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Labour wins the election; what now for UK taxes?

5th July 2024

With the result of the 2024 general election now clear that Labour has secured an overall majority in the House of Commons, what now for UK taxation over the next five years?

See also our quick guide to Labour's tax plans.


See also: House of Commons Library - what happens after the general election?

King's Speech

The first item on the parliamentary agenda will be the King’s Speech on 17 July. This will set out the new government's projects for the new parliament.

In the speech, Labour is expected to announce measures to boost the powers of the Office for Budget Responsibility to independently publish forecasts of fiscal events to keep the chancellor in check, and Labour's proposals to make work pay to reform employment laws. 

It is also expected to revive certain items of legislation that were not enacted before the election, such as the abolition of Furnished Holiday Lets and reforms to the non-dom tax regime.

Rachel Reeves is the new Chancellor

Sir Keir Starmer has already confirmed that Rachel Reeves will be his Chancellor and in charge of steering forward Labour's tax plans as partly set out in its manifesto.

She is in fact Britain’s first female chancellor, having previously been an economist at the Bank of England and HBOS, and will reside at 11 Downing Street. It is rare for a chancellor to be an economist, even though one might have thought this would be a more common occurrence.

In her first speech to Treasury staff she said:

"...I want to be the most pro-growth Treasury in our country’s history."


"I’m under no illusions about the scale of the challenges that we face, the difficult choices that we will have to make"

Autumn Budget

Whilst it cannot be assumed that major taxes changes will not happen sooner, Rachel Reeves has said that her first budget will be in late September, together with a comprehensive spending review lasting one to three years. 

But with the Labour Party conference scheduled for 22-25 September, the budget is likely to be a week or so later in early October. Reeves has said she plans to have a single annual budget in the autumn rather than in the spring.

The key question is what will Reeves announce on tax? 

Labour has repeatedly refused to rule out certain tax rises, including:

  • increasing capital gains tax, 
  • targeting pensions tax relief, 
  • reducing IHT agricultural and business property relief
  • revaluing council tax bands,
  • raising fuel duty. 

Is there any money?

As expected, Rachel Reeves has warned “there’s not a huge amount of money” in the coffers for Labour's spending plans, adding that it would be a "challenge". There is currently around a £30bn black hole that needs to be filled.

Reeves signed up to Jeremy Hunt's spending plans, which the Office for Budget Responsibility (OBR) described as worse than fiction, meaning taxes will have to rise somewhere if some of Labour's spending pledges are to be delivered without adding to public borrowing.

In the longer term Reeves is looking to the private sector to help cover investment plans to boost the economy. Mark Carney, the former governor of the Bank of England, has been advising her on the creation of a new National Wealth Fund designed to encourage billions of pounds in private investment to boost growth. A report is expected to be published on 9 July, the same day that parliament reconvenes.

But what if that projected growth doesn't happen, or not quickly enough? That leaves Reeves in a difficult economic position. She will then need to raise taxes, borrow more, or introduce George Osborne-style austerity to cut spending. None of these options are palatable. 

Capital taxes

Although Reeves has previously said that ‘preferential tax treatment’ for wealth generators was an important element in growing an economy, and a ‘wholesale equalisation’ of income tax and capital gains tax could hurt investment, it cannot be ruled out that CGT will rise in the short term, such as by equalising rates with those of income tax. 

CGT is paid by around 5% of taxpayers.

If it were to be the case that rates did increase, would that be from the date of the budget or more likely from April 2025?  There is still time to undertake transactions before taxes change, such as disposing of assets (subject to family and commercial considerations).

See our article: Might we see changes to Capital Gains Tax after the election?

According to the Guardian, based on research by the Institute for Fiscal Studies, Labour is not only considering aligning CGT rates with income tax rates, but is also looking at restricting IHT agricultural and business reliefs to £500,000 per person (instead of e.g. the current 100% where agricultural land is being actively farmed). 

Interestingly, HMRC's own projections show that increasing CGT rates from 20% to 30% would lead to a decrease in revenue for the Treasury.  That could be because those potentially liable to the increased tax could choose not to sell, or even invest in the first place.

VAT on private education

There is also a proposal to remove the VAT exemption from private school fees. The business rates exemption for private schools may also be removed. The Institute for Fiscal Studies estimates that this would raise £1.6bn per year in extra tax (on current numbers attending private schools), but the cost of absorbing extra pupils into state schools as a result could cost between £100m to £300m per year.

It is understood that the policy may be subject to a number of legal challenges from independent schools as potentially a breach of the European Convention on Human Rights (ECHR):

  • Article 2 - Right to education.
  • Article 14 - Prohibition of discrimination.
  • Article 1 - Protection of property. 

If the policy is enacted, it is not clear as to whether one could, in principle, retain the current ‘VAT-free’ status by prepaying school fees, but that would be subject to any (as yet unclear) anti-forestalling legislation.

On 21 June 2024, Rachel Reeves indicated that Labour will delay VAT on private school fees until 2025.

Pension lifetime allowance

Rachel Reeves had originally pledged to reverse the abolition of the £1m pension lifetime tax-free limit on pension contributions, which Jeremy Hunt announced last year. In seeking to reverse the abolition, however, Reeves has since u-turned on this and will NOT reintroduce the lifetime limit.

What is more likely to happen is that tax relief for pension contributions will be restricted to a flat rate.

Other budget announcements

In the manifesto and in media interviews with Reeves, Labour has made the following policy announcements:

  • A promise not to "raise taxes on working people"
  • Raise £5bn a year by tackling tax avoidance
  • To keep tax thresholds frozen for the lifetime of this parliament.
  • To make private equity bosses pay 45% tax rather than the 28% they can pay under the “carried interest” rules.
  • The 25% rate of Corporation Tax will be held in place until 2029
  • Full Expensing and the Annual Investment Allowance will be maintained.
  • Within six months of a Labour government, it has pledged to publish a “roadmap” for business taxation.
  • Possible scrapping or reducing business asset disposal relief (formerly entrepreneurs' relief).

Labour's Green Prosperity Plan

On the much-advertised policy of spending £28bn a year on its Green Prosperity Plan to boost green industries (first announced in 2021), Rachel Reeves has made clear that this is only an ambition and will depend on keeping within certain fiscal parameters. 

Labour now only plans to borrow £2.6bn a year for net-zero investment and cover the balance through an extended windfall tax on oil and gas companies. But it still plans to create a state-owned energy company at a one-off cost of £8.3bn, and to decarbonise heavy industry via a £7.3bn national wealth fund.

Labour's Business Partnership

Labour has also published a Business Partnership paper that includes policies such as:

  • One Budget every autumn, at least 4 months before the new tax year 
  • 10-year Research & Development budgets and a new Regulatory Innovation Office
  • Apprenticeship Levy reforms to create a more flexible skills Levy.
  • A New Deal for Working People that provides a living wage and bans “exploitative” zero hours contracts 

We have already seen some dilution of the proposed policies on workers' rights due to lobbying by businesses, and push back from the shadow chancellor.

On 24 May 2024, the New Deal for Working People was renamed Make Work Pay in order to reassure businesses, and promises a full consultation before enacting legislation. 

It does confirm some key policies, including removing some current trade union legislation, a reduction in government outsourcing, and an end to hire and re-fire (unless bankruptcy would otherwise result), as well as “day one rights” on unfair dismissal, parental leave and sick pay (all subject to an employer's probationary periods and other possible exemptions yet to be made clear).

Further reading

See our previous election articles:

Contact us

We will keep you updated as tax policy announcements arise ahead of the autumn budget.

In the meantime, if you would like to discuss how the change of government may affect your taxes or those of your business, please contact your usual Bishop Fleming advisor.

[Gary Mackley-Smith]

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