension triple lock?
Despite longer-term concerns around its sustainability, both Labour and the Conservatives have committed to maintain the State Pension triple lock, which determines how much the state pension increases by each year. It’s based on the highest of average earnings growth, inflation, or 2.5%. With wage rises now well above inflation and 2.5%, pensioners will be due a healthy rise next April.
As things stand a full new state pension would exceed the currently frozen income tax personal allowance by 2027. Labour has not outlined any policies to address the issue of greater numbers of low-earning pensioners being caught by tax reporting and payment duties, but it’s sure to be an increasing issue given higher interest rates on cash alongside rises in the level of the state pension.
5. Inheritance tax
Frozen allowances and higher house prices are pushing more estates into paying inheritance tax (IHT) and receipts are at a record high. The Labour manifesto was silent in the matter of IHT, leaving the door open to reform.
It could make a tempting target. With the baby boomer generation hitting their sixties and seventies their accumulation of wealth is increasingly being passed through gifts and through the taxation of estates. The easiest way to tax wealth is when it moves, and it remains a distinct possibility we will see changes to the current regime.
If you haven’t already, now is a very good time to consider who you want to benefit from your assets and check whether you might be affected by IHT. It may be that some forward planning can help minimise the amount of tax your estate pays or eliminate it altogether. There are simple ways to do so such as making gifts, as well as more specialist methods for larger estates.
6. Capital Gains Tax (CGT)
At first glance there appears to be little scope to ratchet up tax on capital gains with the CGT allowance halved to just £3,000 for the 2024/25 tax year. Indeed, Labour previously said it had “no plans” to change CGT rates, which depends on the income tax rate you pay and whether the asset is residential property. However, with its audit of the nation’s finances now complete, plans could be forming.
Any moves to align CGT rates to those of income tax, as has been speculated, could catch out some investors. Current rates of CGT are 10% and 20% for basic and higher rate respectively, and extra for second properties – 18% and 24% for the current tax year. There are rumours that CGT rates could be aligned with those of income tax, so someone’s marginal rate of 20%, 40% or 45%, which would be a considerable increase.
There could also be more targeted and indirect ways to increase taxes on capital such as reforming the reset of capital gains on assets on transfer to a spouse on death or changing the scope of business reliefs. Again, it’s a case of ‘watch this space’ but entrepreneurs and business owners
looking to dispose of stakes or assets should be alert to any changes that might occur.
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Navigating family wealth challenges in changing times
Download your free guide and discover how the UK’s ‘squeezed middle’ is balancing finances with the expectations of different generations.
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