Following yesterday’s general election, the Conservative Party’s turbulent 14-year reign has come to a dramatic but much predicted end. The Labour Party will now form the next UK Government with an historic majority of MPs and, later today, Sir Keir Starmer will become the UK’s 58th Prime Minister.
For the first time in over 800 years, the UK will also have its first female Chancellor of the Exchequer in Rachel Reeves. Reeves has put economic stability at the core of Labour’s manifesto and promised that, assuming Labour can drive growth, there will be no additional tax rises needed over those already announced. She has also ruled out a snap budget or fiscal statement, declaring that she wants to receive forecasts from the UK’s Office of Budget Responsibility (OBR) before she commits to an outcome (the OBR requires 10 weeks’ notice to prepare its forecasts). As such, she is unlikely to deliver a budget before mid-September at the very earliest and we will need to wait a while longer to establish if Labour will stand by its manifesto promises.
For our buying clients, and London’s prime residential markets, the most relevant proposals are:
~ Abolition of the non-dom regime and wholesale changes to the inheritance tax regime, as announced by the Conservative Party pre-election. Changes to inheritance tax will be subject to a consultation. In its manifesto, Labour promised to go further than the Conservative Party proposals saying they would close further “non-dom tax loopholes” and “end the use of offshore trusts to avoid inheritance tax so that everyone who makes their home here in the UK pays their taxes here”. A change to inheritance tax policy is unquestionably the most emotive here.
~ The introduction of a new UK Foreign Income and Gains (FIG) regime (again, announced by the Conservative Party pre-election) to attract those “genuinely living in the UK for short periods to allow [the UK] to continue to attract top international talent”.
~ Imposing VAT (20%) on private school fees.
~ Changing the taxation of carried interest. Again, Rachel Reeves has said this will be subject to a consultation. She has also indicated she will focus on restricting capital gains tax treatment to situations where fund managers are putting their own capital at risk.
~ A 1% increase in the current non-resident SDLT surcharge (taking it to 3% and the top rate of SDLT to 18%).
For now, Labour has committed not to increase corporation tax, income tax, national insurance or VAT. It has said it has “no plans” to increase capital gains tax (or imposing CGT on an individual’s main home) and has also ruled out a wealth tax or mansion tax.
Whilst I imagine there will be all manner of headlines in the coming days, the reality is that there is very little instantaneous change. It has been clear for some time that Labour would form the next government (the only uncertainty has been the extent of their majority) and their manifesto has set out the tax changes they plan (at least for now). For all the hypothesising over their proposed policies, the devil will be in the detail and we will not know that until Labour’s first budget is delivered and draft legislation is published.
From an international perspective, as we look out on a turbulent year of global elections, we are told that the UK election seems very benign, or as one strategist at Bank of America described it, a “non-event”. In fact, in recent days sterling and UK Government Bonds have strengthened and City investors (as well as our new Chancellor) have suggested the UK could become a “safe haven” for global investors in a world where “other countries are tilting to more populist politics”. Analysts at UBS have even said Britain could emerge as an “island of stability” in Europe. A period of political stability is certainly welcomed and the country, and London in particular, will benefit if the UK can continue to project that stability onto the global stage.
If you or your clients would like to discuss the impact of today’s election results or Labour’s proposed changes, please don’t hesitate to contact me or a member of the RFR team.
With warmest wishes,
Following yesterday’s general election, the Conservative Party’s turbulent 14-year reign has come to a dramatic but much predicted end. The Labour Party will now form the next UK Government with an historic majority of MPs and, later today, Sir Keir Starmer will become the UK’s 58th Prime Minister.
For the first time in over 800 years, the UK will also have its first female Chancellor of the Exchequer in Rachel Reeves. Reeves has put economic stability at the core of Labour’s manifesto and promised that, assuming Labour can drive growth, there will be no additional tax rises needed over those already announced. She has also ruled out a snap budget or fiscal statement, declaring that she wants to receive forecasts from the UK’s Office of Budget Responsibility (OBR) before she commits to an outcome (the OBR requires 10 weeks’ notice to prepare its forecasts). As such, she is unlikely to deliver a budget before mid-September at the very earliest and we will need to wait a while longer to establish if Labour will stand by its manifesto promises.
For our buying clients, and London’s prime residential markets, the most relevant proposals are:
~ Abolition of the non-dom regime and wholesale changes to the inheritance tax regime, as announced by the Conservative Party pre-election. Changes to inheritance tax will be subject to a consultation. In its manifesto, Labour promised to go further than the Conservative Party proposals saying they would close further “non-dom tax loopholes” and “end the use of offshore trusts to avoid inheritance tax so that everyone who makes their home here in the UK pays their taxes here”. A change to inheritance tax policy is unquestionably the most emotive here.
~ The introduction of a new UK Foreign Income and Gains (FIG) regime (again, announced by the Conservative Party pre-election) to attract those “genuinely living in the UK for short periods to allow [the UK] to continue to attract top international talent”.
~ Imposing VAT (20%) on private school fees.
~ Changing the taxation of carried interest. Again, Rachel Reeves has said this will be subject to a consultation. She has also indicated she will focus on restricting capital gains tax treatment to situations where fund managers are putting their own capital at risk.
~ A 1% increase in the current non-resident SDLT surcharge (taking it to 3% and the top rate of SDLT to 18%).
For now, Labour has committed not to increase corporation tax, income tax, national insurance or VAT. It has said it has “no plans” to increase capital gains tax (or imposing CGT on an individual’s main home) and has also ruled out a wealth tax or mansion tax.
Whilst I imagine there will be all manner of headlines in the coming days, the reality is that there is very little instantaneous change. It has been clear for some time that Labour would form the next government (the only uncertainty has been the extent of their majority) and their manifesto has set out the tax changes they plan (at least for now). For all the hypothesising over their proposed policies, the devil will be in the detail and we will not know that until Labour’s first budget is delivered and draft legislation is published.
From an international perspective, as we look out on a turbulent year of global elections, we are told that the UK election seems very benign, or as one strategist at Bank of America described it, a “non-event”. In fact, in recent days sterling and UK Government Bonds have strengthened and City investors (as well as our new Chancellor) have suggested the UK could become a “safe haven” for global investors in a world where “other countries are tilting to more populist politics”. Analysts at UBS have even said Britain could emerge as an “island of stability” in Europe. A period of political stability is certainly welcomed and the country, and London in particular, will benefit if the UK can continue to project that stability onto the global stage.
If you or your clients would like to discuss the impact of today’s election results or Labour’s proposed changes, please don’t hesitate to contact me or a member of the RFR team.
With warmest wishes,
