A New Era: What to Expect from Keir Starmer's Labour Government

On 5th July, Keir Starmer was appointed Prime Minister by Charles III, marking the Labour Government's return after 14 years. His immediate priority is stabilising the economy through clearer and fairer tax regulations aimed at reducing the tax gap.

In this edition, we would like to share an overview of what we can expect from this new administration.

Labour's manifesto pledges include maintaining current rates of income tax, national insurance, and VAT to ensure economic stability amidst challenges such as inflation and rising mortgage rates.

The government has also expressed strong support for the business sector, committing to cap the current corporation tax rate at 25%. They will introduce a system allowing full deduction of capital investments and maintain the annual investment allowance for small businesses, boosting investor confidence and supporting entrepreneurs.

To increase tax revenues, Labour plans to abolish non-dom status, close tax avoidance loopholes, and revise rules for individuals with short stays in the UK.

They also propose raising stamp duty by 1% for non-UK residents purchasing property and ending the use of offshore trusts, aiming to prevent inheritance tax evasion and establish a fairer tax regime.

To strengthen HMRC, they also plan to invest in improving systems to enhance efficiency and increase reporting and registration requirements.

While the government has outlined these changes, details on implementation remain unclear, including whether there will be caps on inheritance tax and capital gains tax.

Regarding inheritance tax, it is estimated that reforms, such as eliminating the inheritance tax-free status for contribution pension pots, will generate ￡200 million in tax revenue this year. Conversely, increasing capital gains tax may have an adverse effect. Higher rates could discourage individuals from selling their shares to avoid the tax, leaving gains unrealised and possibly reducing tax revenue. In the long term, this could negatively impact the economy.

We will closely monitor updates from the cabinet concerning these tax issues. They are expected to be addressed in the Autumn Budget, likely on Friday 13th or 18th September.

The government's first 100 days are viewed as a defining period and a crucial time during which the cabinet holds significant sway over policy reforms and strives to achieve political goals. This period culminates on 12th October, following the State Opening where the new government's priorities are addressed. The House of Commons is scheduled for the summer recess starting on 23rd July, and the conference recess likely in September or October. This leaves little time for the government to have a honeymoon period and emphasises the need to immediately tackle pressing matters.

In these unpredictable and fast-changing times, planning for the future can be difficult. At Haggards, we understand the need for guidance and support during such turbulent periods. We always put our clients first, and with our professional expertise, we are dedicated to helping you achieve the best outcomes and succeed together. If you need a reliable and approachable partner, we're here for you. Please don't hesitate to get in touch with us. We'd love to hear from you.

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