Labour has won a decisive victory in the general election, and savers and investors will be keen to know what this means for their finances.
While we already know about Labour’s manifesto pledges, we will have to wait until the new government’s first Budget to get a better understanding of how our taxes will be affected.
The Budget will likely announce the details around adding VAT to private school fees. It may also include changes to ISAs and pensions, inheritance tax, stamp duty and capital gains tax.
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Labour has already said it will reduce the first-time buyer stamp duty exemption threshold from £425,000 to £300,000.
The party has not ruled out any changes to capital gains tax, meaning the rates or annual tax-free allowance could be amended in a forthcoming Budget.
The Budget will be the first big fiscal event of Keir Starmer’s ruling party, and the first Labour Budget for 14 years.
We look at when it’s expected to be announced, and what could be in the famous red box.
When will the Budget take place?
The Labour government’s first Budget looks set to take place in the autumn.
Rachel Reeves, the new Chancellor, says she will announce the exact date of the Budget before the end of this month (July).
Starmer has a busy few days after winning a landslide victory at the general election, meeting King Charles to formally ask to form a government, and then preparing for the King’s Speech on 17 July.
The speech, written by the government, sets out the legislative agenda for the political year ahead.
But details about the economy, government spending priorities (such as on schools and the NHS) and any changes to our personal finances will be unveiled later, at the Budget.
Labour has previously said they would not deliver a Budget without forecasts from the Office for Budget Responsibility (OBR), an independent public body.
It takes 10 weeks for the OBR to assess the economic impact of policy announcements and produce a report.
So, if the new government issued an instruction to the OBR on 5 July, the Budget could take place on Friday 13 September, at the earliest.
If Labour are superstitious, they may opt to move the Chancellor’s speech until the following week. Or, they could wait longer.
Budgets usually take place in the autumn (with another one in the spring).
But previous governments have been known to wait until December - former chancellor George Osborne announced one of his Budgets on 3 December.
However, the consensus among experts is that Labour’s first fiscal event will take place in September, or possibly October.
Who will announce the Budget?
The Budget will be announced by the Chancellor.
Rachel Reeves served as shadow Chancellor when Labour were in opposition, and Starmer named her as his Chancellor when he unveiled his cabinet last week.
This makes Reeves the UK’s first female Chancellor.
Reeves, who previously worked at the Bank of England, has worked hard to win business leaders round, and position Labour as the “party of growth”.
What is expected to be in the Budget?
The Budget is likely to contain further information about some of Labour’s manifesto pledges.
This includes the removal of private school fees from VAT exemption, and a crackdown on tax avoidance and loopholes, including abolishing the non-dom status.
Gary Smith, partner in financial planning at wealth management firm Evelyn Partners, comments: “The manifesto provided little detail on these measures and we might not find out the small print until an Autumn Budget, which is expected in September, and even that will probably not clarify everything, like pensions policy for instance. We may instead see a number of reviews launched.”
One to look out for is a pensions review. The Labour manifesto said: “We will undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets.”
A poll by Ipsos in May revealed that 56% per cent of British voters expect taxes to go up after the UK general election if Labour win, and 52% if the Tories remain in power.
Labour have repeatedly insisted they will “not increase taxes on working people”. It says National Insurance, income tax, VAT and corporation tax will not be hiked.
The party has offered no such assurances about stamp duty, capital gains tax and inheritance tax though, raising questions over whether these could be tweaked in the Budget.
Smith says: “Capital gains tax, inheritance tax and the tax-preferential treatment of pension saving have all featured in speculation around possible targets for a government that needs to raise revenues down the line.”
However, he adds: “It’s unlikely the new government will introduce any controversial new measures straight away, as Mr Starmer will be accused of sleight of hand. It is the middle years of the parliament when Labour could push the policy boat out, as there’ll be time before the next election for the ripples to subside.”
According to Myron Jobson, senior personal finance analyst at the investment platform Interactive Investor, the first Budget of the newly-elected Labour government “will prove crucial, as it sets out its stall for personal finances over the next five years, potentially rubber-stamping manifesto positions on taxes, benefits, and allowances that will shape the economic landscape for individuals and families”.
He notes that Labour will likely reaffirm its position to maintain the state pension triple lock, as well as keeping the freeze on income tax thresholds.
“Also, many first-time buyers will be waiting with bated breath to see whether the pledge to make permanent the mortgage guarantee scheme designed to ensure low-deposit mortgages will see the light of day, and, if so, how quickly it will be rolled out,” says Jobson.
The British ISA and the “pot for life” pension reform could potentially make an appearance in the Budget too.
What about the economic forecasts?
The Budget will also contain information about how well the economy is doing, and forecasts for the future - courtesy of the OBR.
Paul Dales, chief UK economist at the consultancy Capital Economics, comments: “Labour is taking over just as inflation has fallen back to the 2% target and the Bank of England is on the cusp of cutting interest rates from 5.25%.”
Dales predicts that inflation will fall a bit further and the Bank will cut rates to 3% next year, meaning that GDP growth could accelerate.
We will have to wait for the official forecasts in the Budget, but in the meantime, Capital Economics thinks economic growth will rise to 1.2% this year and to 1.5% in both 2025 and 2026.
Dales adds: “Moreover, our current estimate is that at the first fiscal event after the election - probably in September - the OBR will grant Labour fiscal headroom of around £16 billion (0.6% of GDP), up from £8.9 billion (0.3%) in the March Budget.
“That may mean Labour can raise spending a bit further than planned without raising taxes / borrowing by more than planned. Looser fiscal policy, though, may just mean inflation is a little higher and interest rates don’t fall as far.”
