News & Events
Navigating tax changes under Labour: What can we expect?
23rd July 2024
Following the general election on July 4th, which resulted in a Labour victory, it’s highly likely that we can expect some tax changes in the coming months. The Labour manifesto included several key points that could, if implemented, have an impact. Here, the Rowleys tax team outline some of the key tax changes that may lie ahead, along with our insights on what it might mean for you and your business.
Corporation tax and business investments
Corporation tax at 25%
Labour has pledged to maintain the corporation tax rate at 25% throughout the entire parliament. While this rate is higher compared to some previous years, Labour’s commitment to providing more certainty around the full expensing relief regime and clarity over qualifying capital purchases is welcomed. They have also pledged to maintain the £1M Annual Investment Allowance, which is crucial for businesses planning significant investments.
R&D relief
Labour’s manifesto emphasised stability, with no mention of changes to the current R&D relief for corporate investment planned, a relief that has undergone multiple changes recently. This consistency is vital for businesses planning long-term investments in innovation and development.
Stability and planning
Roadmap for business taxation
Labour plans to publish a comprehensive roadmap for business taxation within six months of taking office. This will cover the duration of the next parliament, aiming to provide businesses with much-needed stability and certainty. We at Rowleys recommend that businesses stay informed about this roadmap, as it will be crucial for future planning and strategy.
National Wealth Fund
The creation of a National Wealth Fund, backed by £7.3 billion through the UK Infrastructure Bank, is intended to stimulate private sector investment and drive growth. This initiative is not only beneficial for direct recipients but also for the entire supply chain, which includes many SMEs that form the backbone of our economy.
Personal and business taxation
Income Tax and NI Rates
Labour has pledged not to increase the rates of National Insurance (NI) or income tax during this parliament. However, income tax thresholds will remain frozen until 2028, leading to an overall increase in tax take as wages rise.
There has also been mention of possible changes to the national minimum and national living wage, with suggestions that they will remove age bands so there is only one rate, as well as change the remit of the Low Pay Commission to ensure that the minimum wage is a genuine living wage.
Businesses should prepare for the potential impact of these changes on their payroll and financial planning and speak to their advisers for advice.
VAT and business rates for private schools
Labour intends to remove the VAT and business rate exemption for private schools. This change is complex and unlikely to be implemented before September 2025. However, it’s important to note that private schools will be able to recover VAT on costs, which may mitigate the full impact on parents.
Non-doms and tax avoidance
New taxation system for non-doms
Labour plans to introduce a more comprehensive taxation system for Non-Doms, expanding on the changes proposed in the Spring Budget. This includes potential changes to the tax treatment of offshore trusts and remittance basis rules, aimed at increasing tax revenue from this group.
Strengthening HMRC
Labour is committed to giving HMRC more funding to tackle tax avoidance, increasing registration and reporting requirements, and strengthening enforcement powers. Businesses should ensure they are compliant with all tax regulations to avoid potential penalties.
Capital taxes and property
Inheritance Tax (IHT)
Currently, there are no specific mentions of changes to IHT, but there is speculation about potential reforms. Labour might explore changes to the rebasing of assets for capital gains tax purposes when subject to business or agricultural relief from IHT. Any changes in this area could impact family-owned and mid-market businesses that rely on these reliefs to pass businesses to the next generation. In addition, any changes to the taxation of Non-Doms is likely to include changes to the current IHT rules.
Capital Gains Tax (CGT)
There is uncertainty surrounding CGT, with potential consultations on future increases. Businesses should stay updated on any announcements and prepare for possible changes.
Stamp Duty Land Tax (SDLT)
Labour plans to increase SDLT by 1% on the purchase of residential property by non-resident individuals. This could impact the property market and associated sectors.
Removing red tape
Labour has pledged to speed up development by removing the red tape and updating national planning policy to give greater priority to development. This move would increase the opportunity for those in the construction industry and all connected supply chain.
Summary
The Labour government’s focus on stability for businesses, particularly through the maintenance of investment reliefs and the creation of the National Wealth Fund, is positive.
While there is still uncertainty around capital taxes, we advise clients not to make knee-jerk decisions. Instead, consider long-term financial planning and stay informed about any potential changes.
Overall, the election brings some certainty and stability, but further policy clarifications are expected in the coming months. We will be closely monitoring any developments and will keep you updated.
We expect that a Budget date will be announced in the coming weeks. Rowleys will be holding a Budget Breakfast event following the Budget announcement to provide further insight and clarification on the changes. Email: jo@rowleys.biz to register your interest in this event.
Get in touch
For more detailed advice and to discuss how these changes might affect your business, please get in touch with our team at Rowleys. We are here to help you navigate these changes.