Labour Wins Keys To 10 & 11 Downing Street – What Will It Mean For Your Money? – Forbes Advisor UK

5 July: Rachel Reeves To Become UK’s First Female Chancellor

Big political themes have dominated the 2024 General Election, which the Labour Party has won with a crushing victory over its Conservative Party rivals: NHS and social care funding, immigration, decarbonisation, housing, education, crime and, of course, the economy, writes Kevin Pratt.

It seems likely that Rachel Reeves, the new Chancellor of the Exchequer and the first woman to hold that post, will focus primarily on developing a strategy for national growth by boosting investment and attracting capital from overseas.

In terms of our personal finances, there are unlikely to be any bombshells when she delivers her first Budget sometime in the next few weeks. In its manifesto and during the campaign, Labour pledged not to raise income tax, national insurance or VAT, and it committed to maintaining the ‘triple lock’ on the state pension, which guarantees that it will rise each year in line with inflation, wages or 2.5%, whichever is higher.

But, like any new government, Labour has chunky spending plans – renationalising passenger rail services, building 1.5 million homes, creating a state owned energy company among them – so where will it find the money?

There are suggestions that, with taxing income more aggressively off the slate, it will look at tax on capital and accumulated wealth instead, with inheritance tax, capital gains tax, pension pots and even property holdings all potentially seen as sources of increased revenue.

It remains to be seen if Labour will increase income tax thresholds, which were frozen under Rishi Sunak. This has led to more people paying higher rates of taxes as pay increases took them into a higher tax bracket. If it doesn’t, it may face criticism that it is giving the green light to a rise in personal taxes, albeit a passive one.

Labour also wants to crack down on what it sees as tax avoidance and the use of loopholes, both by corporations such as online retailers and by wealthy individuals. And it has pledged to remove the VAT exemption on public schools fees by September 2025 – a measure seen as controversial by those affected, but one which hasn’t harmed the party’s performance at the ballot box.

Reeves’ first Budget will tackle the big themes, naturally, but it seems likely she will want to reassure voters who switched to Labour from the Conservatives that her party understands the importance of family finances. For example, she is unlikely to tinker with the workings of the successful Individual Savings Account regime, unless it is to simplify the range of accounts and perhaps build on the previous regime’s idea of a so-called British ISA, which would reward investment specifically into UK companies with a higher tax-free annual allowance.

Labour has consistently presented itself as the party of business and wealth creation. Households across the nation will watch with keen interest to see what impact this will have on their own financial situation.