UK democracy is modernising - sweet sixteens and seventeen year olds will be given voting rights in England for the first time in the next general election.

The change was promised in Labour’s manifesto, and aims to restore trust in politics through ‘Labour’s Plan for Change’.

As part of the seismic changes, voters will also be able to use their bank cards as ID, making it easier for people to turn up and exercise their right to vote.

In England, you currently have to be 18 to vote. In 1969, the voting age was lowered from 21 to 18. Lowering the age brings the voting system in line with Scotland and Wales, where 16-17 year olds can vote.

Deputy prime minister Angela Rayner said: “For too long public trust in our democracy has been damaged and faith in our institutions has been allowed to decline. We are taking action to break down barriers to participation that will ensure more people have the opportunity to engage in UK democracy, supporting our Plan for Change, and delivering on our manifesto commitment to give sixteen year olds the right to vote.”

There are concerns that not all 16 year olds have a grasp of the right information at that age to make an informed decision. I also believe that many will follow influence - whether it be family, friends or social media. Can a 16 year old filter out the noise and make an informed choice?

But, if they can tie the knot at 16, work and pay taxes, why shouldn’t they have a say on which government is in charge of the policies that impact their finances? Maybe.

What can Labour do for 16 year olds?

Having upset older voters with the winter fuel allowance cuts, even though that has seen a U-turn, alongside other fiscal policies over IHT and pension changes, Labour will need to look very attractive to this new wave of younger voters that it may desperately need.

But can Labour deliver on their priorities - and what would those priorities be?

For those that stay in education, student fees are likely to be a talking point - would Labour scrap or reduce them?

For those starting employment, perhaps a boost to their pension journey by scrapping the minimum income level at which they are enrolled into a pension, or possibly a non-contributory incentive until they are at least 18?

Gaining the support of this age group will possibly cost the government more and any party that wants the votes of teens is going to have to try hard to grab their attention.

It’s hard to know what 16 year olds are looking for.

According to a poll of 500 16-17 year olds by ITV News, half do not want the power to vote.

And if they were to vote, the poll found 16 and 17 year olds favoured left-wing parties, though Nigel Farage's Reform UK came up second as the most-supported party.

Around 33% said they supported Labour, 20% said Reform, 18% said Green.

My view is, this age group has just left school, they have not had time to absorb what is going on in the world, they do not yet know what they need in life and what policies they would support. Worryingly, they will be led by influence. Popping the ‘X’ into a black box, in my view, should be left for the 18-plus.

But equally, if Labour truly wants to modernise the voting system and UK democracy, then it should perhaps also remove voting for 80-plus. Policies like Brexit will impact younger people, and so it should be their vote that really matters.

Chancellor Rachel Reeves has announced cuts to public spending worth billions of pounds, including restricting winter fuel payments to those on Pension Credit or other means-tested benefits.

In a speech this afternoon, Reeves declared that Labour had inherited a projected overspend of £22 billion from the Conservatives, and accused the previous government of “covering up the true state of the public finances”.

The Chancellor said she had made “difficult decisions” to find £5.5 billion of savings this year and £8.1 billion next year, while pledging to “fix the foundations of our economy”.

She also revealed the date of the Budget - 30 October - and said there would only be “one major fiscal event per year”.

According to Reeves, this would “put an end to surprise budgets, which have previously caused uncertainty for both the markets and family finances across the country”.  

In 2022, Liz Truss and Kwasi Kwarteng’s mini-Budget sent shockwaves through the economy after it announced billions of pounds of unfunded tax cuts. 

Today’s political announcement comes just days before another big event for the UK economy. On Thursday, 1 August, the Bank of England’s Monetary Policy Committee will meet to discuss cutting interest rates.

Most economists are expecting the Bank to finally cut the 5.25% base rate, possibly to 5%.

We look at what Reeves announced today, from ditching the Stonehenge tunnel and a NatWest share offer to axing the winter fuel payment for millions of pensioners.

Labour's spending cuts

Reeves's mantra for today's speech was "if we cannot afford it, we cannot do it" as she took a sledgehammer to a raft of spending commitments.

First, she said that all government departments would be asked to make savings totalling at least £3 billion.

All non-essential spending on consultants would be stopped.

The Chancellor axed several transport projects: the A303 Stonehenge tunnel, A27 Arundel bypass and the Restoring Your Railway programme.

Meanwhile, she said other transport projects would be reviewed by the transport secretary.

Reeves also announced that the government would drop the NatWest share sale to retail investors.

Next on her list was Boris Johnson’s New Hospital programme. She said the government would conduct a "complete review" of the project, adding that only one had so far opened.

The last part of her speech caught many people by surprise, touching on social care and pensioner payments.

Reeves announced that Labour would not take forward the previous government's social care reforms.

This means it will not introduce a cap on social care charges.

Sarah Coles, head of personal finance at the investment platform Hargreaves Lansdown, called it a "bitter blow".

She commented: "Rachel Reeves has announced that the reforms outlined in 2021, and originally promised for last year, were never funded, and so the issue has been jettisoned yet again. It’s devastating for those people who need care and face catastrophic costs."

The Chancellor's next target was winter fuel payment. "Those not on Pension Credit or other means-tested benefits will not get winter fuel payment from this year," announced Reeves. 

Around 10 million pensioners will lose their winter fuel payments - something Reeves referred to as a "necessary and urgent decision".

The move will save the government about £1.5 billion a year.

Reeves also revealed that more work would be done to boost the take-up of Pension Credit, including identifying eligible claimants.

Receiving Pension Credit unlocks the door to other benefits, including from later this year, the winter fuel payment.

In notes accompanying Reeves's speech, the government announced that the VAT tax break for private schools would end on 1 January 2025.

It will not be possible to pre-pay the fees now and beat the tax hike. The government said: "20% VAT will also apply to pre-payments of fees for terms starting on or after 1 January 2025 made on or after 29 July 2024."

Office of Value for Money

The Chancellor also announced that an “Office of Value for Money” would be established to deliver better value for money for taxpayers, using existing civil service resource. 

This would “put an end to wasteful spending in government, providing targeted scrutiny of public spending so that value for money governs every decision government makes”, according to the Chancellor.

Reeves said it will begin work on identifying and recommending savings for the current financial year, while also ensuring that poor value for money spending is cut off before it begins. 

She added that action would be taken to stop non-essential spending on consultants, alongside hastening delivering admin efficiencies in departments. 

Budget Responsibility Bill

Meanwhile, the government highlighted the Budget Responsibility Bill, which was mentioned in the King’s Speech earlier this month. 

This will ensure all big fiscal announcements on tax or spending that are worth more than 1% of the UK’s GDP will be subject to scrutiny by the independent Office for Budget Responsibility (OBR). 

The Treasury says this will guard against large-scale unfunded commitments in the future. 

Neil Shearing, group chief economist at the consultancy Capital Economics, notes that the new team at the Treasury “have been laying on the gloom pretty thick since the election”.

“Reeves has even stated that she has been bequeathed the worst economic inheritance of any incoming government since the Second World War. This gloom has been motivated more by political positioning than economic reality, reflecting efforts to manage the expectations of both an electorate that voted for change and backbench MPs who are clamouring to loosen the purse strings”

However, he adds that the government will have to “run a tight fiscal ship”, with “public debt currently running at 99.5% of GDP – the highest since 1962”.

Reeves’s first Budget

The Chancellor also confirmed the date of the much-anticipated Budget: 30 October.

It will be published alongside a Spending Review, and Reeves said she had already commissioned an OBR forecast to coincide with these.

Labour said it aims to “get debt falling as a share of the economy by the fifth year of the forecast”.

In terms of changes to your personal finances in the Budget, experts expect to see tax hikes for higher earners.

For example, capital gains tax (CGT) could be a target. The rates could be increased to align with income tax rates. Or the timing of when CGT is applied could change, such as applying it when someone inherits an asset that has risen in value.

With inheritance tax to pay as well, it could mean bereaved families pay a “double death tax” of more than 50%.

There is also mounting speculation that pension tax relief could be reformed. If a flat rate of below 40% was applied, it would mean higher-rate taxpayers and additional-rate taxpayers would receive less tax relief on their pensions.

Other options open to Reeves and her colleagues include cutting the £60,000 annual tax-free pension allowance, or reducing or scrapping the 25% tax-free cash.

Pressure is mounting on the new Labour government to simplify the ISA rules in order to reignite the UK equity market and channel more money into British stocks.

Broker AJ Bell has written to Chancellor Rachel Reeves urging the government to consider a “radical” overhaul of ISAs as well as implementing tax breaks for UK stocks to unblock the British stock market.

The move comes after a record £1.8 billion was withdrawn from UK equity funds in May, marking the continuation of a bruising period for the country's stock market. 

AJ Bell wants the government to create a single ISA product that incorporates cash ISAs, stocks and shares ISAs and junior ISAs. It also wants Reeves to consider increasing the overall ISA allowance from £20,000 to £25,000.

Michael Summersgill, chief executive of AJ Bell, says: “AJ Bell has campaigned for radical ISA simplification for years and wholly supports Labour’s intention to pursue fundamental reform in this area. By combining the best features of ISAs into a single product, the government can make it easier for people to take the first step into long-term investing. 

“These reforms could be undertaken at limited cost to the taxpayer and the potential prize is substantial.”

Summersgill adds: “Creating a genuine incentive to invest in UK assets, such as by scrapping stamp duty on UK investments, would also help.”

According to figures from the Investment Association, the industry body, almost £55 billion has been withdrawn from UK equity funds by retail investors since 2016.

Laith Khalaf, head of investment analysis at AJ Bell, says: “May was the worst month on record for UK equity fund flows, quite the accomplishment for a sector that has been in outflow for eight years. Even more troubling for UK asset managers is the fact the trend seems to be accelerating.”

What is causing the UK outflows? 

The Investment Association says: “Diversification of portfolios remains a driving factor in UK equity outflows. Investors and their advisors continue to reallocate outside of the UK, with strong inflows for global, Europe and North American funds.”

In stark contrast, flows into US funds have been stellar. North American and global funds attracted £7.8bn and £7.58bn respectively in the first six months of 2024, according to separate data from investment software provider Calastone.

The rise of passive investing has also been detrimental to flows into the UK. Khalaf says: “Tracker funds have seen the lion’s share of inflows across the industry. But passive investing logically favours a global approach, and with the UK representing just 4% of the MSCI World Index, not much of the huge wall of money invested in trackers is benefiting UK stocks.”

Weak performance from active managers, Khalaf adds, “stemming from the hegemony of a clutch of large technology stocks, combined with a focus on cost and simplicity, means the rise of passive investing almost certainly has further to run”. 

Will UK stock sentiment recover?

Many analysts have highlighted that London Stock Exchange-listed companies are looking cheaper than US rivals.

Michael Brown, chief investment officer at Martin Currie, highlights that real wage growth and employment data in the UK have both beaten analyst expectations. Furthermore, the country's Manufacturing and Services Purchasing Managers' Indices have all turned positive unlike its European neighbours.

“The international perception of the UK is changing,” says Brown.

“A change of government, to one more moderate and international in tone, coupled with a deterioration of European political stability, notably in France, indicates that there remains room for sterling to appreciate. This would be beneficial for lowering inflation rates even further.”

He suggests that sterling could be boosted by the Bank of England taking its time on rate cuts.

“At the same time, a reduction in the risk premium for UK assets could accelerate sterling’s move and positively surprise the equity market,” he adds.

Emma Reynolds has become the new pensions minister, in a role that will span the Department for Work and Pensions (DWP) and the Treasury.

The Wycombe MP is the 17th pensions minister, taking over from Paul Maynard. She joins Liz Kendall, the secretary of state for work and pensions, in the DWP, and Chancellor Rachel Reeves, in the Treasury. 

Prime Minister Keir Starmer has been busy announcing key appointments in his cabinet along with ministerial positions, since winning a landslide victory in last week’s election.

Last night, Reynolds posted on X (formerly Twitter) that she was “delighted to spend my first day meeting other ministerial colleagues and officials in my new role as Pensions Minister in the Department of Work and Pensions”.

Reynolds is a parliamentary secretary in the Treasury and the DWP, meaning she will work across both departments, raising hopes that future pension policy will be more “joined up”.

Steve Watson, director of policy and research at Cushon, a pensions and savings firm, comments: “Under the last government, a lot of pensions initiatives were being pushed by the Treasury. With a foot in both the DWP and Treasury, I expect we will now see a more joined-up approach to pensions policy, which can only be a good thing for this crucial sector.”

Jon Greer, head of retirement policy at the wealth manager Quilter, adds: “This appointment does give the view that Labour will treat pensions with the thought and consideration that is required, not least because the role is a joint appointment with the Treasury and DWP. 

“After a number of years of pensions being used as a political football, we hope Labour’s huge majority will give it enough cover to sensibly plan reform and improve upon the current regime where possible.”

Who is Emma Reynolds?

Reynolds was first elected to Parliament in 2010, representing Wolverhampton North East and served for nine years before losing her seat in 2019.  

She stood again in the 2024 election, this time in Wycombe, Buckinghamshire, and won with a majority of just over 4,500 votes.

After studying politics, philosophy and economics at the University of Oxford, Reynolds worked in Brussels as a political adviser. She also set up a lobbying company and has been a special adviser to former MP and MEP Geoff Hoon, as well as working at public affairs consultancy Cogitamus.

Greer notes: “While [Reynolds] has little pensions experience to speak of, she has previously served in Parliament for nearly a decade prior to her re-election last week. 

“Furthermore, her most recent experience being at TheCityUK financial services trade association should give her a good starting point from a knowledge perspective and provide potential to grow into the role. With experienced hands such as two-time Minister for Pensions Sir Stephen Timms also being appointed at the DWP, we hope this will give stability to an industry that is so vital to the health and economy of this nation.”

Since 1998, when the pensions minister role was created, there have been 17 pensions ministers, with Timms serving twice.

Sir Steve Webb and Guy Opperman served the longest, at about five years each.

What are the main priorities for the new pensions minister?

Set up a pension review

The Labour manifesto promised a review of the pensions landscape, “to improve pension outcomes and increase investment in UK markets”.

Reynolds may need to start working on this quickly, as a pension review could be announced in the autumn Budget.

The review may look at boosting the amount of capital that pension schemes invest in UK companies, particularly high-growth private companies.

But it could also cover how our retirement savings are taxed, focusing on pension tax relief or perhaps the 25% tax-free cash that retirees can typically withdraw from their pension pots.

Having a pension minister straddling the Treasury and the DWP will help with a wide-ranging review like this.

Rachel Vahey, head of public policy at the investment platform AJ Bell, comments: “The new government is relying on growth in the UK economy to help meet spending commitments. In its manifesto, it promised a review of pensions, with the aim of improving outcomes and encouraging greater levels of investment in UK plc. The latter will likely mean a continuation of the ‘Mansion House’ agenda started by the previous government, which has placed a focus on boosting private equity holdings in occupational pension schemes.

“And whilst the review is ongoing and the bonnet is up, the Labour government may take the opportunity to consider other changes, such as to pensions tax. Reynolds’ dual role will make it much easier to bring that into the fold of one overall review.”

Launch pensions dashboards

Pensions dashboards promise to bring all your pension pots together into one place, allowing you to see how much you have, and making it easier to plan for retirement.

But they have been repeatedly delayed. In theory, they should be up and running by 2026.  

According to Greer, Reynolds has debated on the implementation of pensions dashboards so has some knowledge of them.

Vahey says this is an issue “crying out for the new minister’s attention” and warns that the timeline must not slip again. 

“Dashboards have the power to help pension savers understand what they have saved so far, and, importantly, they can then be nudged into saving more and consolidating pension plans to get the best deal for their retirement.”

Extend automatic enrolment

Automatic enrolment has been successful at creating millions of new pension savers. 

The previous government looked at expanding the initiative with its Auto-Enrolment Extension Bill, which will lower the minimum age to be automatically enrolled into a pension scheme from 22 to 18.

But there is no timetable yet, and Reynolds will need to think about when these changes should happen - and whether anything else could be done to improve retirement outcomes for employees. 

Vahey argues: “People need to save more if they are to have the financial retirement they want. These things take time, so a plan needs to be put in place now to raise the contribution rate.”

Make it easier to transfer pensions

There’s a growing call from the pension industry for the government to step in and make pension transfers simpler and faster.

According to research by pension provider PensionBee, some transfers can take more than two months to complete. 

Becky O’Connor, director of public affairs at PensionBee, says: “A handful of providers continue to misuse the DWP’s anti-scam legislation; delaying transfers by raising unnecessary amber flags or refusing electronic responses, instead forcing slow paper forms. 

“To create a safe, fair and well-functioning pension system for everyone, the new pensions minister must look to strike a balance between robust protections against scams and a smooth and expedient transfer process. It’s time to move away from self-regulation and implement a ‘10-day Pension Switch Guarantee’, a time period already independently enforced by the Ombudsman.”

Consider the pot for life reforms

The Conservative government was planning a ‘pot for life’ pensions reform, and this is something that Reynolds and her colleagues will need to decide whether to continue.

The pot for life idea was first mooted by former chancellor Jeremy Hunt in the 2023 Autumn Statement, and then confirmed again in this year’s Spring Budget.

The scheme would allow employees to choose which pension pot their employer pays contributions into - a model that’s currently used in Australia. Workers could then take their pension pots with them when they change job.

It would avoid the current messy scenario of having lots of different pension pots, which can be forgotten about.

Get to grips with the state pension

The state pension is incredibly complicated, but it’s also hugely important - both to millions of pensioners, and politically.

Labour has previously committed to the state pension triple lock. Reynolds would be wise to learn everything she can about the state pension, and start thinking about the future of the triple lock.

Greer comments: “The state pension triple lock is likely to come under more and more pressure, particularly given the state of public finances and demographic trends. With such a healthy majority we would want to see bold action from Emma Reynolds to start a debate about the future of the triple lock and just how sustainable it can be.”

Deal with the Waspi compensation

The question of compensation for women born in the 1950s who lost out due to changes in the state pension is also awaiting the new government.

Back in March, the Parliamentary and Health Service Ombudsman found the DWP guilty of “maladministration” and called on Parliament to secure funding for up to £10.5 billion. 

This would allow for a payout of between £1,000 and £2,950 for the women affected – though this is lower than what the Women Against State Pension Inequality (Waspi) group was hoping for.

So far, no money has been paid out.

While Labour have lots of other competing priorities in their first few months in office, Sir Stephen Timms, a former pensions minister and now a minister in the DWP, told MoneyWeek in May that he expected Waspi compensation would “be close to the top of the in-tray for the incoming government”. 

Chancellor Rachel Reeves is set to deliver her first Budget in just a few weeks' time - which the government has warned will contain "difficult decisions" and be "painful".

Prime minister Keir Starmer has said there is no other choice given the "situation that we're in", and that those with the broadest shoulders "should bear the heavier burden", suggesting that we will likely see tax hikes in the Budget.

Back in July, Reeves launched a scathing attack on the economic inheritance left behind by the Conservatives. 

She accused the previous government of leaving a £22 billion black hole in the public finances, before introducing a string of immediate cuts to help plug the hole.

These included scrapping infrastructure projects like the Stonehenge tunnel; axing universal winter fuel payments in favour of a means-tested system; and shelving the NatWest retail share sale.

Both Reeves and Starmer have warned of more difficult decisions to come in the forthcoming Budget on 30 October.

There is plenty of speculation about what could be announced, from raising capital gains tax to slashing pensions tax-free cash.

The fiscal event will be the first Budget Labour has delivered in 14 years.

Despite the timing of the Budget - a day before Halloween - Reeves is unlikely to be handing out many treats. The reality is that a tough fiscal backdrop will make some nasty surprises more likely. 

What could be in Rachel Reeves’s Budget?

The Budget – also known as the “red box” – is likely to contain information about some of Labour’s manifesto pledges, as well as other policies and tax changes. We take a closer look at the hints that have been revealed so far. 

Working taxes

First, the good news. In the lead-up to the general election, Labour promised it would not increase taxes for "working people" (income tax, National Insurance and VAT), and Reeves and Starmer have both reaffirmed this pledge in recent months.

The bad news is that, even with income tax rates staying the same, taxpayers will still find themselves paying a larger bill thanks to the effects of fiscal drag. Frozen personal tax thresholds have conspired with high inflation in recent years, causing the tax intake to soar.

Capital gains tax 

Labour has repeatedly insisted it will not hike National Insurance, income tax, VAT or corporation tax.

The party has offered no such assurances about capital gains tax (CGT) though, raising questions over whether these could be tweaked in the Budget. 

William Stevens, head of financial planning at Killik & Co, comments: “With a refusal to acknowledge [that capital gains tax] won’t change, it remains a very real possibility that we see an increase to help fund any fiscal shortfalls elsewhere.”

Changes to CGT could include hiking rates so they're in line with income tax, or reducing the tax-free threshold further. The CGT allowance for 2024-25 is £3,000, half of what it was in 2023-23.

Inheritance tax

Inheritance tax (IHT) could also get a mention. For example, a government needing to raise revenue could increase the rate of inheritance tax, cut the tax-free allowance (known as the nil-rate band), scrap gifting allowances or axe IHT reliefs.

Another option would be to impose a “double death tax” by applying capital gains tax on top of inheritance tax when bereaved families receive assets after a loved one’s death. 

Several think tanks have said this would make sense – however, it could take the total tax rate to 54%, according to the accountants RSM. We explore the topic in further detail in Could Labour impose a ‘double death tax’ of more than 50%?

Meanwhile, pensions are usually exempt from inheritance tax (IHT), but this could also change in the Budget. "Bringing defined contribution pension pots into someone’s taxable estate seems to be very much on the cards, as it can be portrayed as fixing an IHT 'loophole' and will have little impact on economic incentives," comments Ian Dyall, head of estate planning at the wealth manager Evelyn Partners.

State pension triple lock

A commitment to the state pension triple lock was an important manifesto pledge, and Reeves reaffirmed it in her statement to the Commons on 29 July. 

The triple lock means the state pension rises each April in line with inflation, average earnings or by 2.5% – whichever is higher.

“While pensioners will continue to get decent increases to their state pension, they may face more tax. That’s because Labour did not promise to shield the state pension from income tax in the same way as the Conservatives have with the so-called ‘triple-lock plus’ pledge,” says Laura Suter, director of personal finance at the investment platform AJ Bell.

“It means that more pensioners could face tax on their retirement income, thanks to frozen tax bands.”

Private pensions

Pensions have been the topic of frenzied speculation in the run-up to the Budget. Making changes to pensions are a common way for chancellors to raise much-needed revenue.

Pension savers have been rushing to add money to their nest eggs in case Reeves reduces pension tax relief - however, the government is now believed to have abandoned these plans, according to media reports. 

One policy change that is understood to be under consideration is reducing the maximum amount of pensions tax-free cash that savers are allowed to withdraw from age 55. Savers can typically take a quarter of their pots tax-free, up to a limit of  £268,275 (which is 25% of the old lifetime allowance). But, this could be slashed to just £100,000.

Private school fees

Labour has confirmed that it will add VAT to private school fees from 1 January 2025 to help fund more teachers in the state sector, meaning costs could increase by up to 20%.

So, we could see more details about this announced by Reeves in the Budget.

According to calculations by Hargreaves Lansdown, the average fees for a private secondary school over seven years are likely to cost a total of £140,552, with 3.5% annual inflation factored in. However, if schools add the full cost of VAT to this, it could push up the seven-year bill to £168,633.

The government also said it will introduce legislation to close the pre-payment loophole, which would have allowed parents to avoid paying VAT by paying their children’s school fees in advance.

Although the new rules won’t kick in until 1 January, any fees paid in advance from 29 July (covering the term starting in January) will be subject to VAT.

Freedom to Buy

Labour’s flagship housing policy is the Freedom to Buy scheme. The party has pledged to help get 80,000 people onto the property ladder over the next five years, by making the current mortgage guarantee scheme – due to expire next June – permanent.

Myron Jobson, senior personal finance analyst at investment platform Interactive Investor, says first-time buyers will be waiting “with bated breath” to see whether this pledge sees the light of day. They will also be keen to understand how quickly the policy will be rolled out, he adds.

Stamp duty

Labour confirmed before the election that, if it formed the next government, the first-time buyer stamp duty exemption threshold would drop back to £300,000.

The threshold was raised in September 2022 from £300,000 to £425,000 and was due to be reversed in April 2025.

Reeves may mention this in the Budget, and possibly other changes to stamp duty. The exact changes will depend on whether Labour’s priority is to raise money or to help home buyers.

Non-dom status 

Labour has been clear for a long time that it would launch a crackdown on tax avoidance and loopholes, including abolishing the non-dom status. Many tax professionals agree that the concept of domicile is outdated for tax purposes. 

Further details were published shortly after Reeves’s spending audit in July. The government confirmed it would remove preferential tax treatment for non-doms from 6 April 2025, replacing the current system with “an internationally competitive residence-based regime”. 

Under the new rules, new arrivals to the UK will not have to pay tax on any foreign income and gains for their first four years of tax residence, provided they have not been a UK tax resident in any of the 10 consecutive years prior to their arrival. After this point, these earnings will fall within the tax net. 

IHT will be subject to the new residence-based system. The government also confirmed it will end the use of excluded property trusts, formerly used to shield assets from IHT.

However, it was recently reported that some of the plans to abolish non-dom tax status are being reconsidered, amid concerns less money than expected would be raised for public services. We will hopefully find out exactly what is happening with the non-dom rules in the Autumn Budget.

British ISA

The British ISA was absent from the Labour manifesto – and it has been reported that Reeves will formally drop the British ISA in the Budget.

The proposal from the Conservative government was that savers would get an extra £5,000 tax-free allowance each year that they could invest in UK assets. 

Critics say the British ISA will make the ISA regime more complicated, and have little impact on the economy.

Air passenger duty

According to the accountant RSM, air passenger duty (APD) is "one of the more substantial tax levers" open to a chancellor in search of ways to raise revenue.

It says that with the government also focused on decarbonising transport, an increase in air passenger duty for domestic flights "may be under consideration to discourage domestic air travel and fund rail improvements".

RSM adds: "Raising APD would not be a new move by Labour, but an extension of the previous government’s policy. Back in January 2024, Labour took issue with Rishi Sunak’s plans to increase APD rates on all flights, except for private jets. 

"As it stands, the lowest APD rate for domestic flights is £7 per flight. Illustrative figures suggest that if APD was increased by £1 for all passengers in economy class, it would raise an additional £130 million in 2025/26."

Rachel Reeves delivered her first speech as chancellor today, after Labour secured a landslide victory in last week’s general election. 

The new government will build 1.5 million new homes over the next parliament, she said, reiterating the party’s manifesto promise. This will be achieved by reintroducing mandatory housing targets and “grasp[ing] the nettle of planning reform”.

Jonathan Stinton, head of mortgage relations at Coventry Building Society, points out that we have seen similar targets “set and missed before”. 

Nevertheless, shares in major UK housebuilders like Barratt Developments, Vistry, Persimmon and Taylor Wimpey have all risen since the election outcome, suggesting a positive reaction to Labour’s win. 

This comes after a challenging few years for the sector, which has had to grapple with the effects of inflation and higher interest rates. 

Construction and borrowing costs have both risen since 2021, making it more expensive to build new homes. A tough housing market has also made it difficult to shift homes once they have been completed. 

Despite this, some experts suggest the sector could be on the brink of a turnaround, if the winds of political change join forces with a shift in economic policy. 

We look at what falling interest rates could mean for the sector’s fortunes. How long will a turnaround take, and should you invest in UK housebuilders?

When will interest rates fall – and what are the implications for housebuilders?

The Bank of England has been holding interest rates at a 16-year high of 5.25% for almost a year. However, many economists think a first cut could be in store when the Monetary Policy Committee next meets on 1 August.

Reuters recently polled a group of economists, and 63 out of 65 said they thought August was the most likely month for a first rate cut. Only two disagreed, opting instead for September. On top of this, “most of them expect at least one more reduction this year,” the news agency added. 

Over the long term, this could be good news for the UK housebuilding sector, which is sensitive to changes in the interest rate environment. Indeed, interest rates have a knock-on effect on the mortgage market – and mortgage rates have skyrocketed in recent years. 

The average two-year fixed-rate mortgage now costs 5.93%, while the average five-year is slightly lower at 5.51%. For comparison, the same rates sat at 2.44% and 2.74% respectively in December 2019, according to data from Moneyfacts.

This has had a big impact on the housing market. Higher mortgage rates have made buying a house unaffordable for many, while others have been waiting for rates to drop before climbing the next rung of the ladder. 

As a result, house prices fell in late 2022 and 2023 (particularly in the wake of Liz Truss’s disastrous mini-Budget), and the market has remained slow ever since. All of this has been bad news for housebuilders. 

This goes some way to explaining why investors are excited by the prospect of rate cuts later this year. But are brighter days really ahead, and how long will a turnaround take?

Should you invest in UK housebuilders?

Oli Creasey, property research analyst at Quilter Cheviot, acknowledges that rate cuts are on the horizon, but points out that the situation for housebuilders remains complex.

He says: “Demand is low at a time when inflation has taken a permanent bite out of operating margins. We are unlikely to see material cost deflation, and so margins will only be repaired by rising prices. But rising prices on their own will further impact buyer affordability and hence volumes.”

Lower mortgage rates will be key in resolving this “vicious circle”, in Creasey’s view. He adds: “If interest rates come down, buyers will be able to borrow more based on the same income, improving volumes and/or prices. That would flow to housebuilders' bottom lines quite cleanly.” 

Despite this, Quilter Cheviot’s analysis reveals that buyer affordability won’t return to pre-2022 levels until mortgage rates fall below 4% – and probably closer to 3%. In other words, while the long-term outlook for housebuilders looks far brighter than it did 12 months ago, there is still a way to go yet. 

The Bank of England will almost certainly tread a cautious path ahead, cutting interest rates gradually. The base rate is expected to fall to around 3.5% by the end of 2025. 

According to Richard Donnell, executive director of research at Zoopla, this would imply mortgage rates falling to around 4%+. 

While this is an improvement on today’s situation, it remains significantly higher than the affordability levels identified by Quilter. This suggests investors will need to be patient for a little while longer. 

Labour stormed to a landslide victory at the 2024 general election last week. 

On the steps of 10 Downing Street, Keir Starmer, the new Prime Minister, told the nation that his premiership would be “country first, party second”, and promised to lead a “government of service”. Markets have so far responded positively to the new administration.

We already have an idea about what a Labour government will mean for our money thanks to its manifesto. The electorate will not know its concrete plans and how it will fund them until the King’s Speech and Labour’s first Budget.

But who will be enacting Labour’s policies on Starmer’s behalf? Here’s a round-up of who is in the new cabinet.

Who’s in the Labour cabinet?

While the PM already had a shadow cabinet in place during his time in opposition, some members of his top team lost their seats and will therefore need to be replaced. Most prominent among these were former shadow paymaster general Jon Ashworth, and ex-shadow culture secretary Thangam Debbonaire.

We’ve outlined who the key members of the government are when it comes to your personal finances. 

Rachel Reeves

Rachel Reeves has been appointed as the Chancellor of the Exchequer - a role she was always certain to get given the market sensitivity around the government post.

Becoming the first woman ever to head up the Treasury, the new Chancellor will only have a brief moment to savour her new job before the hard work begins. Assuming the new administration will want to deliver a Budget as soon as possible, she will have only weeks to prepare to deliver the key fiscal event. 

Reeves has said she will announce the date of the Budget later this month (July) - it's widely expected to take place in September or October.

The Leeds West and Pudsey MP, a former Bank of England and HBOS economist, will have to make tough decisions given Labour has said it will follow Jeremy Hunt’s tight fiscal rules. According to the respected Institute for Fiscal Studies (IFS) think tank, these rules will mean real-terms spending cuts will hit public services that aren’t ring-fenced.

Reeves will also have to decide what to prioritise out of Labour’s tax agenda. Key measures in its manifesto included reform of inheritance tax and ending the tax break on private school fees. There is also the great manifesto unmentionable of income tax fiscal drag, which means the tax will rise for millions of workers as wages grow.

Angela Rayner

The Labour deputy leader has become the deputy Prime Minister and secretary of state for housing, communities and local government. Her role will put her at the heart of implementing Labour’s Freedom to Buy pledge, reforming house building and changing the buy-to-let market.

Key bits of legislation that will be in her departmental in-tray include resurrecting the Renters (Reform) Bill, and beefing up the leasehold reforms that were watered down at the end of the last Parliament.

Liz Kendall

Liz Kendall has been put in charge of the work and pensions brief. The first thing she's likely to do in the role is to commit to the triple lock on state pensions - one of the first cast-iron commitments Labour made on the campaign trail.

However, with the state pension now rising to a level that means pensioners could face an income tax bill over the coming years - and warnings that the triple lock is unsustainable - Kendall faces some key decisions in the months ahead.

Within the Department for Work and Pensions (DWP), there have been a number of minister appointments, such as Stephen Timms and Alison McGovern.

Emma Reynolds

Emma Reynolds, the MP for Wycombe, has been appointed as pensions minister. 

Her role straddles the Treasury and the DWP, raising hopes that future pension policy will be more “joined up”.

Former pensions minister Steve Webb, who is a partner at the consultancy LCP, comments: "In the past, the two departments have not always been ‘joined up’ when it comes to pensions policy, with Treasury changes to pension tax relief sometimes undermining DWP efforts to boost pension saving. With a combined appointment there is the opportunity for decisions on pensions to take full account of the whole pensions landscape.

"One risk however is that the Treasury desire to see pension assets used to promote economic growth at a macro level could mean that the individual member perspective gets less attention than it should. This is something that the new minister will have to guard against."

Reynolds will have a busy in-tray as she takes up the post. It's likely to include planning the pensions dashboard, deciding on Waspi compensation and extending automatic enrolment - as well as launching a pension review, as outlined in the Labour manifesto.

Other Labour cabinet members

We’ve listed who the other members of the cabinet are, plus ministerial appointments relating to finance. Here’s who we know about so far:

• Foreign Secretary: David Lammy
• Home Secretary: Yvette Cooper
• Defence Secretary: John Healey
• Health Secretary: Wes Streeting
• Energy Secretary: Ed Miliband
• Education Secretary: Bridget Phillipson
• Justice Secretary: Shabana Mahmood
• Chancellor of the Duchy of Lancaster: Pat McFadden
• Financial Secretary to the Treasury: Lord Livermore
• Chief Secretary to the Treasury: Darren Jones
• Economic Secretary to the Treasury: Tulip Siddiq
• Parliamentary Secretary to the Treasury (Chief Whip): Sir Alan Campbell

In the three months since Keir Starmer’s government was formed, a lot has been announced on the topic of pensions. 

In July, chancellor Rachel Reeves promised a “big bang of reforms to unlock growth”, launching the first stage of a government review on the pensions landscape. Then, just before the summer recess, Reeves announced plans to axe the Winter Fuel Payment for all but the poorest pensioners, prompting a big conversation about Pension Credit. 

With the Budget now fast approaching, could retirement taxes be the next focus area for the chancellor? 

Reports this week suggest Reeves has ruled out cutting pension tax relief for higher earners, amid fears this would be difficult to implement and risk upsetting public sector employees. However, it looks like she could still consider cutting the amount of tax-free cash savers are allowed to withdraw from their pension pot once they retire.

We take a closer look at what’s been announced and what else we could see in the Budget on 30 October.

Labour’s pension review

Labour unveiled a Pension Schemes Bill in the King’s Speech in July, with further information following from Reeves shortly afterwards. The chancellor promised a “landmark pensions review” to “boost growth and make every part of Britain better off”. 

The review will come in two parts, with the first phase focusing on investment and the second focusing on retirement adequacy. 

Highlighting the scale of the review, the government said: “[The] new Pensions Bill confirmed in King’s Speech could boost pension pots by over £11,000, with further consolidation and broader investment strategies to potentially deliver higher returns for pensions.”

It added that “an investment shift in defined contribution schemes could deliver £8 billion of new productive investment into the UK economy.”

The government also plans to take action to “unleash the full investment might of the £360 billion Local Government Pension Scheme to make it an engine for UK growth,” it has said. 

UK equity markets have suffered chronic outflows in recent years while retirement costs have soared, leaving the average saver at risk of running out of money in old age. By boosting pension investment and directing funds into UK businesses, the government hopes it can address both challenges at once.

Addressing pension shortfall in defined contribution schemes

Most savers paying into their workplace pension today will be part of a ‘defined contribution’ (DC) scheme. While DC pensions are now the norm, they leave savers at greater risk of pension shortfall than the older ‘defined benefit’ (DB) model. 

As a result, there is currently a “big intergenerational gap between those with adequate DB pensions and younger generations on course for inadequate DC pension incomes,” says Calum Cooper, a pensions expert at the consultancy Hymans Robertson. 

With this in mind, DC reforms are an important area of focus in the government’s pensions review. The government claims DC schemes will be responsible for around £800 billion by the end of the decade, and it wants this money to be invested more productively. 

It says: “Even a 1 percentage point shift of assets into productive investments could mean £8 billion of new productive investment to grow the economy and build vital infrastructure by the end of the decade.”

Going forward, we could see efforts to channel these funds into UK equities, private assets and growth companies. 

Adrian Lowery, financial analyst at the wealth manager Evelyn Partners, says: “It sounds like the plan is to go further than Jeremy Hunt's Mansion House Compact, a voluntary commitment by some of the largest UK workplace schemes to allocate at least 5% into unquoted, UK growth companies by 2030.”

Pension consolidation: cutting down on “fragmentation and waste”

The government has also announced it will look at consolidating the Local Government Pension Scheme to “cut down on fragmentation and waste”. This defined benefit scheme is currently split across 87 funds and spends around £2 billion a year on fees and costs. 

As well as reducing costs, pooling the money could allow the scheme to invest in a wider range of UK assets. These reforms could benefit 6.6 million public sector workers, many of whom are low-paid women.  

As well as focusing on the Local Government Pension Scheme, the government is planning to address DB consolidation more broadly through its Pension Schemes Bill. In particular, it hopes to reduce complexity in the DB market through the use of “superfunds”. 

A superfund exists when several defined benefit schemes are consolidated into one larger scheme. This allows employers to offload their defined benefit pension liabilities, which can help them manage risks and costs.

The government says consolidation offers “greater protection for members”, reducing the risk of them losing part of their pension if their employer becomes insolvent. By generating economies of scale, larger schemes also have the potential to invest in a broader range of investment strategies, such as high-growth assets.

Small pension pot problem

Through its Pension Schemes Bill, the government also hopes to address the problem of small pots. It plans to consolidate these in one place to prevent people from losing track of their money.

This should reduce admin for savers. Most people change jobs several times over the course of their lifetime, and as many as one in five savers think they could have lost track of a pension. This amounts to a staggering £50 billion in lost pension savings, according to analysis from the Centre for Economics and Business Research. 

The previous government proposed “pot-for-life” reforms to help tackle the issue of lost pots. The Pension Schemes Bill from the new Labour government could help further these discussions.

As well as benefiting savers, the government adds that this measure will help pension schemes cut costs. Under current measures, schemes are required to manage a substantial number of loss-making pots. This has undermined their ability to invest in improving their offering for savers.

Consolidation could also help savers “reduce the fees they pay”, says Becky O’Connor, director of public affairs at PensionBee. Recent research shows that half of pension savers have no idea they are being charged fees – but over the course of a lifetime, uncompetitive fee structures could cost you dearly.

Better options for savers once they reach retirement

The Pension Schemes Bill will also require schemes to offer better options to savers once they reach retirement age. The government wants to ensure savers have a proper pension and “not just a savings pot when they stop work”, it says.

To help tackle this, schemes will be required to offer members “a retirement income solution or range of solutions, including default investment options”. We don’t yet know exactly what this will look like, but current retirement approaches include buying an annuity, putting your pension pot into drawdown, or a combination of the two.

“With the growing dominance of defined contribution pension schemes and the freedoms they offer, people’s strategies for taking income from their pensions are now of paramount importance,” says Kirsty Anderson, retirement specialist at the wealth manager Quilter. 

“Decumulating from a pension can be treacherous, particularly without expert help, and savers can easily see their retirement pots run dry before they pass away,” she adds.

Upcoming Budget: will Labour change the way pensions are taxed?

Pensioners can sleep easy in the knowledge that the state pension triple lock is safe for now, after it featured in the Labour manifesto. Starmer reiterated this promise in September when he rejected pleas for a U-turn on the decision to means test the Winter Fuel Payment. The state pension is expected to rise by around £460 a year from 1 April 2025, and it is possible Reeves will use the Budget to confirm this point.

Private pensions could however come under the radar. Some savers are worried that the government could reduce or scrap the tax-free cash savers are entitled to when withdrawing money from a pension. Under current rules, you can withdraw 25% of your nest-egg before tax is due, up to a limit of £268,275. But, according to a Telegraph report, government officials are looking at recommendations by two major think tanks to reduce the limit to £100,000. 

The good news is that cuts to pension tax relief seem to have been shelved for now, though. Under current rules, savers are entitled to tax relief on pension contributions, received at their marginal rate. Some were speculating that Reeves could cut this for higher earners by introducing a flat rate of relief, say 30%. However, this now looks unlikely, after senior Treasury officials reportedly told the chancellor the policy would hit public sector workers on “relatively modest incomes” (The Times). 

Finally, inheritance tax reforms could appear in the Budget, potentially impacting pension savings. Pension pots currently sit outside of the inheritance tax net, making them a tax-efficient way to pass on wealth to loved ones. But think tanks including the Institute for Fiscal Studies have previously criticised this loophole.

New Prime Minister Sir Keir Starmer has entered Downing Street with plenty of policies that could affect homeowners, first-time buyers and landlords.

Labour has come to power with a landslide majority at a time when interest rates remain high, stifling house price growth and property sales.

Delivering his first speech outside Number 10 after Labour's landslide general election win, Sir Keir spoke of the need for more affordable homes.

There are hopes that slowing inflation will encourage the Bank of England to reduce interest rates and help lower the cost of borrowing in the coming months.

But government help may be needed when it comes to issues such as a lack of property supply and affording a deposit.

It may not all be good news for the property market though and landlords, who saw many of the perks of buy-to-let investing reduced under the Conservatives, could face new pressure under Labour.

Housing policies are unlikely to be confirmed until Labour’s first Budget later this year.

But here is what Sir Keir could have in store for the housing market.

Freedom to Buy

Labour’s flagship housing policy is the Freedom to Buy scheme.

It has pledged to help get 80,000 young people onto the housing ladder over the next five years by making the current mortgage guarantee scheme – due to expire in June 2025 - permanent.

Like the mortgage guarantee scheme, Labour said it would incentivise lenders to offer high loan-to-value (LTV) mortgages by acting as a guarantor for prospective first-time buyers who cannot afford a big deposit.

“This initiative seeks to offer more favourable mortgage terms, making it easier for young people to enter the housing market” says Nicholas Mendes, mortgage technical manager at broker John Charcol.

 “While Labour's housing and economic policies aim to support lower mortgage rates and greater accessibility for first-time buyers, the overall impact will depend on the market's perception and the successful implementation of their proposed policies.

 “From our current position, we do not expect to see the volatility of recent years. With inflation expected to near the Bank of England's 2% target, Labour will be in a fortunate position to be the government in power as mortgage rates continue a downward trend.”

Stamp duty changes

While it may be easier to get low deposit mortgages, more first-time buyers could end up paying stamp duty.

Labour has said it will reduce the first-time buyer stamp duty threshold from £425,000 to £300,000.

The allowance had been increased by the Tory Party in 2022 and was due to be reduced in April 2025.

The Conservative manifesto pledged to make the change permanent but Labour confirmed that the reversal will take place as planned.

This may push more first-time buyers into paying stamp duty, particularly around the South East of England and London where prices are often above £300,000.

Labour intends to increase the already higher stamp duty rate on purchases of residential property by non-UK residents by 1%.

It has also pledged to continue Tory plans to scrap non-dom status.

This may deter foreign investment but could boost domestic supply and demand.

Trevor Kearney, founder of The Private Office: Real Estate believes that the Labour party faces conflating policies as it is seeking growth while restricting investment from the super wealthy.

“While the UK was once seen as an attractive place to invest, live and work in, wealthy foreign individuals will now face the removal of rights to avoid taxes in their first four years of residency and avoid inheritance tax on foreign assets held in a trust,” he says.

 "As such, we should expect to see a flurry of nom-doms forced out to other European countries, such as Switzerland and Italy. The knock-on effect of this will be significant – we’ve already seen what harm decisions such as the removal of VAT recovery for foreign tourists can do.

 “The Labour party needs to clarify and refine their pledges. Is a global crackdown on the super wealthy a bigger priority than attracting foreign investment and overseas money? With their aims engrained in growing the economy, the onus should rest with the latter.”

Housebuilding

The UK is well-known to have shortage of homes.

The Conservatives scrapped mandatory targets last year but Labour’s manifesto pledged to build 1.5 million new homes, which could boost supply and bring prices down.

That assumes that the government can get round green belt issues and tough planning departments.

“Such ambitious housing targets have historically been challenging to meet, and this is likely to be no different,” says Karen Noye, mortgage expert at wealth manager Quilter.

“Building 1.5 million homes within five years is an extremely tall order which will require significant resources, substantial investment and careful planning. Its success will also depend on the engagement and cooperation of local authorities, developers and the communities in which these new homes will reside.”

The rental market

Slowing rental growth has already led many landlords to question if buy-to-let is still worth it.

Legislation known as the Renters Reform Bill was going through parliament before the general election to scrap section 21 notices, known as ‘no-fault’ evictions.

The notices let landlords evict tenants without having to give a reason.

Labour’s manifesto said it would "immediately abolish Section 21 'no fault' evictions, prevent private renters being exploited and discriminated against.”

It comes as landlords have already been hit by restrictions on mortgage interest relief and extra stamp duty charges on additional property purchases.

Paul Shamplina, of campaign group Landlord Action, said Labour’s plans will be of “significant concern” within the landlord community.

 “An immediate ban on Section 21 evictions is not feasible without first addressing the current inefficiencies within the court system,” he says.

 “We now anticipate a further surge in the number of landlords serving Section 21 notices in the coming months. Landlords are likely to act pre-emptively to protect their interests before any legislative changes take effect.

 “At Landlord Action, we have already seen an increase in instructions for Section 21 notices as many landlords move to secure their rental income or prepare their properties for sale.”

Ben Beadle, chief executive of trade body the National Residential Landlords Association says that while it is important to protect tenants, it is vital that reform does “not make worse an already chronic shortage of rental properties to meet demand.”

Additionally, while Labour has pledged not to raise income tax, National Insurance, VAT or the headline rate of corporation tax, there are concerns that it could have its sights set on capital gains tax (CGT). 

Lowering the tax threshold or increasing the  CGT rate could bring another threat to landlord profits when exiting a buy-to-let portfolio.

 “This is probably the one area of uncertainty where we have had most enquiries from clients, says Gary Smith, Partner in Financial Planning at wealth management firm Evelyn Partners.

“Some who are most concerned about a possible CGT hike have been looking to dispose of assets, although in most cases this is bringing forward disposals that were already on the cards in the next year or two.”

Research by estate agency brand Jackson-Stops suggests a quarter of those who own more than one property and own them all outright are interested in a two-year temporary capital gains tax relief for landlords who sell to their existing tenants. 

Its analysis also found homebuyers believe a Labour rather than Conservative government would make homes more affordable.

“While a new government is now certain, much is still unknown about how much of Labour’s manifesto they will be able to implement, and how quickly," says Nick Leeming, chairman of Jackson-Stops.

“Significant policy changes have been lauded particularly around housebuilding and making home ownership more affordable.

“For buyers and sellers in the short term the market is likely to remain on the same trajectory as the first half of 2024, the knowledge that a change of government was coming has avoided a cliff edge or need for immediate changes to be made. 

"The property market can also take comfort in its resilience, having navigated changing governments and policy changes time and time again.”

Sir Keir Starmer has become the UK’s newest Prime Minister, after a landslide Labour victory in the 2024 general election. The party has secured 412 seats and 34% of the national vote so far, with two constituencies still to declare.  

MoneyWeek has already looked at what the election result could mean for your money, based on pre-election pledges made in the Labour manifesto. Now, we look at how markets have reacted to news of the Labour landslide since opening this morning. We also delve into the outlook for UK equities and the economy in the months to come.

How has the UK stock market reacted to Labour’s win?

The FTSE 100 climbed 0.45% shortly after markets opened, but has since fallen back and is now pretty much level with where it was at yesterday’s close. The FTSE 250 has posted larger gains, climbing by 1.10% so far today (at the time of writing). 

“There is always a sense of nervousness ahead of markets opening the day after a general election, but we only get extreme volatility when investors are caught by surprise,” says Dan Coatsworth, investment analyst at AJ Bell.  

He adds: “This time round, there was nothing to get heads spinning as the result was widely expected. Instead, investors appeared to welcome the news with open arms. Political uncertainty is over and this removes one of the key risks around UK equities.” 

Coatsworth also points out that the FTSE 250 has more of a domestic focus than the FTSE 100. This helps to explain its higher return so far today. Many of the companies in the FTSE 100 generate a significant portion of their earnings overseas, which means the index is less exposed to domestic events.

It’s worth mentioning that the UK market still faces other challenges, though, such as remaining significantly undervalued compared to its US and global peers. This has created good opportunities for investors to snap up unloved companies at bargain prices (often while earning a decent amount of dividend income). However, some might be starting to wonder if and when valuations will ever catch up. 

Is a Labour or Conservative government better for the stock market?

This is a question we explored at length in the lead-up to the general election, looking at how UK equities fared under every Prime Minister from Margaret Thatcher to Rishi Sunak. However, in truth, the issue is far more complex than it first seems.

Markets operate in a delicate and complex ecosystem. Performance is dependent on a thousand different variables, from how individual companies are run, to where interest rates are heading and how fast an economy is growing.

As John Stepek, MoneyWeek’s former executive editor, pointed out in a recent newsletter for Bloomberg, “you can’t reasonably compare the 1970s to the 1990s [...] and pretend that the critical variable was the political party in power at the time.”

Economic data is far more influential in moving markets than political decisions, and the prospect of interest rate cuts later this year should do more for equity markets than a change in Prime Minister. It’s also important to remember that markets tend to ‘price events in’ before they actually take place, and Starmer’s victory has not come as any great surprise. 

The good news is that Starmer and Rachel Reeves, tipped to be the next chancellor of the exchequer, have been clear in their support for UK businesses. They have repeatedly said they want to lead a party that is “pro-growth” and “pro-business”, while driving more private investment into UK companies. Labour has also promised to cap corporation tax at its current level of 25% for the next parliament. 

What’s next for the economy under Labour?

As far as the economy is concerned, Starmer has been clear about the fact that his first objective is to deliver economic stability. 

Paul Dales, chief UK economist at Capital Economics, points out that Labour has “pledged to follow very similar fiscal rules to the Conservatives”. This means there’s no real scope for fiscal loosening (i.e. a significant increase in spending or tax cuts). 

However, he adds that Labour will ultimately need to “address what looks like an implausibly low projected path for public spending”, and potentially raise taxes by more than outlined in its manifesto. 

“Our hunch is that Labour won’t rush to address this and will instead persist with current spending plans for 6-12 months,” Dale adds. We should know more once the first Budget has taken place, which could be as soon as mid-September.

It’s also worth mentioning that the shifting macroeconomic environment could give Labour a helping hand. “With inflation now tamed, a Bank of England rate cut fast approaching, [...] and GDP growth improving, the new government will at least start with some tailwinds behind it,” says Jason Hollands, managing director at Bestinvest.

Hollands adds that rates could potentially fall as low as 3% by the end of next year. 

Which sectors could fare well under Labour?

In the lead-up to the election, there was much speculation about what a Labour or Conservative victory could mean for different sectors of the UK stock market. 

In particular, UK housebuilders have been in focus, as both Labour and the Conservatives outlined commitments to build new homes in their election manifestos. Labour has promised 1.5 million. 

This sector has suffered in recent years thanks to higher interest rates, however a shift in the macroeconomic backdrop as interest rates come down could also give housebuilders a lift. 

The Bank of England’s next meeting will take place on 1 August, and most economists are expecting a first cut at either this meeting or the following one in September.

Hollands suggests building materials firms and renewable energy infrastructure companies could also benefit from Labour’s commitment to building new homes and investing in the green economy. 

Chancellor Rachel Reeves revealed the date of her first Budget today, while launching a scathing attack on the economic inheritance left behind by the Conservatives.

Speaking to the House of Commons as she unveiled her spending audit, Reeves accused the previous government of creating a £22 billion black hole in the public finances.

“Before the election, I said that we would face the worst inheritance since the Second World War… but upon my arrival at the Treasury three weeks ago, it became clear that there were things that I did not know. Things that the party opposite covered up,” she said.

In her pre-Budget statement, the chancellor pledged to “restore economic stability” and announced a string of measures and cuts which she hopes will deliver £5.5 billion of savings this year and £8.1 billion next year.

Cuts will include axing some road and rail projects, means-testing the winter fuel payments currently received by around 10 million pensioners, and dropping plans to reform adult social care charges. 

Reeves said she would set out her fiscal plans in full alongside a spending review in a Budget statement on 30 October.

“The worst may be yet to come, as the chancellor issued an ominous warning that even more difficult decisions will be made in the Budget scheduled for the eve of Halloween,” says Myron Jobson, senior personal finance analyst at investment platform Interactive Investor. 

“As such, people should strap themselves in for further twists and turns in the personal finance landscape as the government pursues a new strategy to balance the books,” he adds.

Why won’t the Budget take place until October?

After Labour was elected on 4 July, Reeves told the public that she would announce a date for her first Budget before the end of the month. 

Labour had previously said it 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. 

As such, the very earliest anyone was expecting the Budget to take place was Friday 13 September, provided the government issued instructions to the OBR immediately after securing its election win the day after polling closed.

Budgets usually take place in the autumn, with another delivered in the spring. 

However, Reeves revealed today that she would deliver her Budget on 30 October, the day before Halloween. 

What has been announced already?

We have already had some clues as to what will appear in the government’s first Budget. 

Labour made a string of pledges in its election manifesto, including plans to remove the VAT exemption on private school fees. The party also said it would crack down on tax avoidance and loopholes, including abolishing the non-dom status. 

Despite the need to raise money to fund public services, Labour has said it will “not increase taxes on working people”, which means no hikes to income tax rates, National Insurance or VAT. The party has previously said it will not increase corporation tax either.

However, it is possible we will see some tax rises in other areas. Experts think capital gains tax and inheritance tax could be in the spotlight, as well as rules around how pensions are taxed.

According to Gary Smith, financial planning partner at wealth management firm Evelyn Partners, the problem with this is that none of these “wealth taxes” are huge revenue raisers on their own – “at least not without major reform”. 

Labour also used the King’s Speech to outline other areas of focus – including a new Pension Schemes Bill which will look to make the retirement savings landscape more efficient and productive. 

A two-stage pensions review was also launched a few days later as part of the government’s plan to deliver better outcomes for savers while boosting investment in the UK economy.

Today, Reeves’s pre-Budget statement has set out a whole host of additional measures, including:

• A move to axe universal winter fuel payments – only those receiving pension credits or other means-tested benefits will receive the payment going forward. 
• A decision to axe certain infrastructure projects, including the Stonehenge tunnel, the Arundel bypass and the Restoring our Railways scheme. 
• A review of Boris Johnson’s new hospitals plan, which promised to build 40 new hospitals by 2030. 
• No reforms to adult social care charges. 
• Plans to shelve the NatWest retail share offer until at least next year.

The government has now also confirmed that VAT will kick in on private school fees from January 2025, earlier than previously expected. 

There is already a lot to digest, with today’s pre-Budget statement almost resembling a Budget in its own right. The public will be watching closely on 30 October to see what else is announced.

Sir Keir Starmer’s Labour Party has secured a large majority at the 2024 general election.

Returning 412 MPs on a 34% share of the national vote, the party has secured an 170-seat majority. This is a similar-sized majority to the ones Tony Blair secured in 1997 and 2001. Two constituencies have still to declare at the time of writing.

Starmer, who has formally been made Prime Minister by King Charles III at Buckingham Palace, evoked Tony Blair in 1997 in his dawn victory speech. He said the “sunlight of hope” was now shining on the UK, and added that “a weight has been lifted” by the Tories’ defeat.

It was a torrid night for Rishi Sunak’s Conservative Party, which has (so far) lost 250 seats and a dozen former cabinet ministers. It will now form the main opposition in the House of Commons after 14 years of governing the country. The Conservative tally of 121 constituencies came after it lost almost half of its vote share with 24% of the ballots cast in its favour. However, it remained ahead of the Liberal Democrats (71 seats), the SNP (nine), as well as Reform UK and the Greens (both four).

So, with a Labour government coming into power, what are its key money policies - and how soon can we expect them to be enacted? We’ve rounded up everything you need to know.

Labour election win: what are its main money policies?

When Starmer launched the Labour manifesto in Manchester in mid-June, he said his party would “rebuild” the UK economy. Economic stability was one of six key pledges that formed the heart of the document, alongside recruiting 6,500 new teachers and cutting NHS waiting times.

On tax, Labour promised it would “not increase taxes on working people”. It has pledged not to hike income tax, National Insurance or VAT. However, millions of people seem likely to face a higher income tax burden over the next five years as a result of fiscal drag. The party looks set to continue the Tories’ threshold freeze.

It has also targeted reform of wealth taxes. The manifesto said the Starmer government would “address unfairness in the tax system” by barring the use of offshore trusts to get around inheritance tax (IHT). At the same time, tax breaks for private school fees are set to be scrapped. We’ve written about how to protect your wealth from Labour.

When it comes to state pensions, Labour has promised to retain the triple lock. However, it has not addressed the big question of how income tax will interact with this state support over the coming years. Pensioners look set to face a tax bill should the freeze on the personal allowance remain in place. There is also significant doubt over whether Waspi women will receive a compensation package.

On private pensions, the party has been vague, promising reform after a review is conducted into the current system. While it hasn’t outlined a detailed vision for change, its manifesto said the new system would be centred around delivering “better outcomes” for savers and retirees, as well as bolstering “security in retirement”.

Meanwhile, Stamer’s party has also targeted expanding the coverage of face-to-face retail banking. It has pledged to open hundreds of new banking hubs before the end of the Parliament.

In terms of investing, Labour has promised to create a supportive environment for “innovation and growth” in the financial services sector - part of the pro-business approach it has been keen to construct since Starmer took over the party from Jeremy Corbyn. Investors could benefit from the Labour government by dint of its big majority.

There is also an ambition to get pension funds to invest more heavily in the UK, while a new National Wealth Fund will be set up to generate further private investment in public infrastructure.

On property, the new government has said it wants to get more first-time buyers onto the housing ladder by expanding the mortgage guarantee scheme. The Freedom to Buy policy will be accompanied by what Labour hopes will be a home building boom, as well as an aim to keep mortgage rates down. One big question about the party’s policy on this front surrounds the future of stamp duty, with the temporary discounts announced by the Conservatives currently due to expire in spring 2025.

The buy-to-let sector also faces significant change, with Section 21 ‘no fault’ evictions set to be removed “immediately” by Starmer’s administration. Private tenants will be afforded the protections from damp and mould currently set out for social housing by Awaab’s Law. For leasehold, Labour has pledged to end the current system, making commonhold the “default tenure” for flats and scrapping “unfair” maintenance charges.

A final key thing to note is that the party has said it will sign up to the same set of fiscal rules established by Jeremy Hunt in the wake of the Liz Truss premiership. In essence, this means it will seek to restrict public borrowing and get debt falling as a percentage of GDP over the next five years. At present, this means cuts to some frontline public services are expected.

When is Labour’s first Budget going to be?

We won’t know for certain how a Labour government will operate until Chancellor Rachel Reeves delivers her first fiscal event. She has previously pledged to deliver one with an Office for Budget Responsibility (OBR) assessment of how her spending plans will affect the economy. The lack of an OBR report was part of the reason why Liz Truss’s mini-Budget almost crashed the UK economy in late-2021.

OBR reports take 10 weeks to put together. It means that if Reeves asked the independent public body to produce one as soon as possible, the earliest date by which it would be available would be Friday 13 September. There have been reports that the Chancellor may wait until October to deliver the set piece event.

What other key dates do we need to know about?

As well as question marks over when the next Budget will take place, we also don’t yet know when Labour will begin to set out its policy agenda in the House of Commons.

The summer months are usually when Parliament goes into recess. During this ‘holiday’ period, no bills pass through the House of Commons - although MPs and ministers will still technically be working.

There hasn’t been a recess yet this summer, and it’s likely one will be called at some point. When it is called, it will delay any new Labour legislation.

At the moment, we know Parliament will return on 9 July so that new MPs can be sworn in. They will then elect the new chairs and members of the various select committees that scrutinise the government’s bills.

Then, on 17 July, King Charles III will deliver the King’s Speech. This will set out the next government’s legislative agenda, so we’ll find out exactly what its policy priorities are for the coming year.

Polling stations opened at 7 o’clock this morning, and voters are out in force to decide who will become the UK’s next Prime Minister.

It is a criminal offence to publish a poll or survey once voting has opened, so we won’t have any new data until the exit poll comes out at 10pm. 

As of yesterday, the BBC’s poll tracker was showing that Labour had an 18-point lead on the Conservatives. This is a small narrowing compared to earlier in the campaign period, when Labour enjoyed a 22-point lead. 

The BBC tracker suggests the Conservatives gained a small amount of support in the final week, but Keir Starmer’s party still remains comfortably ahead. 

What’s more, several polling experts have predicted a decisive Labour majority. “Even at the lowest end of our prediction, Labour would have 391 seats and a majority of 132,” a team of experts from YouGov said yesterday. 

That said, it’s worth remembering that the polls have been wrong before – notably in the lead-up to the 2015 general election and the 2016 EU Referendum. 

The surest way to get the result you want this election day is to exercise your democratic right to vote. So make sure you head to your local polling station before 10pm today, where you can have your say. 

Who’s behind Labour and the Conservatives in the polls?

The bid for Number 10 is a two-horse race between Starmer and current Prime Minister Rishi Sunak. However, other parties have played a visible role over the course of the campaign period. 

They will be hoping to hang on to their existing seats and, in some cases, grow their share of the House of Commons, where they will look to exert pressure on the leading party.

When the final polls were conducted on 3 July, Reform UK was coming in third place, four points behind the Conservatives. The Liberal Democrats were next, followed by the Green Party, the SNP and Plaid Cymru.

The BBC’s poll tracker showed the percentage split as follows:

• Labour: 39%
• Conservatives: 21%
• Reform UK: 17%
• Liberal Democrats: 11%
• Green Party: 7%
• SNP: 3%
• Plaid Cymru: <1%

Are opinion polls accurate?

Opinion polls don’t always predict the right result – and there are several reasons behind this.

An important one is voter secrecy. Some people prefer to keep things between them and the ballot box. Indeed, psephologists often talk about “shy Tories” who tell the pollsters they are going to vote one way, before ultimately choosing a different candidate.

Another reason could be poor sampling, where those surveyed aren’t representative of the wider electorate. Sometimes pollsters don’t ask the right questions either, which can influence the results. It is also important to ask who has paid for the poll, and whether they have an ulterior motive in skewing the questions to achieve a particular outcome. 

Opinion polls were famously inaccurate before the 2015 general election in suggesting the Conservatives and Labour were neck and neck. Many were speculating about the prospect of a hung parliament and another coalition government but, in reality, David Cameron won a clear majority with 99 more seats than Labour.  

When the British Polling Council looked into these errors after the election, it found that the surveys did not use an accurate sample of the population. As a result, it over-represented Labour voters.

What time will the exit poll be released, and is it more accurate than opinion polls?

The exit poll will come out at 10pm this evening as polling stations close. 

Exit polls are generally deemed more accurate than opinion polls, so this evening’s result could give us a decent idea of what to expect over the hours that follow as votes are counted.

Teams stationed at constituencies across the country will catch voters as they leave the polling station and ask them who they voted for. 

“By targeting electors immediately after they have voted, the poll gathers voting behaviour, rather than voters’ stated intentions ahead of the day,” says Ipsos, the market research firm that conducts the exit poll. 

Ipsos adds that the simple methodology behind the UK exit poll also contributes to the reliability of its results. 

The company says: “The UK exit poll asks one question only: ‘Who did you just vote for?’ It asks no further questions on background or motivation, which is more common in other exit polling worldwide.”

These aren’t the only reasons why exit polls tend to get it right, though. Another important factor is that they are administered face-to-face. 

This means relatively few refuse to participate, with four in every five people approached at the 2019 general election agreeing to take part, according to Ipsos. The more representative the survey group, the more reliable the poll.

There’s never a bad time to get your personal finances in order – but the election has given many the kick that they needed. 

New research from Rathbones reveals close to half of high-net-worth individuals (45%) have reviewed their wealth planning in the past year, with 20% saying it was the general election that prompted their change in plans.

When asked what changes they had made, 12% said they had brought forward gifting plans while a further 16% said they had changed the nature of their planned financial gifts. 

This suggests taxpayers are concerned about being hit by changes to inheritance tax (IHT) rules – however it is important to point out that Labour has not currently announced any plans to hike IHT rates or reduce the nil-rate band. 

As well as the election, today’s shifting macroeconomic backdrop is also front of mind for the individuals surveyed by Rathbones. Twenty-five percent said they had reviewed their financial plans due to interest rates remaining high. Another 17% reported changing their investment strategy in the past 12 months. 

"It’s encouraging to see that so many people are taking proactive steps to adapt to changes in the economic landscape," says Olly Cheng, financial planning director at Rathbones.

Interest rate cuts are expected at some point this year, with some economists betting on a change in policy when the Bank of England next meets on 1 August. When interest rates are cut, we could see a change in how different asset classes perform. 

Equities tend to do well in a falling interest rate environment, as rate cuts typically boost the economy and earnings. Meanwhile, the amount of income you can earn in the bond market could start to fall once the Bank of England shifts gear. This could mean now is a good time to lock in higher rates. 

Should you review your financial plan?

Now is a good time to review your financial plan, whether you have a few thousand in savings or a far larger sum. 

Issues like inheritance tax might sound like they only impact the ultra-wealthy, but if a single parent leaves their estate to their children (including the family home), the recipients could be forced to pay inheritance tax as soon as the value of the estate exceeds £500,000. 

To put this into context, the average house in London costs £501,880, according to the latest HM Land Registry data. 

Married spouses and civil partners wanting to leave their estate to loved ones can combine their tax-free allowances to pass on larger amounts, but not everyone is married and able to do this. 

Similarly, an unmarried person who chooses to leave their estate to someone other than a child or grandchild (or other direct descendant) won’t qualify for the residence nil-rate band. This means they can only pass on £325,000 before tax is due.

Higher interest rates were another issue raised in the Rathbones survey – and these impact all of us. Anyone with savings in the bank should be thinking about whether they are being paid a competitive rate, and whether now is a good time to fix their savings. 

Finally, with the UK tax burden at a record high, anyone who is saving or investing for the future should be thinking about how they can do this in the most tax-efficient way possible. Two of the simplest steps you can take include using your annual ISA allowance, if you can, and paying into your pension.

How could the election impact your finances?

One of the main ways a government can raise funds is through taxation, so it is unsurprising savers and investors are planning for a potential change in the rules after 4 July. 

Labour and the Conservatives have given some hints in their manifestos, but more measures could follow once the newly-elected Prime Minister is ensconced in Number 10. 

Tax has been wielded as a political battering ram this election season, with the Conservatives in particular accusing Labour of plans to increase taxation. However, the reality is that taxes will rise no matter who wins on 4 July. 

Both Labour and the Conservatives are planning to keep income tax thresholds frozen until 2028, which means many will find themselves in a higher tax bracket thanks to the effects of fiscal drag.

By 2028-2029, the Office for Budget Responsibility (OBR) estimates there will be around 3.7 million more taxpayers overall. There will also be 2.7 million more higher-rate taxpayers, and 600,000 more additional-rate taxpayers. That’s compared to a scenario where all allowances and thresholds had been indexed to inflation, and the additional rate kept at £150,000. 

At the moment, neither party is planning to hike income tax rates, National Insurance or VAT (with the Conservatives actually promising a 2p cut to National Insurance). But the next government is going to have to find more money somewhere.

The Institute for Fiscal Studies (IFS) has said that a heavier debt burden and higher spending requirements mean the next Parliament will need to either increase taxation, cut spending, or take on more national debt. 

Politicians have not been upfront about this “trilemma”, the IFS adds, accusing both parties of a “conspiracy of silence” in their manifestos. 

With this in mind, now is a good time to ensure you are making the most of the tax-free allowances currently available to you. 

That could mean topping up your ISA or your pension, or moving some cash into tax-efficient investments like Premium Bonds. It could also involve timing the sale of assets carefully to minimise capital gains tax, or gifting assets to loved ones in line with inheritance tax rules. 

The good news is that you don’t need to do all of this before polling day. Once the new government is formed, it will announce a date for the first post-election Budget. If Labour wins, as anticipated in the polls, shadow chancellor Rachel Reeves has indicated this could take place in September.

With the general election just two days away, some of the measures announced in Jeremy Hunt’s Spring Budget feel like a relic of the past. 

One of the initiatives announced was the British ISA, an additional £5,000 tax-free allowance intended to boost investment in the UK economy. But with Labour comfortably ahead of the Conservatives in the polls, some might wonder whether this initiative is dead in the water.

The government held a consultation on the proposed initiative between 6 March and 6 June, however any noise around the new investment allowance disappeared into the furore of the election campaigns.

The Conservatives (who initially proposed the new ISA) failed to mention it even once in their election manifesto. 

Labour was also silent on the topic in its manifesto document, despite the fact that a party spokesperson previously told City A.M. the party had “no plans to drop the British ISA”. MoneyWeek has contacted Labour to confirm this report.

It could be as simple as other policies taking precedence in two already-long documents. Both parties have otherwise been clear in their commitment to boosting investment in domestic businesses.

That said, the British ISA was met with a limp reception after being announced several months ago. With this in mind, it is worth considering whether both parties’ silence on the topic reveals something more beneath the surface. Is it possible that the British ISA will be dropped?

What could a Labour win mean for the British ISA?

“I very much hope that the fact Labour hasn’t mentioned the British ISA in their manifesto, combined with their commitment to ISA simplification in their January policy paper on financial services, means it will now be consigned to the policy dustbin,” says Tom Selby, director of public policy at AJ Bell. 

“While the aim of the British ISA – boosting UK capital markets – was laudable, the policy had more holes than a piece of Swiss cheese and would have been ineffective in achieving that aim,” he adds.

The proposal from the government was that savers would get an additional £5,000 tax-free allowance each year that they could invest in UK assets. 

The exact parameters of the vehicle have not yet been defined, but investments could include UK stocks, UK equity funds, corporate bonds and gilts. 

MoneyWeek recently looked at what could potentially be included in the British ISA, if it goes ahead.

One of the main drawbacks is that the proposal complicates an already-intricate ISA landscape. It could also encourage investors to concentrate a large portion of their portfolio in UK assets, rather than diversifying more broadly. 

“The new government needs to go back to the drawing board by focusing on ISA simplification for the benefit of savers and investors,” Selby says. He suggests this could be achieved by increasing the overall ISA allowance to £25,000. 

He adds: “This combination of changes would be much more likely to achieve the policy goal of boosting UK capital markets (as investors tend to exhibit a natural ‘home bias’ for UK investments) without layering on unwelcome complexity.”

Will the British ISA work in boosting investment into the UK economy?

In an “excessively optimistic scenario”, the British ISA would deliver around £4 billion of inflows into UK equities, according to Laith Khalaf, head of investment analysis at AJ Bell. 

“Based on the current run rate, that would just about cover three months of retail outflows from UK funds,” he adds. Indeed, despite a decent year for the FTSE 100, the latest data from the Investment Association reveals UK investors pulled £1.3 billion from UK equity funds in the month of April alone. 

But that’s not the only problem. As Rachael Griffin, tax and financial planning expert at Quilter, points out, the vast majority of savers don’t exhaust their existing £20,000 ISA allowance anyway. 

She says: “An additional £5,000 to invest in UK companies is unlikely to scratch the surface, and will do very little to alleviate the pains the London stock market is going through just now. 

“The reality is, the UK has a cash savings problem and too much money is sat in low-yielding cash ISAs, doing very little to help [savers] or the economy. Finding ways to get that money invested for the long term would be far more beneficial.”

If Labour wins the election, it plans to toughen the rules on non-doms further, and there’s widespread speculation about higher capital-gains tax. In March, chancellor Jeremy Hunt pinched one of Labour’s long-standing flagship policies by announcing the effective abolition of the UK’s “non-dom” regime. Under the rules, which date back to the 19th century, foreign citizens living in the UK, but whose permanent home (“domicile”) is overseas, can avoid paying UK tax on their foreign income and gains for up to 15 years provided they do not bring income or capital gains back into the country. Hunt’s March budget slashed the amount of time people can benefit from that status from 15 years to four, effective from April 2025.

What will Labour do on tax?

If elected, Labour says it will be even tougher, reversing the Tories’ plan to let non-doms who will lose benefits from next April permanently to shield from inheritance tax any foreign assets held in an offshore trust. Given the UK’s unusually high inheritance tax rate of 40%, this could be the clincher that sends the super-rich heading for friendlier climes, according to wealth managers. Labour has ruled out rises in the rates of income tax, national insurance and VAT (although sticking with the Tory policy of raising tens of billions by freezing thresholds). But in order to avoid massive spending cuts, or higher borrowing, it will need to put up taxes – and the very wealthy are likely to be in its sights.

Will there be a wealth tax?

The only party committed to a wealth tax (that is, a tax on rich people’s assets, rather than their income or spending) is the Greens. They propose a 1% annual levy on wealth above £10 million, and 2% on assets above £1 billion. Labour has ruled out a wealth tax (it didn’t even pledge one under Jeremy Corbyn), although not rises in capital gains or council taxes. The main argument in favour is that the rich have got much richer, says David Smith in The Sunday Times. In 2010, the combined wealth of the top 100 people in that paper’s Rich List was £172 billion. This year it was £594 billion.

Do wealth taxes work?

Wealth taxes are hard to implement, damage entrepreneurship and you don’t end up raising much money. In 1990, 12 of the 38 countries in the OECD group of wealthy nations had a wealth tax, but they raised an average of only 1.5% of tax revenues. Now there are just three: Spain, Switzerland and Norway. Many countries abandoned wealth taxes “because they were perceived to be unpopular, economically damaging, administratively cumbersome and prone to avoidance and evasion, while not actually delivering much revenue," says Stuart Adam of the Institute for Fiscal Studies. If Labour wants to squeeze more cash out of the 1% – people earning more than about £180,000 a year, most of whom are employees or the self-employed – or indeed the 0.1% – the business owners and investors who earn more than around £700,000 – it will need to find other ways.

How the super rich avoid tax

If you’re a salaried employee, it’s hard to do and you’ll get into trouble. But if your income is in the form of capital gains or dividends, it’s much easier. For example, partners in private equity firms, and certain other investment managers, are typically taxed on the capital gain on so-called “carried interest”. In effect, it means they pay only 28% instead of the 45% additional rate of income tax. Labour has pledged to scrap that loophole. And there’s another odd law that they really ought to fix, argues Dan Neidle, the ex-City law firm partner who now campaigns for simpler and fairer taxes. People who have built up a business in the UK who take dividends, sell the business and move to Monaco just days later, are not liable for tax on their gains. The UK, unlike the US for example, imposes no exit tax on those heading off to tax havens. Such a tax was extremely hard to impose under EU law, but is a genuine Brexit opportunity. Labour should make the most of it.

What should Labour do?

Equalise capital gains and income taxes, argues Neidle. However, it would be unfair to tax gains that are merely the function of prices rising over time, and so there needs to be an “indexation allowance” to adjust for inflation. In other words, we need to return to exactly the tax regime introduced in the 1980s by that socialist firebrand Nigel Lawson, whose eminently sensible reforms – equalising CGT with income tax rates – were later reversed and made less fair by Gordon Brown. Another route to realising more taxes from the very rich would be to tax property more heavily. Council tax, for example, is capped at relatively low flat rates, rather than paid in proportion to properties’ values.

What about a global wealth tax?

US president Joe Biden is promising to find $500 billion over 10 years for social programmes by charging a 25% tax on the unrealised capital gains of the 10,000 Americans who are worth $100 million or more. That would be so “nightmarishly complicated” that it’s highly unlikely to work, even if it happens, says The Economist. But a global wealth tax on individuals’ existing assets could be an idea whose time is coming, says Martin Sandbu in the Financial Times. The global corporate tax reform known as Pillar 2 – instituting global minimum tax levels on large multinationals – is something of a “miracle”. But if one miracle, why not two?

An international scheme to tax the wealth of the world’s 3,000 billionaires – a 2% annual levy – would net up to $250 billion (£197 billion) a year in extra revenue, according to a report by the French economist Gabriel Zucman, which was commissioned by Brazil as current holders of the G20 presidency. And this is only from billionaires. Once in place, and secured by more onerous and universal exit taxes, it is “hard to see why fiscally squeezed politicians would decide to spare those with merely hundreds, or even scores of millions,” says Sandbu. “A global wealth tax could arrive sooner than you think.”

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As the Labour government prepares to deliver their first Budget next month, many retirees will be bracing themselves for further pension shocks.

The new government has already scrapped the winter fuel payment for millions of pensioners, and prime minister Keir Starmer has warned that the Budget will be "painful" with more "difficult decisions" to come.

There is speculation that the state pension could be means-tested, while savers could see their pension tax relief cut.

These are just rumours at this stage - others include hiking fuel duty and capital gains tax.

Pensioners will be pleased to know that the state pension triple lock should remain in place at least, with the full new state pension forecast to rise by more than £400 a year in April.

However, a rise in the state pension also brings back memories of former prime minister Rishi Sunak's repeated claims that a Labour government would subject the state pension to a "retirement tax”.

But what does this mean exactly? Are Keir Starmer and chancellor Rachel Reeves planning to introduce a new tax that will only affect the state pension?

We delve into the “retirement tax” issue and fact-check the Tories’ claim, and also look at what other pension decisions the Labour government could take to plug the fiscal black hole that they claim they inherited from the Conservatives.

Will Labour bring in a retirement tax?

A retirement tax sounds like a new tax policy that would target pensioners - but Labour have not announced anything like this.

So, it’s unlikely they would bring in an explicit retirement tax. Although of course, political parties can (and do) introduce new policies that are not in their manifestos after forming a new government.

What the Tories are referring to when they say “retirement tax” is the fact the state pension could soon rise above the tax-free personal allowance.

The full new state pension is currently worth £11,502 a year. The personal allowance is £12,570. There are no plans to increase the personal allowance, but thanks to the triple lock, the state pension will rise each year by at least 2.5%.

With a predicted rise of more than £400 a year next April, the full new state pension will reach about £12,000 - and is likely to breach the personal allowance by 2027-28, meaning retirees will have to pay income tax on part of their state pension.

The Conservatives previously announced “triple lock plus” to get around this problem. They said that if they won the election, they would introduce a new personal allowance for pensioners, which would rise in line with the triple lock - therefore keeping pace with the state pension and reducing the risk of pensioners being taxed.

Labour have not committed to such a policy. Starmer previously described the move as “desperate”, adding that it would leave a “Corbyn-style” black hole in the public finances.

We should hopefully see a mention of the state pension in Rachel Reeves's first Budget on 30 October.

It will likely confirm the government's commitment to the triple lock - but it's not clear if the situation of retirees paying tax on their state pension will also be included.

What do pension experts think about the so-called retirement tax? 

The discussion around a retirement tax was arguably a clever move by the Conservatives, getting older voters worried about what a Labour government could do to their pensions.

Helen Morrissey, head of retirement analysis at the wealth manager Hargreaves Lansdown, previously told MoneyWeek that it was "unfair to say that Labour would introduce a retirement tax if they won the election”.

She adds: “The Conservatives have upped the ante with the triple lock plus but it is a controversial policy, which is seen as intergenerationally unfair and Labour have refused to match it on cost grounds. 

“The key issue is frozen tax thresholds that are pulling older people into tax-paying territory – numbers have risen by more than a quarter since the freeze was introduced. This can partly be down to more older people working and drawing a larger income but it is also the case that pensioners on smaller incomes are affected.”

Tom Selby, director of public policy at the investment platform AJ Bell, says the Conservatives “clearly tried to set a trap for Labour” with the triple lock plus and talk of a retirement tax.

He says that now Labour are in power, they will need to be "mindful of the state pension tax iceberg that is looming into view", with the full new state pension set to exceed the personal allowance in the coming years. 

“While there are already pensioners who built up entitlement under the pre-2016 system paying income tax on their state pension today, Keir Starmer will doubtless want to avoid the symbolism of the full state pension being subject to income tax.”

Do pensioners pay tax on their state pension? 

While the full new state pension is currently below the personal allowance, plenty of retirees do already pay income tax on their state pension.

Former Lib Dem pensions minister Steve Webb suggests that almost 2.5 million pensioners pay income tax on their state pension - and would still be taxed even if the Tories' triple lock plus policy had come into effect.

That’s because many people receive extra payments under the old state pension scheme.

About 6.7 million people of state pension age or over paid income tax in 2021/22. This is based on all of their income, so includes workplace and personal pensions and any work, on top of the state pension.

The figure is projected to have risen to 8.5 million in 2024/25 (a 26% increase) as more pensioners fall into the income tax bracket.

The increase in pensioner taxpayers is largely due to the substantial hikes to the state pension (it rose 8.5% this April, and 10.1% in April last year) and the frozen personal allowance. The tax-free allowance is set to stay at this level until 2028.

What does Labour plan to do with pensions?

The Labour government says it will undertake a review of the pensions landscape to "improve pension outcomes and increase investment in UK markets".

A review could potentially cover pension tax relief, and the 25% tax-free cash on pension withdrawals.

Pension savers currently get their marginal rate of income tax back as tax relief on their contributions. So, basic-rate taxpayers receive 20% tax relief, while higher-rate taxpayers get 40%.

Previous governments have looked at changing this attractive upfront tax relief. Suggestions have included making all tax relief 20%, or changing it to a flat rate of 33%.

The 25% tax-free cash policy could also come under the spotlight in a Labour review. To save money, the new government could lower the maximum level of tax-free cash to, say, 20%.

The Conservatives ruled out changing pension tax relief and tax-free cash in the run-up to the general election, but Labour haven’t made the same promises.

Will Labour reintroduce the lifetime allowance?

Chancellor Jeremy Hunt announced in March last year that the pension lifetime allowance would be scrapped, helping high earners and those with large pension pots avoid a tax charge of up to 55%.

At the time, Labour said they would look at reintroducing the allowance if they won the next election.  

However, the party seem to have backtracked on this, given that the allowance was not included in their manifesto.

Morrissey comments: “Labour’s stance on reinstating the lifetime allowance was not popular and threatened to bring extra complexity to people’s retirement planning. 

"The recent announcement that they were dropping this policy was greeted with a sigh of relief by those who felt their retirement planning was left in limbo.”

The general election is almost upon us, with voters set to head to the ballot box on 4 July. This means it’s time to start thinking about which party has the best policies for you on everything from taxes to social care, pensions and housing.

It is hard to believe that more than five weeks have passed since Prime Minister Rishi Sunak fired the starting gun, standing outside Number 10 in the pouring rain as D:Ream blared in the background. 

Whatever the election outcome, the song was certainly right about one thing. As far as the British weather is concerned, things have only got better. This is just one of many factors psephologists will be watching next week, with voter turnout typically boosted by dry weather.

Before you kick back and enjoy this week’s sunshine, though, there are some important steps you need to take before polling day, from getting your finances in order to deciding which party to vote for. 

If you are still undecided, we have done a round-up of all the main parties’ manifesto promises. See our analysis on Labour, the Conservatives, the Liberal Democrats, the Greens, Reform UK and the SNP. 

Here are seven things you need to know, seven days before the general election. 

1. Get your personal finances in order

Taxes have been in focus this election season. Labour has promised not to hike income tax, National Insurance or VAT. The Conservatives have pledged the same, while also promising a 2p cut to National Insurance and no hikes to capital gains tax or pension taxes. 

However, the truth is that voters will suffer a bigger tax bill no matter who gets into office. Frozen tax thresholds have conspired with fiscal drag in recent years, meaning that more and more people are finding themselves dragged into a higher tax bracket.

With this in mind, it makes sense to make use of all the allowances available to you. Make sure you are using your annual £20,000 ISA allowance, if you can, to shield your savings and investments from income and capital gains tax. 

Also consider topping up your pension. Currently, savers receive tax relief on pension contributions at their marginal rate. This means that HMRC gives you a valuable top-up each time you put money in your pension pot (up to a certain limit). 

Voters should also remember that manifesto promises don’t necessarily give the full picture of what a party will do once it is in government – and the Institute for Fiscal Studies has accused both parties of a “conspiracy of silence” when it comes to taxes. 

A heavier debt burden and higher spending requirements mean the next government will need to either hike taxes, increase national debt, or cut spending, the independent think tank warns. 

It is worth making use of any personal allowances you have now in case the next government is forced to change the current rules.

2. Don’t panic when it comes to your investment portfolio 

At election time, there is always a lot of noise around what an incumbent government could mean for the fortunes of the stock market. But you should remember that investing is less about timing the market than time in the market. 

While there could be some short-term volatility (particularly if markets are surprised by the election outcome), politics generally has less of an impact on market performance than economic developments. The thing you should be watching more closely is the timing of interest rate cuts.

Labour leader Keir Starmer is comfortably ahead in the polls at the moment, and has been vocal about the fact that he is leading a “changed Labour”, which is “pro-growth” and “pro-business”. 

With this in mind, “the prospect of a government spearheaded by Sir Keir and Rachel Reeves is unlikely to spark the sort of fear that would have been inspired by an administration whose driving forces were Jeremy Corbyn and John McDonnell,” says Russ Mould, investment director at AJ Bell. 

See our recent pieces: “What could the general election mean for UK equities?”, “Are the Conservatives or Labour better for the stock market?”, and “What would a Labour supermajority mean for capital markets?”

3. Consider whether there are any stocks you’d like to buy

As we have established, an election is no reason to buy or sell a load of stocks. However, it is worth thinking about whether any companies or sectors could be given a long-term boost by a shift in policy or regulation. 

One sector that has been highlighted by several commentators is UK housebuilding. Both Labour and the Conservatives have voiced commitments to building more homes in an attempt to tackle the housing shortage and boost affordability. Labour has promised planning reforms and 1.5 million new homes over the next parliament, while the Conservatives have promised 1.6 million.  

Two stocks that Hargreaves Lansdown highlights are Taylor Wimpey and Vistry. Vistry is an affordable housing specialist, and so is in “a good position to benefit from a Labour administration”, according to Susannah Streeter, head of money and markets at the investment platform. 

As well as a supportive political backdrop, housebuilders should benefit from falling interest rates. The Bank of England kept rates frozen at its June meeting, but could start cutting the base rate as soon as 1 August. 

4. Think about fixing your savings

The Bank of England said its decision to hold the base rate at 5.25% last week had nothing to do with the timing of the general election. However, some commentators have suggested the Monetary Policy Committee (MPC) would have been nervous about its decision getting politicised.

Many expect rates to be cut at either the August or September MPC meeting. By August, the general election will be out of the way, however we won’t have the full picture on what the incumbent government plans to do with fiscal policy. 

If Labour wins the election, shadow chancellor Rachel Reeves has indicated there wouldn’t be a Budget until mid-September (to give the Office for Budget Responsibility time to prepare an independent forecast). It is unclear whether the MPC would want to wait for this before cutting rates, however it is a possibility that is worth considering. 

“Whoever makes it into Number 10 will be changing policy, taxes and the fortunes of the UK economy, all of which play into the economic data the Bank scrutinises every month,” says Laura Suter, director of personal finance at AJ Bell. 

While the exact timing of cuts is hard to call, it is hard to dispute the fact that they are close on the horizon. This means you may only have a matter of weeks to lock in higher savings rates while they last. 

See our round-up of the best one-year fixed savings accounts. 

5. Decide who you are going to vote for

Don’t leave it to chance on the day. Read up on each party’s policies so that you are well informed when you head to the ballot box. As well as looking at each party’s manifesto, you should read up on your local candidates as it will be their names on the ballot paper on 4 July. 

MoneyWeek has published extensive analysis on each of the major parties through the lens of what they could mean for your money. See our analysis on Labour, the Conservatives, the Liberal Democrats, the Greens, Reform UK and the SNP. 

6. If you haven’t sent your postal vote in time, you can still vote in person

All postal votes need to be received by the elections team at your local council by 10pm on polling day to be counted, so the advice is always to return this as soon as possible. 

However, if you don’t think your postal vote will get there in time, you can still vote in person. 

To do this, you can just take your postal vote to your local polling station on 4 July. The team working there will ask you to complete a form detailing your name and address, how many postal votes you are handing in, and why you are handling these votes.

You are permitted to handle your own postal vote, as well as those of close relatives and people for whom you provide care. You are restricted to handing in postal votes for up to five other people.

7. Bring ID to the polling station

Don’t get caught out like Boris Johnson did at the local and mayoral elections on 2 May. You are now legally obliged to bring a form of photo ID with you when you turn up at the polling station to vote. 

Acceptable forms of ID include a UK or EU passport, a UK or EU driving licence, or a Blue Badge. The other forms of acceptable ID are listed on the government website.

Private renters and landlords make up a significant portion of the UK electorate. With this in mind, it should come as no surprise that politicians have been appealing for their votes as we race towards a general election on 4 July. 

Around 35% of people in England live in rented accommodation, according to the latest English Housing Survey. Sixteen percent are in social housing, while 19% are in private rented accommodation. 

Meanwhile, around 13% of people in Scotland and Wales are private renters, versus 16% in Northern Ireland. It should be noted that a lack of regular data in Wales and Northern Ireland means we have to rely on information from the 2021 Census, so these figures could have shifted slightly since then. 

Meanwhile, there are currently around 2.82 million private landlords in the UK, based on income tax data from HMRC. That amounts to around 4% of the population. 

Against this backdrop, we look at the key policies each major party has promised when it comes to buy-to-let landlords and renters. How will a Labour or Conservative win affect you?

Housing is in focus this election season 

It’s not just the scale of the private rental market that has thrown it into focus this election season. As Maria Sobolewska, professor of political science at the University of Manchester, argues for the BBC, “the issues affecting renters have never been more visible politically”. 

Inflation and housing shortages have caused rents to rise sharply. Landlords’ mortgage costs have soared too, with many passing some or all of this cost on to tenants in the form of rent increases.

With this in mind, Sobolewska thinks renters could be instrumental in deciding the outcome of the election result. To this end, she compares Generation Rent to Margaret Thatcher’s “Essex Man”, New Labour’s “Mondeo Man”, David Cameron’s “Mumsnet Mums” and Boris Johnson’s “Workington Man”.  

In 2010, renters were fairly evenly split on whether they would vote Conservative or Labour, Sobolewska says, but since then they have been shifting towards the left. This could bode well for Labour leader Keir Starmer. Prime Minister Rishi Sunak’s promise to ban no-fault evictions suggests the Conservatives have not given up on winning their vote yet, though. 

Meanwhile, private landlords make up a smaller portion of the UK population at 4%, but their influence is by no means insignificant. Traditionally, they tend to be more Conservative leaning, and Rishi Sunak will be keen to secure their vote on 4 July. 

Landlords have seen their margins squeezed in recent years and any party which speaks to these issues may find it is able to curry favour. Extra stamp duty was imposed on private landlords in 2016 and, since then, tax reliefs have been scaled back. House prices also fell in 2023 as mortgage costs soared – a double whammy for property owners. 

Many landlords have been passing higher mortgage costs on to their tenants by putting rents up, but research suggests rents are now hitting an affordability ceiling. This suggests landlords may struggle to raise them much further. Combined with a tighter regulatory landscape, this is leaving some landlords questioning whether buy-to-let is still worth it. 

What the election could mean for renters 

Before the election was called, the Conservative government had hoped to abolish no-fault evictions through its Renters Reform Bill. The policy did not make it through in time, but has since been picked up in the Conservative Party manifesto. 

Labour, the Liberal Democrats and the Green Party have also stated their commitment to abolishing no-fault evictions. Reform UK, on the other hand, would not look to abolish this measure. Instead, the party has said it would “boost the monitoring, appeals and enforcement process for renters with grievances”. 

As well as abolishing no-fault evictions, Labour has said it would empower tenants to challenge unreasonable rent increases. The party has also promised to raise living standards in rented accommodation, for example by extending ‘Awaab’s Law’ to the private sector. This measure (currently in place in social housing) requires landlords to investigate and fix health hazards like damp and mould within specified timeframes.

Other manifesto pledges include:

• Energy efficiency: Labour has said it will ensure homes in the private rented sector meet minimum energy efficiency standards by 2030, helping reduce energy bills for tenants. The Green Party has also promised to push for “a tenant’s right to demand energy efficiency improvements”. 
• Tenancy lengths: The Liberal Democrats have said they would make three-year tenancies the default. 
• Improving standards and regulation: The Lib Dems have said they would create a national register of licensed landlords. Meanwhile, the Greens have said they would introduce rent controls and “private residential tenancy boards to provide an informal, cheap and speedy forum for resolving disputes before they reach a tribunal”.   

What the election could mean for buy-to-let landlords 

While much of the focus has been on protecting renters’ rights, the Conservatives have doffed their cap to private landlords in their manifesto. As well as abolishing no-fault evictions, they have promised to “strengthen other grounds for landlords to evict private tenants guilty of anti-social behaviour”.  

In a surprise measure, the party has also promised to introduce capital gains tax relief on a temporary basis for landlords who sell to their existing tenants. Under current measures, landlords selling a rental property have to pay 18% capital gains tax if they are a basic-rate taxpayer, or 24% if they are a higher or additional-rate taxpayer.

Reform UK has been going after the traditional Conservative vote, and has also promised incentives for landlords. The party has said it would “restore landlords’ rights to deduct finance costs and mortgage interest from tax on rental income”. 

Tips for first-time buyers and buy-to-let landlords 

Whether you’re a first-time buyer or a buy-to-let landlord, MoneyWeek regularly shares tips on the steps you can take to make the most of your money. 

We regularly publish research on whether it is cheaper to buy or rent. While soaring mortgage rates made renting the more affordable option at one point last year, buying is now cheaper once again. The challenge for first-time buyers is saving up a big enough deposit. 

If you are keen to climb the property ladder but don’t have quite enough tucked away in your savings account, you could explore a 95% mortgage or a 30-year option. However, beware, these will usually cost you considerably more in interest payments.

If you are still saving for a deposit and want to boost the value of your pot, you could also look into a Lifetime ISA. You can put up to £4,000 in a Lifetime ISA each tax year and the government will give you a 25% bonus. 

There are some drawbacks on these accounts too, though. You can only use the money to purchase a first home up to the value of £450,000 or to save for retirement. If you access the money for any other reason, you will be hit with a 25% penalty.

Meanwhile, if you are a buy-to-let landlord, it is worth looking into which parts of the country are most profitable. Rents aren’t growing at the same rates everywhere, as we explored in a recent piece: “Best buy-to-let property hotspots in the UK”. 

Incorporating your properties in a company structure could also prove more tax-efficient – but it is important to consider the additional costs and responsibilities associated with setting up and running a property business. By setting your property portfolio up in this way, you could also expose yourself to higher mortgage rates. 

The Labour Party looks increasingly likely to form the next government.

Keir Starmer's political grouping has routinely been around 20-points ahead in the polls. At the same time, things only seem to be getting worse for Rishi Sunak’s Conservative Party.

Nigel Farage’s Reform UK and Sir Ed Davey’s Liberal Democrats appear to be eating into the Tory vote despite the party’s attempts to woo its core base. Policies like the triple lock plus and the promise of further cuts to National Insurance have failed to move the dial for the incumbent party of government.

Indeed, on Wednesday (19 June), a Savanta and Electoral Calculus poll for The Daily Telegraph found the Tories could slump to just 53 seats on 4 July, while Labour could be on course for an unprecedented 382-seat majority. Although other polls have not been quite as unkind to Sunak, his party’s messaging has shifted from pushing for victory to preventing a Labour ‘supermajority’.

Grant Shapps, who began talking about this scenario on 12 June, said a supermajority would give a Labour government a “blank-cheque” and would allow them to “do anything they wanted” with their “vague” prospectus for government. In other words, he - and other senior Conservatives - are trying to say this outcome would be bad for democracy.

Others have poured cold water on this idea. Non-partisan think tank the Institute for Government said this week that size doesn't matter - it’s what you do with it that counts. Its director and CEO Hannah White said: “It is the attitude that the next government takes to the role of parliament that will actually make the difference, however large the majority it secures.”

Elections are always bumpy times for investors, as markets wrangle with the uncertainty national polls present. But how could a supermajority - or an unexpected outcome, like a coalition - affect the markets? We’ve taken a look.

Does the size of a Labour majority matter to the markets?

The consensus among the experts MoneyWeek has spoken to is that a supermajority isn’t going to produce a big market shock.

Russ Mould, investment director at AJ Bell, tells us that a large win for Labour would be “no shock at all” for the markets given polling already suggests it’s on the cards. He says: “Markets are pricing in a Labour win and a hefty one at that, and it is a prospect they are currently taking with equanimity, given the party’s manifesto promises not to jack up taxes and what feels like a charm offensive towards the City.”

Susannah Streeter echoes Mould. The head of money and markets at Hargreaves Lansdown says: "A supermajority is unlikely to dramatically unsettle investors. It would enable the new government to get on with their agenda which has already been digested by markets.”

A factor that means any supermajority shock would be kept in check is the international make-up of the UK markets. Jason Hollands, MD of investing and pensions platform Bestinvest, tells MoneyWeek: “Bear in mind that the majority of earnings for UK listed companies are made overseas. Around three-quarters of the FTSE 100 aggregate earnings are made outside of the UK.

“So the UK equity market isn’t really a barometer of the UK economy or overly sensitive to domestic fiscal policy, though there is greater domestic exposure in the small and mid-cap parts of the market.”

How might a different general election result affect the markets?

The chances of an outright Conservative victory look to be vanishingly slim. But there is a small possibility that the general election could result in a hung Parliament. So, how would the markets react in this scenario?

Badly, says Streeter. “Anything other than labour dominance is more likely to be unnerving, given expectations," she says. "It could weaken the position of Keir Starmer and his ministers and hamper their ability to drive change.”

She adds: “A minority administration or coalition would be more unsettling as it would mean more uncertainty and may hamper bringing in Labour’s agenda. [It could] potentially hold back investment due to the need to integrate other parties’ promises made on the campaign trail.”

Mould agrees, adding that even a “thin Labour majority” would come as a surprise. He says: “A coalition would be much more of a surprise, and markets are unlikely to welcome the near-term uncertainty that would bring. Although the nature of the coalition and identity of the partners – and the cabinet positions they get and influence they can wield – will be important here. The markets took the Tory-Lib Dem coalition in their stride [as] they had the European debt crisis to worry about instead.”

Could a Labour government with a big majority be good for market performance?

Say the prospect of a Labour supermajority becomes a reality. What do the history books tell us about the market impact of governments with hefty majorities?

Research by investment manager Fidelity International has found that markets have performed well when a government has operated with a majority, regardless of whether the administration in charge wears a blue or red rosette. But they have tended to perform even better during periods with a “tired government” that’s heading for defeat at the ballot box.

Tom Stevenson, investment director for personal investing at the company, says: “In absolute terms, the best performance by the FT All Share index was during the Wilson/Callaghan term that ended with the Winter of Discontent and the start of the Thatcher era. Between 1974 and 1979 the market rose by 260%.”

Stevenson says the next best periods were the John Major term between 1992 and 1997 (187% return), the second Thatcher term from 1983 to 1987 (154%), and Tony Blair’s first term (134%) between 1997 and 2001.

Stevenson adds that a factor that can play a bigger role than the size of a majority in influencing the stock market is inflation. He adds: “Ultimately, market returns are only worth something to an investor if they help them keep ahead of rising prices. During the whole 60-year period covered by my analysis, this was only the case in six of the 16 parliaments.

“During the [majority] Heath government from 1970 to 1974, for example, the market rose by 24% but lost investors around 10% in real terms. The first Thatcher government [with a similar majority] saw a 61% rise in share prices but because inflation was still averaging 16% a year in the early 1980s, investors were underwater in real terms come the 1983 election.”

Starmer will be hoping for inflation to remain on target anyway. But if he wants to attract investor votes at the next election, he’ll have to hope the Bank of England can keep any future global shocks in check.

What’s the best investment strategy for a Labour majority?

So, is there a good way to approach a Labour majority when it comes to investing? The answer is that it’s best to keep things simple, according to Stevenson.

He says: “Political noise will be unavoidable over the next couple of weeks. While investors are right to concern themselves with the economic and fiscal policies of the parties vying for their votes, when it comes to their stock market investments they’d do better to focus on their long-term financial goals. Who’s in or out of power is neither here nor there over an investing lifetime.”

Hollands suggests investors should keep an eye out for sectors that could benefit from the next government’s policy proposals. He says: “When the election is over and markets see rate cuts on the near horizon, we may well see the more domestically focused parts of the market react positively in expectation that policy support could be coming down the line.

“With limitations on the ability to embark on a borrowing blitz – the bond markets will not tolerate it - and the tax burden already very high, one of the main levers a Labour government will seek to pull is through directing private capital to achieve some of its objectives.”

Hollands points to the Labour manifesto’s mention of a review of the pensions system, which would bid to ‘increase investment from pension funds in UK markets’. He says it isn’t yet clear whether this will entail incentives or tougher regulation, but driving “more institutional capital into UK assets” would be “more likely” to prove effective in rebooting the UK equity market through increased liquidity, than the Conservatives ditched British ISA plan. He adds: “This could end up being the aspect of a Labour victory that has the greatest effect on UK equities.”

He also says that sectors, like construction and renewable infrastructure, could do well after the election due to Labour’s house building and planning reform pledges.

But investors may have to be wary as time goes on, warns Streeter. She says: “There is more of a risk of market turbulence after a few years of the government bedding in, especially if the economy took a turn for the worse and the tax take dips.

“It would be very hard for Labour to cut services and do anything drastic with public spending, and they appear to be in a bit of a tight spot with their fiscal commitments. However, Rachel Reeves has suggested that in the future borrowing rules could distinguish between day-to-day spending and investment to propel long term growth, potentially loosening the purse strings to further support and partnerships with the private sector, above and beyond the current manifesto commitments.

“So far, such indications do not seem to have perturbed the debt markets, with bond investors appearing to be more sensitive to interest rate speculation than the investment plans of an incoming government.”

Streeter reckons the policy area investors should watch is Brexit. She says: “Valuations which have been languishing lower, partly due to the Brexit effect, could be positively impacted if Labour wins given [its] recent pledges for closer trade ties between the UK and the EU and less of a focus on regulatory divergence.”

Where a Labour majority could be problematic to investors is in how it approaches regulation, Mould suggests, pointing to the “increasingly interventionist approach to the economy” Conservative governments since 2010 have taken. He points to the Help to Buy scheme, energy price caps, and windfall taxes on North Sea oil producers as examples of government meddling. Mould also mentions the tougher actions of regulators, such as the Financial Conduct Authority and  Competition and Markets Authority, who “appear to be responding to public pressure for greater action”.

He adds: “In this context, perhaps the hardest part for investors going forward will be spotting which industry or sectors will come under scrutiny next, in the wake of such recent examples as betting, funeral services and veterinary services.”

Inheritance tax receipts totalled £1.4 billion in April-May this year – £0.2 billion higher than the same period a year ago, the latest HMRC data shows. 

This comes after the government collected a record-breaking £7.5 billion in inheritance tax (IHT) last tax year, suggesting we could be on track for another record high in the 2024/2025 tax year.

Frozen nil-rate bands are largely to blame. The current tax-free allowance is £325,000, with an additional £175,000 available to those leaving the family home to their children or grandchildren. We run through the rules in our explainer: “What is inheritance tax?”

“The current £325,000 nil-rate band has been at that level since 2009,” explains Andrew Tully, technical services director at financial platform firm Nucleus. Meanwhile, the £175,000 residential nil-rate band was “introduced on a phased basis between 2017 and 2020”, and has also remained frozen ever since.

In the 2022 Autumn Statement, chancellor Jeremy Hunt said inheritance tax allowances would be frozen until 2027/2028. In recent years, these frozen thresholds have conspired with inflation to put families at the mercy of fiscal drag.

We look at the trend going forwards. Will families face an ever-rising tax bill? Have any parties announced IHT reforms in their election manifestos? And how can you slash your inheritance tax bill?

Will inheritance tax rise further?

So far, neither Labour nor the Conservatives have said they plan to increase inheritance tax rates. The standard rate is 40%, charged on the part of your estate that exceeds the nil-rate band. Likewise, neither party has announced plans to slash the nil-rate bands.

However, that doesn’t mean families won’t find themselves footing a higher bill. Nicholas Hyett, investment manager at Wealth Club, points out: “Freezes on thresholds over the last few years, partnered with decades of house price rises, have brought more and more estates into the tax band.”

When the £175,000 residential nil rate band was fully introduced at the start of the 2020/2021 tax year, the average UK house cost around £230,000. Today, it costs £281,000, according to the latest data from the Office for National Statistics. 

“The haul for the Treasury from IHT is likely to escalate in the coming years due to a particular demographic bump,” adds Laura Hayward, tax partner at wealth management firm Evelyn Partners.

“As the wealthy baby boomer generation dies off in the next couple of decades, there will be a massive transfer of wealth.”

What will the general election mean for inheritance tax?

While Labour was tight-lipped on inheritance tax in its manifesto (only pledging to crack down on the use of offshore trusts to shield assets), some have suggested it is conspicuous by its absence. No mention of it now could mean plans to make changes further down the line.

Meanwhile, many Tory voters will be disappointed by Rishi Sunak’s relative silence on the topic, particularly after Hunt referred to the tax as “profoundly anti-Conservative” in an interview with The Telegraph in May. 

There is no mention of the tax at all in Sunak’s 76-page manifesto, and the only pledge the party has made on the campaign trail is to maintain agricultural property relief. This allows some farming land to be passed on free from inheritance tax.

Recent research from Hargreaves Lansdown revealed that one in six (16%) would be more likely to vote for a party with plans to cut inheritance tax. However, the same measure was highly unpopular with another 12% of survey respondents. This highlights just how divisive the issue is.

How to cut your inheritance tax bill

There are a few things you can do to help reduce your IHT bill – “whether that’s making gifts in your lifetime, passing pensions on tax free, [or] investing in certain qualifying AIM shares,” says Hyett. 

Married couples also enjoy inheritance tax perks. They can pass their estate on to their spouse without any immediate tax implications. Furthermore, if one partner doesn’t use up their nil-rate band, they can pass the remainder on to their spouse to use in the future too. 

In theory, if a married couple were to combine all of their allowances (nil-rate band and residential nil-rate band), they could pass on an estate worth £1 million to their children without any tax being due (£325,000 + £325,000 + £175,000 + £175,000). 

Pensions continue to be a big topic during the election campaign, with the main parties all committing to the state pension triple lock.

But the Conservatives have gone a step further, publishing forecasts that the state pension will hit £13,200 by 2029, and unveiling a “triple lock plus” policy.

The latter involves keeping the state pension triple lock, which raises the pension each year in line with wage growth, inflation or 2.5%, whichever is highest.

It also introduces a new tax-free personal allowance for pensioners, which would increase each year in tandem with the triple lock, cutting the amount of income tax that retirees pay.

The Conservative Party website declares: “So if you vote to stick with the plan, Rishi Sunak and the Conservatives will not only guarantee the triple lock - we’ll introduce the triple lock plus. 

“This means the personal allowance for pensioners will rise every year - ensuring they NEVER pay tax on their state pension.”

However, former pensions minister Steve Webb, who is a partner at the consultancy LCP, says this claim is incorrect.

His research finds that nearly 2.5 million pensioners will still pay tax on their state pension after implementation of the triple lock plus policy.

We delve into the figures and look at which pensioners already pay income tax on their state pension, and if and how this would change due to triple lock plus.

How would the triple lock plus policy work? 

The full new state pension is worth about £11,500 a year. This is only slightly below the tax-free personal allowance of £12,570.

Many pensioners have other income, such as from personal or workplace pensions, part-time work, investments, and/or buy-to-let. So, if their total income is more than the personal allowance, they will have to pay tax.

Separate analysis by LCP suggests that about 9.15 million pensioners will pay tax in the current tax year. With the state pension rising in line with the triple lock, thousands more retirees could be dragged into the income tax net over the next few years.

In fact, pensioners who only receive the state pension - and no other income - face the prospect of being taxed on this money.

This is where triple lock plus comes in. The Tories pledge to “triple lock” the personal allowance for pensioners, ensuring that the pensioner tax allowance is always above the standard new state pension rate.

Why won’t the policy protect all retirees from paying tax on their state pension?

LCP claims that around 2.5 million pensioners will still be paying tax on their state pension even if the triple lock plus policy was introduced. 

Steve Webb explains: “With record numbers of pensioners now paying income tax, there is an understandable focus on pensions and tax. But much of the discussion has assumed that pensioners typically receive a standard rate of pension such as the new flat rate of around £11,500 per year. 

“The reality is that the amounts pensioners receive vary hugely, from a few pounds a week to hundreds of pounds a week. We estimate that more than one in five of all pensioners have state pensions in excess of the income tax threshold.”

This means that these pensioners would “overwhelmingly continue to be taxpayers even if future policy linked the income tax allowance to increases in the headline rate of state pension”.

Why do some pensioners receive more than £11,500 a year from the state pension?

The new state pension pays about £11,500 a year (if you qualify for the maximum amount). But most pensioners do not receive the new state pension. Instead, the majority are on the old state pension system.

In 2023/24, there were 8.4 million pensioners who reached state pension age before 6 April 2016 and therefore come under the “old” state pension system. And 3.2 million who reached pension age after this date who come under the “new” state pension.

According to Webb, 2.1 million pensioners on the old system – roughly evenly split between men and women – get pensions now that are in excess of the tax allowance and will continue to be so even if allowances and pensions rose by the triple lock.

In addition, around 300,000 pensioners - mainly men - on the new state pension are receiving pensions above the income tax allowance. This may be because of transitional protection of accrued rights built up prior to 2016. 

In simple terms, those who had built up a pension under the old rules that is bigger than the new flat rate as at 2016 were allowed to retain this higher entitlement even when the new rules were introduced. 

Will the triple lock plus lower pensioners’ tax bills?

Yes, if the personal allowance increases for pensioners, it will reduce their tax bills. 

But LCP argues that when the Tories say “the personal allowance for pensioners will rise every year - ensuring they NEVER pay tax on their state pension” this is not true for all pensioners. Because some retirees receive a state pension that already exceeds the personal allowance.

LCP says: “The ‘triple lock plus’ policy will, of course, deliver a lower tax bill for millions of pensioners compared to a policy of continuing to freeze personal allowances for pensioners. But our analysis shows that for around one in five pensioners it will not deliver the stated objective of ensuring that their state pension is completely free of income tax.”

To be fair to the Conservatives, while they only refer to the “state pension” on their website, they do mention the “new state pension” in their manifesto when talking about triple lock plus.

On page four they pledge to: “Cut tax for pensioners with the new triple lock plus, guaranteeing that both the state pension and the tax-free allowance for pensioners always rise with the highest of inflation, earnings or 2.5% – so the new state pension doesn’t get dragged into income tax.”

On page 15, they mention the new state pension again, saying that the party will “ensure the new state pension is not dragged into income tax”.

But as Webb has highlighted, even if the Tories are only making the pledge about the new state pension - and not the old state pension - this may still be incorrect, because a pensioner on the new state pension could still receive more than the £11,500 figure, and therefore pay tax on the income.

The UK stock market has had a strong year so far, but remains unloved with investors. This has a fair bit to do with politics. 

With election fever running high, your mind might jump straight to the current Sunak-Starmer race. But the series of events that has led to UK equity outflows in recent years goes back further to 2016.

Much like now, it was the month of June and the Euros were gripping the nation. England suffered a humiliating defeat to Iceland at the first stage of the knockouts, prompting manager Roy Hodgson’s resignation. 

But this wasn’t the UK’s only exit from Europe that month. As football fever shook the continent, the UK was still reverberating from its decision to leave the European Union after voting ‘Leave’ at the referendum on 23 June. 

Brexit hit the domestic market hard and UK equities have been undervalued ever since – both compared to their peers in the US and relative to their own history. 

Covid followed hot on Brexit’s heels (just as the terms of the withdrawal agreement were being finalised), and inflation then proved stickier in the UK than elsewhere. This was partly driven by the country’s overreliance on gas compared to other European markets.

You could call it a series of unfortunate events. So what’s the good news?

In short, this challenging period has created the opportunity for investors to snap up UK companies at bargain prices. After several years of headwinds, UK equities have been having a strong year in 2024 – and some experts think they still have further to go. 

We look at the risks and opportunities – including the general election – and highlight seven funds that offer diversified access to the UK stock market. 

How much of a bargain do UK equities offer?

The FTSE 100 has soared to record highs this year – but many experts believe UK equities are still undervalued. Jason Hollands, managing director at Bestinvest, points out that they are trading at a “wide discount” compared to global equities and their long-term average.

He says: “Whereas UK equities are currently trading at around 11.6 times their forecast earnings for the next 12-months, global equities (as measured by the MSCI All Country World Index) are trading at 17.5 times.”

If a company is trading at 11 times its earnings, this means it would take 11 years to make back the money you paid out for the stock (unless of course you sold it before the end of this period). In other words, investors are willing to pay a higher premium for global equities than UK equities right now.

The disparity between UK and global equity valuations is partly a reflection of “the very different sector composition of the UK market”, Hollands explains. It is less exposed to tech stocks which are currently trading at lofty valuations. That said, he points out that a sector-by-sector comparison still shows UK companies trading at a discount. 

“UK energy companies are trading at 7.9 times earnings, whereas globally the average is 10.6 times,” he explains. “Likewise, UK banks – a sizeable component of the UK market – are trading at 6.9 times earnings, but the global average is 9.9 times.” 

What’s more, despite strong performance so far this year, UK equities are still cheap compared to their historic valuations. “The 20-year median valuation for UK equities is 12.4 times earnings, so currently UK equity multiples are also -7% lower than the longer-term trend,” Hollands explains. 

Will the general election impact UK equity markets?

In recent weeks, MoneyWeek has shared extensive analysis on what the election could mean for UK equities. We have looked at whether Labour or the Conservatives are better for the stock market, as well as diving into various sector opportunities ahead of polling day.

The long and short of it is that neither Labour nor the Conservatives appear to have any big economic surprises up their sleeve. Both have been vocal about their commitment to ensuring economic stability. 

While former Labour leader Jeremy Corbyn was widely seen as being business-unfriendly, Keir Starmer has been at pains to point out that he is leading a “changed Labour” which is “pro-growth” and “pro-business”. 

With this in mind, UK equity investors probably don’t need to worry too much about the effects of the election on portfolio performance. As MoneyWeek’s former executive editor John Stepek points out in a newsletter for Bloomberg, investors would be better off making sure the admin side of their portfolio is in order.

“A change of government might not do much to move the dial on the prices of shares. But it could certainly lead to a bigger tax bill when you come to sell, or lower tax-efficient allowances for when you’re investing in the first place,” he says.

The Conservatives ruled out increasing capital gains tax in their manifesto, but Labour has been quiet on the issue so far and the Liberal Democrats and Green Party have said they would like to raise it. 

One potential benefit could be the introduction of the British ISA, announced in Jeremy Hunt’s Spring Budget. The government recently finished consulting on this measure, which would offer an additional £5,000 ISA allowance each year for UK investment. In theory, this (combined with pension reforms both parties are planning) could boost investment into UK markets, giving them a further lift.

MoneyWeek recently looked at what’s rumoured to be included in the British ISA – but after no mention of it in the Conservative manifesto (and a limp reception when it was first announced), there’s a chance it could be dead in the water. Investors will have to wait and see what happens on 4 July.

Outlook for UK equities

While watching the general election play out is certainly exciting, the timing of interest rate cuts is likely to have more of an impact on market performance. Rate cuts are generally good news for equity markets, as they tend to boost the economy and earnings, resulting in stronger company performance. 

The Bank of England held rates at 5.25% for the seventh consecutive time today (20 June), but many experts are still hoping for a summer rate cut when the Monetary Policy Committee next meets on 1 August. 

In the meantime, there are several reasons to feel constructive about UK equities, in Hollands’ view. “Valuations are low which is a good starting point, dividends are attractive but generally well covered by earnings and with headroom to grow, and overseas buyers and private equity can clearly see the opportunity given the frenzy of bids we are seeing this year,” he says.

Indeed, companies have been leaving the London Stock Exchange at a worrying rate in recent years – partly due to this spate of buyouts. This suggests overseas investors are seeing something that domestic investors are missing. 

On top of this, the UK stock market has long been known as “a good place to look for dividend income”, says Hal Cook, senior investment analyst at Hargreaves Lansdown. “With mature industries like banks, oil and gas, and tobacco, this shouldn’t come as a surprise,” he adds.

But dividends aren’t the only way companies return value to shareholders – share buybacks are an important strategy too. And many UK companies have been making good use of this mechanism in recent months. 

“The UK market currently has the highest ratio of companies doing this of any major market, even the US where buybacks have long been more commonplace,” says Hollands.

How to invest in the UK stock market

If you’re looking to take advantage of the discount on offer in the domestic market, the most straightforward way to invest is to buy a diversified UK equity fund. 

There are hundreds of funds on the market, but an important first step is to decide whether you want to go down the active or passive route. 

Active funds try to beat the performance of a benchmark by selecting the companies that have the most compelling prospects. Meanwhile, passive funds (also known as index trackers) mirror the performance of a broader stock market index, such as the FTSE 100 or the FTSE 250. Passive funds generally come with lower fees. 

Once you have decided which type of fund to buy, you should think about investment style and market cap. Do you want a fund that focuses more on income, growth, or a combination of the two? Would you be better off with a large, medium or small-cap fund? 

Each fund will come with a different risk profile, so it’s important that you read this carefully to ensure it’s appropriate. If you’re not sure, speaking to an investment adviser or robo-adviser might be helpful.

Seven UK equity funds to consider

There are hundreds of UK equity funds on the market, which can make the process of selecting one feel overwhelming. 

The experts at Bestinvest have highlighted four active funds that they are keeping an eye on right now. Meanwhile, the team at Hargreaves Lansdown has highlighted three passive options. We take a closer look. 

• Artemis UK Select: This is a best ideas fund that targets undervalued growth companies. Its top holdings include Barclays, NatWest, 3i Group, Shell and Rolls-Royce. The fund has returned a cumulative 70.3% over the past five years, compared to the FTSE All-Share which returned 30.1%. The fund’s peer group (the IA UK All Companies Sector) returned 20.1% over the same period.
• Three investment trusts to consider: Investment trusts can be a good way to access the UK equity market, as they work a little differently to investment funds. Trusts are openly traded on the market, which means they can trade at a discount or a premium to the value of their underlying assets. Three that the team at Bestinvest like include Temple Bar Trust, Murray Income Trust, and Fidelity Special Values Trust. Each is currently trading at a discount. 
• iShares PLC Core FTSE 100: If you want to match the performance of the 100 largest publicly-traded UK companies, Hargreaves Lansdown suggests this index tracker could be a good one to consider. It invests in every company in proportion with its index weight.
• iShares UK Dividend ETF: This passive fund “offers exposure to 50 of the highest dividend-paying stocks listed in the UK”, Hargreaves Lansdown explains. If you are looking for an income-generating investment, this could be a good option for you. The top holdings currently include HSBC, Vodafone, Imperial Brands, British American Tobacco and Rio Tinto. 
• Vanguard FTSE 250 ETF: If you’re looking to invest in medium-sized companies (which can have better long-term growth prospects than large-cap companies), then an index fund which tracks the FTSE 250 could be of interest. “These businesses make more of their money domestically than their FTSE 100 counterparts,” Cook explains. This is something to bear in mind as it means the index is more exposed to the individual fortunes of the UK economy.

Capital gains tax (CGT) has become a surprise focus in the general election, with several parties pledging to raise it. Meanwhile, speculation is growing over what Labour might do with the tax if they win on 4 July.

CGT is paid by investors, business owners, and property owners who make a profit when selling a buy-to-let or holiday home.

The Conservatives have ruled out increasing CGT, but the Lib Dems and Green Party want to raise it.

Labour didn’t include capital gains tax in their manifesto, bar a mention about closing a loophole for private equity workers.

The party instead chose to focus on its promise that there would be no increases to income tax, National Insurance (NI), VAT and corporation tax.

This has naturally led to questions around whether a Labour government would therefore tinker with other taxes like inheritance tax and CGT to raise money.

While many of the rumours have been whipped up by the Tories, a senior Labour official recently “liked” a LinkedIn post that said raising CGT would be “politically wise”, leading to more speculation that a tax hike could be on the way.

On the other hand, Labour leader Keir Starmer said at the weekend he was happy to rule out putting capital gains tax on the sale of primary homes. “It was never our policy,” he said.

But there are plenty of other tweaks to CGT that could be made by a new government hoping to raise revenue to fund its policies.

We look at what the political parties have said so far on capital gains tax - and what Labour could do.

Conservatives

This is an easy one. The Conservative manifesto stated: “We will not increase capital gains tax.”

It also said that it would introduce CGT relief for landlords if they sold the property to their tenants: "To further support homeowners, we will introduce a two-year temporary capital gains tax relief for landlords who sell to their existing tenants."

However, it’s worth pointing out that investors, second homeowners, buy-to-let landlords and business owners have already been hit hard by changes to CGT under the Tory government.

The annual exempt allowance has been repeatedly slashed. In 2022-23, it was £12,300. Today, it stands at just £3,000.

HMRC figures estimate that 260,000 more individuals and trusts will be paying CGT for the first time by 2024-25 because of the cuts to the allowance.

Liberal Democrats

The Liberal Democrats have been vocal in their aim to reform capital gains tax, and use it as a cash cow to make it their second largest new revenue stream.

They hope to create more than £5 billion of revenue by reforming CGT. 

The party say they want to “close loopholes exploited by the super wealthy” by adjusting CGT rates and “basing them solely on capital gains”. 

The party would also increase the CGT tax-free allowance from £3,000 to £5,000.

Charlene Young, pensions and savings expert at investment platform AJ Bell, comments: “With public finances currently leaving little to no headroom for spending, it’s no surprise that CGT is attracting the attention of the Lib Dems. 

“The pure rate of tax on gains is lower than taxes on earned income, and it’s not payable on your main residence.

“Increasing the rate of CGT substantially would be an unwelcome change for many investors and property owners. Although the manifesto indicates that any increase in rates should be accompanied by a modest rise in the tax-free allowance to at least offset some of the impact on smaller shareholders who’ve been dragged into the CGT web in recent years.”

The rate of CGT you pay depends on your income tax band and the asset. If you’re a higher or additional-rate taxpayer you’ll pay 24% on your gains from residential property (primary residences are exempt), or 20% on investment gains.

For basic-rate taxpayers, the rates are 18% and 10% respectively.

Young adds: “The manifesto doesn’t explain what the new rates will be, but to ‘close loopholes’ between earned income tax and investing gains would involve bringing the tax rates closer together, potentially meaning a tax rate of up to 45% - equivalent to the additional rate of income tax.”

Green Party

The Greens have gone a step further by pledging to align the rates of income tax and CGT. The party claim it would only affect 2% of taxpayers.

However, AJ Bell argues that many investors and business owners would be hit by the move - and that the policy could have the opposite effect of raising money for the government. 

The investment firm points out that the government’s own estimates show that if the highest CGT rate rose by 10 percentage points it would actually cost the government £2 billion by 2026-27. 

“That’s because big increases in tax tend to impact investor behaviour. For example, investors may hold onto assets for longer rather than realising gains, find different ways to shelter their gains from the taxman, or own second homes through companies to avoid the tax altogether,” it said.

Labour

With Labour the clear front-runner in the election polls, the million-dollar question (or should that be the £3,000 question to reflect the CGT allowance) is will they raise CGT if they get into power?

Private equity workers will see a tax increase. Labour says it will close a loophole for private equity workers that allows them to treat performance-related pay as capital gains. It means the sector faces paying higher rates through income tax.

But apart from Starmer’s commitment to not slap CGT on primary residences, we haven’t heard much else from Labour officials about the tax on the campaign trail.

“Starmer made it clear that nothing in the manifesto will need additional tax rises, but Labour has not ruled out changes to capital gains tax,” comments Sarah Coles, head of personal finance at the wealth manager Hargreaves Lansdown.

“At this stage, it’s difficult to know exactly what these changes might be, or whether they would be needed, but for investors with holdings outside tax wrappers, there could be an extra cost. Labour said it is advocating for wealth creation, so it will have to tread carefully on CGT if it wants to ensure the right incentives are in place to create this wealth.”

Changes to CGT could include amending CGT rates or the annual tax-free allowance, or changing the scope of reliefs.

If you’re wondering how a Labour government could affect your finances - and steps you can take now - check out How to protect your wealth from Labour. 

Will Labour raise CGT?

Chris Etherington, private client partner at the accountancy RSM, is doubtful that Labour would raise CGT. 

He admits that Starmer’s “wide-ranging veto on tax rises leaves very little room for a future chancellor to manoeuvre and naturally leads to speculation that capital gains tax (CGT) rates should be reviewed”.

Many people assume that CGT is a tax for the wealthy, and research shows it was paid by fewer than 3% of UK adults between 2011 and 2020, according to Etherington.

However, a large amount of CGT revenues is driven by the sales of businesses, so if Labour did raise the tax, it could be seen as an anti-business move.

Etherington points out that shadow chancellor Rachel Reeves is aware of this, stating in an interview with BBC Radio 4’s Today programme in March 2023: “I don’t have any plans to increase capital gains tax. There are people who have built up their own businesses who maybe at retirement want to sell that business. They may not have had huge income through their life if they’ve reinvested in their business, but this is their retirement pot of money.”

Etherington also echoes AJ Bell’s point about how a change in CGT could impact investor behaviour. 

He explains: “In the year to 5 April 2024, CGT is estimated to have generated over £15bn for the Treasury but it is too simplistic to suggest that doubling the main rate of CGT from 20% to 40% would generate an extra £15bn.

“Latest statistics highlight 45% of CGT revenues come from large disposals generating gains of £5m or more. Introducing a 40% or 45% rate of CGT would undoubtedly distort taxpayer behaviour in relation to these larger disposals, potentially draining the Treasury of much-needed funds.”

He concludes: “A CGT rate of 45% would be one of the highest in the world and nearly every country in Europe could inadvertently become a more attractive place than the UK to crystallise gains. It is little wonder that a CGT rate rise may not be part of Labour’s immediate plans and there are good reasons why they may be keen for that to remain the case.”

John Swinney has launched the SNP manifesto for the 2024 general election in Edinburgh, with Scottish independence, austerity and Brexit high up on its agenda.

 The party, which has been in charge of the Scottish government since 2007, has promised that it would move to open independence negotiations with the UK government should it secure a majority of seats north of the border. It also wants to end the “Westminster consensus” of public service cuts, as well as rejoin the EU.

In terms of personal finance commitments, the party says it wants to push for full devolution of the tax system, maintain the triple lock on the state pension, and get the Westminster government to provide “full, fast, and fair” compensation to Waspi women. It also pledged it would “tackle the cost of living crisis” by, amongst other things, calling for statutory social tariffs for utilities.

While you can’t vote for the SNP unless you live in Scotland, the party had the third biggest grouping of MPs in the House of Commons during the last Parliament. But the polls suggest it could lose several seats at the 4 July election.

Its manifesto is the last to be published by the major parties. The Conservative Party’s document contained promises targeted at its core vote, while Labour’s manifesto was centred around proving it could be trusted with the public finances. The Liberal Democrats have pledged to make the economy fairer, the Green Party has pushed to make the UK more environmentally friendly, while Reform UK has laid out a five-year plan to overtake the Tories.

What money pledges has the SNP manifesto made?

The SNP has set out several personal finance pledges covering taxes, pensions and utility bills. Here’s a round up of what the manifesto promises across each of these categories.

Taxes

After independence, the second highest priority in the SNP manifesto is a plan to push the Westminster government to give Holyrood “full devolution” on tax. At present, the Scottish government has control over income tax - but little else besides.

John Swinney’s party says having control over the entire tax system would make it “fairer” and would allow the Scottish government to ensure it “protects public services and invests in our economy”.

A key levy it wants greater power over is National Insurance. It suggests it wants to bring it in line with Scottish income tax, which has different bands to those elsewhere in the UK. The SNP has also targeted bringing windfall taxes under Holyrood’s scope to help it fund its cost of living measures and tackle climate change. The document suggests taxes on excess profits could be extended to other sectors, given the current oil and gas-focused regime is geographically focused on the North East of Scotland.

Other taxes it wants under its scope include road tax and fuel duty, which it says would allow it to “develop a new approach to funding road travel” - the suggestion being that these taxes would be scrapped in favour of something else. VAT reform would also be high up on the party’s agenda, with lower rates applied to hospitality and tourism and reliefs extended to other services, like on-street EV charging. Like Labour, it says it wants to strip private schools of their VAT tax break.

Alongside tax reforms, the SNP says more devolved powers would also allow it to crack down on tax avoidance and evasion. The party added that it wants to force international firms to be more transparent about how much they pay into the public purse.

Public finances

The SNP has come up with its own set of fiscal rules that it says will allow Scotland to pour more investment into its infrastructure and public services. Most of the main parties have signed up to Jeremy Hunt’s strict set of rules, which some economists have described as being arbitrary and too tight.

If Swinney succeeds in convincing the next UK government to implement his fiscal rules in its first budget - an event the party wants to happen immediately - we would get a ‘public sector net worth rule’, which the manifesto says would recognise the value of investing in infrastructure and public sector assets, on top of liabilities. A maximum limit on debt servicing costs would also come in, which would see the sustainability of the national debt reviewed. Finally, it calls for three-year detailed spending plans to support planning and boost clarity for devolved governments.

These rules would support public services and grow the economy, the SNP claims, arguing that the current rules “choke off borrowing for investment” and are not “pragmatic”.

One key infrastructure spending commitment it wants to bring in is a £28bn a year green investment. In a clear dividing line with Labour, which axed its own £28bn environmental target, the party says it could deliver a “step change” in advancing towards net zero.

Cost of living

On the cost of living, the SNP has targeted reforming utilities in a bid to alleviate financial pressures. It wants to push for an “essentials guarantee” that would ensure everyone can afford “basic necessities”, such as food and energy.

Among the party’s ideas to bring energy bills down, it wants to implement a statutory social tariff on energy bills, bring in a “significant cut” to standing charges and increase benefits. It would also reintroduce the Help to Buy ISA to aid first-time buyers.

Pensions

The SNP has joined the other major parties in committing to the triple lock on the state pension. It says it also wants to bring in a ‘wellbeing pension’ and to oppose any speeding up of plans to hike the state pension age.

For Waspi women, there is a pledge in the manifesto to press the next UK government to implement compensation in full. It adds that it wants to reverse pension credit cuts, maximise pension credit uptake, and to force the Westminster government to “compensate in full” those who have been affected by the Equitable Life Scandal.

Many small businesses will be watching the political debate over apprenticeships with keen interest. While Labour and the Conservatives may have competing visions of how apprenticeship schemes should work in future, one thing is not in dispute: the number of smaller firms taking on apprentices has dwindled in recent years.

That’s largely because the Apprenticeship Levy, the government’s flagship policy on apprenticeship funding, was designed with bigger firms in mind. Smaller businesses are worried about the cost of funding apprenticeships, but also find it difficult to navigate a complex regulatory and administrative system. Nor have training providers done a good job of supporting employers.

Labour’s headline proposal is to introduce greater flexibility into the apprenticeship system. In particular, it thinks employers should be allowed to use up to half of their funding from the Apprenticeship Levy – or be paid directly by the government – to fund training and apprenticeships for existing staff. The Conservatives, meanwhile, want to stick with the existing system, but provide more funding by scrapping some university courses they believe offer poor value.

Supporting apprenticeships with small businesses

Right now, one in four small businesses in the UK runs some sort of apprenticeship scheme, according to the Federation of Small Businesses. It has previously said that proper reforms of the rules would enable its members to offer two million additional apprenticeships.

Ministers have already made some progress on tackling the challenges standing in the way of smaller firms. For example, since April, small companies eligible for state funding for apprenticeship schemes no longer had to top up this cash from their own funds when taking on young workers. The regulations on large companies sharing their funding have also been loosened to allow them to finance more apprenticeships at smaller businesses.

Nevertheless, there is still a significant amount of red tape to work through when taking on apprentices. Businesses need to work with accredited apprenticeship providers – identifying the right provider for their industry – and complete a sheaf of paperwork to secure funding. There are also strict rules on the support that learners must receive throughout their apprenticeships.

It’s also important to recognise that financial support for apprenticeships is designed to cover the cost of the training itself. Employers will still need to pay their apprentices a salary – including for time spent in training and education – in line with the national minimum wage. There is some additional support available for the youngest apprentices – and those with special circumstances – but this isn’t a free lunch.

Still, there is widespread agreement that, when apprenticeship schemes work well, there are significant benefits for employers. These include reduced recruitment costs, better staff retention rates and fewer skills shortages. Labour believes these benefits will accrue from support for existing staff as well as for new recruits – flexibility that some employer groups have been calling for. The Conservatives believe the existing scheme can be made to work better for smaller firms, with extra funding already available for employers concerned about cost, rather than the other issues holding them back.

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The triple lock will boost the state pension to £13,200 a year in five years’ time, according to predictions in the Conservative manifesto.

The new state pension currently pays out £11,502 annually (£221.20 a week) for those who qualify for the full amount.

It rises each year with the triple lock: wage growth, inflation or 2.5%, whichever is highest. And the main political parties - Lib Dems, Labour and the Conservatives - have all pledged to keep the triple lock mechanism if they win the next election. 

The Tories have gone one step further and unveiled “triple lock plus”, which would hike the tax-free personal allowance for pensioners by the triple lock each year, cutting the amount of income tax that retirees pay.

But the Conservative manifesto also revealed how much it expects the state pension to rise each year as a result of the triple lock.

We look at the figures, and how the triple lock will boost the state pension in future - especially given inflation is falling. Today inflation hit 2% in the 12 months to May, the lowest level in almost three years.

What are the Conservative forecasts for the state pension?

The Tories re-confirmed their commitment to the triple lock when they launched their manifesto last week. The party also published a forecast of how the triple lock would increase the state pension. 

The manifesto said that they would “continue to uprate the state pension in line with the highest of prices, earnings or 2.5%. On current forecasts, this will mean the new state pension increases by a further £430 in April next year to £11,970; and increases by £1,685 a year to £13,200 by the end of the parliament.”

Let’s drill down into these predictions. How did the Tories arrive at a figure of £11,970 a year for a full new state pension next year? 

Steven Cameron, pensions director at Aegon, thinks that the state pension rise will be based on wage growth next April. “Given today’s announcement that inflation sat at 2.0% for May, it’s very likely the triple lock will be based on earnings growth. This currently stands at 5.9%, but it’s the figure published in September which is used, and the implied manifesto expectation is this will fall to 3.7% by then.”

In terms of the eventual rise to £13,200 by 2029, Aegon calculations show that this means the Conservatives are assuming the minimum 2.5% increase in the following four years:

“In other words, current forecasts are that both inflation and earnings growth will not exceed the 2.5% per year guaranteed increase over this period”, notes Cameron.

Of course, if they do exceed 2.5%, pensioners will enjoy a larger increase to their state payouts. 

The state pension soared by 10.1% last April, the highest ever increase (based on the consumer prices index measure of inflation in September 2022). In April this year, pensioners enjoyed another bumper boost of 8.5% (in line with earnings growth).

Cameron says these increases were due to inflation and earnings growth skyrocketing in exceptional circumstances. He adds that the Conservatives’ predictions indicate a “return to more typical triple lock increases, which still allow state pensioners to at least retain their purchasing power.”

Do the state pension predictions look realistic?

The state pension forecast tallies with predictions put out earlier this year by the investment platform AJ Bell.

It thinks the UK state pension could rise to £13,236.10 by April 2029 (or £254.54 a week), thanks to the triple lock.

This forecast assumes earnings data dominates the next two triple locks, before 2.5% is used to uprate the state pension over the following three years. 

AJ Bell’s estimates are based on Bank of England forecasts for inflation and wages up to 2027/28, after which it assumes both percentages will sit at 2%.

The triple lock is a popular policy with older voters. According to a survey by My Pension Expert of 1,295 UK adults over 40, more than half (51%) say a political party’s commitment to maintaining the triple lock would significantly influence their voting intentions at the next general election. 

More than half (57%) also feel that if the state pension triple lock was scrapped it would be damaging to their financial plans for retirement.

However, critics say the policy is aimless, and vulnerable to big increases that are out of kilter with the rest of the population. It is also becoming increasingly expensive - and unaffordable. 

Tom Selby, director of public policy at AJ Bell, argued: “As the real value of the state pension rises as a result of the triple lock, it also increases the likelihood of planned state pension age hikes being accelerated to balance the books, creating both uncertainty and the potential for intergenerational unfairness.”

The country will head to the polls tomorrow, electing the UK’s next Prime Minister. Whoever is chosen could be in charge of running the country for the next five years.

Politicians are almost out of time to win your vote. It’s crunch time, and voters need to decide whose name to put their cross next to on the ballot paper. 

The manifestos were published last month, with the Conservatives promising a 2p National Insurance cut as their headline pledge. 

Meanwhile, leader of the opposition Keir Starmer has fashioned his party as a changed Labour – one that stands in stark contrast to Jeremy Corbyn’s party in terms of its pursuit of growth and its pro-business stance.

The Liberal Democrats, Reform UK, the Green Party, the SNP and Plaid Cymru have all announced a string of policies too, and will play a significant role in exerting pressure on the two main parties. 

None of them can expect to supply the next inhabitant of Number 10, but they will be hoping to hang on to existing seats and, in some cases, grow their share of the House of Commons. 

But which party will win your vote in tomorrow’s general election? We look at who has the best policies for voters of different ages and demographics. 

Which party is offering the most to pensioners?

Pensioners typically turn out in force at the ballot box, so it is unsurprising that all major parties have been vying for their fair share of the pensioner vote in recent weeks. 

Labour, the Conservatives and the Liberal Democrats have all promised to maintain the triple lock, if they win the upcoming general election. This increases the state pension each year in line with inflation, average earnings or 2.5% – whichever measure is highest. 

Arguably, the Conservatives have gone the furthest with their ‘triple lock plus’ policy, which promises to unfreeze the personal allowance for pensioners. 

Prime Minister Rishi Sunak has said this would prevent pensioners from ever paying income tax on their state pension, however analysis from former pensions minister Steve Webb suggests the issue is actually more complex than Sunak allows.

Critics of the policy point out that the state pension is already expensive enough as it is. They also argue that the ‘triple lock plus’ promotes intergenerational unfairness at a time when workers continue to face a higher tax bill thanks to fiscal drag.

What’s more, a poll conducted by YouGov on 29 May (a couple of days after the ‘triple lock plus’ policy was announced) suggests the Conservatives might not have done quite enough to win pensioners round. Fifty-four percent of the age group said the party’s plans did not go far enough. 

Perhaps those leaning more towards a Labour vote are concerned that Sunak’s plans to cut National Insurance could put the state pension at risk – an accusation Starmer’s party has levelled at the Conservatives in the past.

In terms of the other parties, the Greens have said they would move away from the triple lock to a double-lock system. Meanwhile, Reform UK’s manifesto makes no mention of the triple lock. 

“This could mean that it is so ingrained within the system that it doesn’t need to be mentioned or it could mean it’s for the chop,” says Helen Morrissey, head of retirement analysis at Hargreaves Lansdown. 

Which party is prioritising working parents?

Both Labour and the Conservatives are committed to continuing the rollout of Jeremy Hunt’s free childcare reforms. Previously, there had been some doubts as to whether Labour would commit to the policy amid concerns about the strain it could put on the sector. 

Labour has also announced plans to convert over 3,000 classrooms into nurseries in schools with spare capacity, creating 100,000 additional nursery places. The party plans to fund this by ending tax breaks for private schools. 

Labour has also promised free breakfast clubs for primary school children, and 6,500 new teachers for the state sector. 

Meanwhile, the Conservatives have promised to “end the unfairness in child benefit by moving to a household system”. Currently, parents start losing their allowance as soon as one parent’s income hits £60,000. The Tories have also said they will raise the child benefit threshold to £120,000. 

Whether parents end up voting Labour or Conservative could be determined by how much they earn, and whether their children are educated in the state or private system. 

Those with children in the state sector will be pleased by the prospect of additional teachers and more nursery places. Meanwhile, those with children in private school will likely be nervous about the prospect of a potential 20% fee hike, if VAT is imposed on school fees. 

Of course, Labour and the Conservatives aren’t the only two parties on your ballot paper. The Liberal Democrats could also look attractive to those thinking about having children in the future. 

Ed Davey’s party has promised to double statutory maternity pay and shared parental pay to £350 per week, as well as introducing “an extra use-it-or-lose-it month for fathers and partners, paid at 90% of earnings”.

The Lib Dems have also said they would make these “day-one rights” and extend them to self-employed parents.

Which party is doing the most for young people?

When it comes to young people, a key focus for both major parties is housing. Mortgage rates have skyrocketed in recent years, pushing the dream of home ownership out of reach for many.

Labour has unveiled a Freedom to Buy pledge on the election trail, which we explored in a recent article. Meanwhile, the Conservatives have promised to launch a “new and improved Help to Buy scheme”, while permanently scrapping stamp duty for first-time buyers, up to a threshold of £425,000. 

“Neither of the main parties mentioned the Lifetime ISA in their manifestos. However, it still offers a vital leg-up onto the property ladder,” adds Sarah Coles, head of personal finance at Hargreaves Lansdown.

“An estimated 11% of first-time buyers with a mortgage used a Lifetime ISA to get onto the property ladder in the most recent year we have data for (2022-23),” she explains.

Other Conservative policies directed at young people include replacing certain “rip off” degrees with 100,000 new apprenticeships. Meanwhile, Labour has promised a “youth guarantee”, which will ensure 18 to 21-year-olds have access to training, an apprenticeship or support finding work.

The Conservatives have also said they will introduce a new form of national service – a policy which has been met with a mixed reception among young people. The programme would not involve being conscripted into the armed forces, but would require 18-year-olds to get involved in community service. 

In terms of the other parties, the Greens are likely to prove popular with young voters who often point out that they will have to live with the effects of climate change for longer than anyone else. One of the Green Party’s headline policies is to reach net zero by 2040 by rolling out more renewable power.

Labour has also focused on energy transition, pledging to set up a new publicly-owned clean energy company. The party would pay for this by upping the windfall tax levied on oil and gas companies.

Which party is doing the most for renters?

Some experts have argued that “generation rent” could play a big role in influencing the outcome of this election, with around 35% of all people in England currently living in rented accommodation. 

Labour, the Conservatives, the Liberal Democrats and the Green Party have all stated their commitment to abolishing no-fault evictions – a significant step in improving renters’ rights. There had been efforts to get this measure through Parliament before it was dissolved for the election, but the government ran out of time.

High rental costs have also been in focus. Labour has said it will empower tenants to challenge unreasonable rent increases, while the Greens have said they would look to introduce rent controls. 

Other manifesto pledges from Labour and the Greens have focused on improving the energy efficiency of rental properties. Meanwhile, the Lib Dems have said they would make three-year tenancies the default and introduce a national register of licensed landlords.

See our recent article for further details: “How will the general election impact renters and buy-to-let landlords?”

The Labour Party has pledged to open 350 banking hubs during the next Parliament, if it wins the 2024 general election.

Sir Keir Starmer’s party, which launched its manifesto last week, claimed it would “bring banking back to the high street” should it form the next government. It would do so by giving the Financial Conduct Authority (FCA) new powers, and by reforming the criteria for where hubs can be created. It comes as Labour has sought to paint itself as the party of business.

Banking hubs work in a similar way to bank branches in that they give people access to face-to-face everyday banking services. The only difference is that these spaces are operated by multiple banking brands. They were first launched in 2021 in a bid to keep a banking presence in towns that had lost access to physical branch services, with 56 currently in operation.

Dozens of bank branches are set to be shuttered this year. RBS and TSB are among the brands who are reducing their high street presence. Labour claims 6,000 branches have closed since 2015.

We have covered the manifesto launches of the Conservative Party and Liberal Democrats. You can also read about what the Green Party manifesto and Reform UK’s policies would mean for your money.

Labour: banking hubs ‘make our high streets better off’

The Labour Party has pledged to “quickly” establish “at least” 350 banking hubs over the next five years. It said it would unlock these extra hubs by updating the existing qualifying criteria that governs whether a town or village can get one.

Doing so would “ensure fair treatment for bankless towns and underserved communities” it said. Starmer’s party claimed the current criteria had “unfairly denied” some communities the face-to-face banking services they were seeking.

It has also promised to give ATM provider Link and the FCA greater powers to identify places that are in need of a hub. It added that areas which don’t have a high street bank would be “first in the queue” to get one. The services provided by these hubs could be bolstered so that they can provide digital training and debt advice, the party promised.

Accusing the Conservatives of reducing high streets to “ghost towns”, Labour pointed to new research by London Economics - which was commissioned by banking hub operator the Post Office - that found 350 hubs would be worth £83m a year to the nation’s key thoroughfares, or £415m over five years.

This longer-term figure would rise to £593m if 500 hubs were created, the research stated. But the party added that these figures were likely to be underestimates given the evolution of the services banking hubs offer could unlock even more value for high streets.

Labour’s shadow chancellor, Rachel Reeves, said: “After 14 years of the Tories, many of our high streets have been reduced to ghost towns. This election is a chance to vote for change to end the chaos and decline and make our high streets better off. Labour’s plan for growth means bringing banking back to high streets, with hundreds of new banking hubs that can support local communities and their businesses.”

What have the other parties said about banking hubs?

Only the Conservatives and the Lib Dems have mentioned banking hubs in their respective manifestos.

Rishi Sunak’s party has sought to highlight its record by saying it has announced 100 banking hubs during its time in office. Its manifesto added that the Conservative government has legislated that banks and building societies which are considering shutting a branch have to make specific considerations before they do so. However, the Tories have not made any pledges about going any further with these policies.

Meanwhile, the Lib Dems have said that they want to support banking hubs and are committed to “protecting access to cash, especially in remote areas”. These would come under a “national financial inclusion strategy” that would require the FCA and the Prudential Regulation Authority to give greater consideration to ensuring that banking and financial services are open to everyone.

Hundreds of thousands of mortgage borrowers will have seen their monthly repayments rise by the general election, making housing a key political issue, research suggests.

Yet there is very little promised in the general election manifestos on mortgage support.

Borrowers on fixed-rate mortgages over the past few years have been sheltered from interest rate rises.

But data from UK Finance suggests around 700,000 fixed-rate mortgages have already expired this year and a total of 1.4 million borrowers will have needed to remortgage by the end of this year.

Meanwhile, technology firm Eligible, which uses artificial intelligence to analyse bank customers’ financial and behavioural data, estimates that 100,000 fixed-rate mortgages will end before the general election of 4 July.

That means that as the nation heads to the polls for the general election, many borrowers will be moving from historically low fixed rates of between 1% to 2% to an average of 5.97% for a two-year fix and 5.53% for five years.

A homeowner used to a 2% fixed rate for a £200,000 mortgage over 25 years would see their repayments rise from £848 per month to £1,285 if remortgaging to a two-year fix at 5.97%.

The figure could be higher for others and the Treasury launched a mortgage charter in June 2023 to help borrowers struggling with rising mortgage repayments.

Financial Conduct Authority (FCA) figures show around 1.1 million borrowers have benefited so far from the charter.

It comes amid hopes of an interest rate cut in the coming months that could bring mortgage pricing down, although analysts don’t expect this to happen until at least August.

Will the next government help with mortgage costs?

Despite the millions of homeowners set for increased monthly repayments and the hundreds of thousands already seeking support, the general election manifestos are relatively quiet on mortgage support.

Much of the general election housing policy focus is on first-time buyers, with the Conservatives pledging to maintain stamp duty thresholds for first-time buyers and Labour promising a permanent version of the Mortgage Guarantee Scheme known as Freedom to Buy.

“Public sentiment with this election with the people that I am speaking to is lack of trust on both parties,” says Michelle Lawson, director at Lawson Financial.

“This result of the election is going to be the least worst not the best person for the job in my opinion. Most borrowers whose product ends on or before 4 July should have done something by now - if not they are cutting it fine.

“The majority now have accepted their payments will increase and can absorb the rise however there will be some that will struggle.”

Scott Taylor-Barr, principle adviser at Barnsdale Financial Management, says most people are apathetic about the impact the election will have on their mortgage and general finances.

“Most borrowers I am speaking to are not struggling to meet their mortgage commitments,” he says.

“Many are tightening up on things, but that is more discretionary type spending, taking less holidays, keeping the car longer, or cancelling TV and music subscription services. Meeting their mortgage payment is an extremely high priority to them and so there are lots of other things that will be stopped first.”

How to cope with rising mortgage costs

Banks are still committed to the Treasury-backed mortgage charter, set up last year to help struggling borrowers remortgage to a new deal six months before their current one ends, switch to interest-only or extend their term to reduce repayments

FCA data between July 2023 and April 2024 shows 159,000 mortgages have either been switched to interest-only or had their terms extended so far.

Another 1.1 million have locked in another fixed rate before their current deal ends.

That is one method recommended by mortgage brokers to ensure you can secure a rate you are comfortable with.

It means you can apply for a deal early if you think pricing will increase, while having the freedom to change to a different product if rates drop.

Other options include overpaying your mortgage to reduce the term and overall debt.

Beyond any further mortgage support from the next government, many borrowers are waiting on the timing of the next interest rate cut as there is a risk of fixing now and paying over the odds or missing out on the best mortgage rates if a cut is delayed.

“Many advisers would say it’s a coin toss as to what will happen next with rates,” says Simon Bridgland, broker at Release Freedom.

“Simply get the best product available and hunker down, as turmoil ends as sure as it starts. Those struggling to meet payments and lucky enough to be with a lender who subscribes to the mortgage charter are taking advantage of its benefits.”

The Labour Party unveiled its general election policy pledges on Thursday (13 June).

Its lengthy manifesto document, which the party titled ‘Change’, makes several major pledges, including plans to cut NHS waiting times, recruit more teachers and set up a publicly-owned green energy company. There were also several money policies.

Personal finance commitments include keeping the triple lock on state pensions, ending a VAT tax break for private school fees, and closing inheritance tax loopholes. But the manifesto was as much about what Labour didn’t say, as what it did.

According to the Institute for Fiscal Studies (IFS) think tank, the party has joined the Conservative Party and Liberal Democrats in a “conspiracy of silence” about public spending cuts. Meanwhile, the document’s own silence on capital gains tax and the lifetime allowance has suggested neither measure will be off limits at Labour’s first Budget event - should it form the next government. However, there appeared to be little basis for the Tories’ £2,000 tax hikes claim in the manifesto.

Alongside its money pledges, Labour also revealed several housing market reforms. Some, like Freedom to Buy, had been announced in advance of the manifesto launch. But there were one or two property-related surprises in the document too. So, what are they - and what do they mean for housing?

Labour manifesto rental reforms

One of the more eye-catching pledges Labour made was a plan to extend Awaab’s Law. The law is named after the toddler Awaab Ishak, who died of a respiratory condition that was caused by excessive mould in the social housing he lived in. At present, it forces social landlords to investigate safety hazards in their accommodation within a certain time frame. Labour’s manifesto suggests it could be extended to include private landlords.

However, the most attention-grabbing commitment from Starmer’s party was a pledge to resurrect key elements of the Renters Reform Bill. The legislation, which formed a key part of Boris Johnson’s 2019 manifesto, was first watered down - and then axed when Parliament dissolved for the general election.

Labour would “immediately” abolish section 21 ‘no fault’ evictions, if it gets elected on 4 July. The party says it will also give tenants the power to challenge unreasonable rent hikes, force landlords to implement minimum energy efficiency standards by 2030, and give renters greater protections against exploitation and discrimination.

These measures are unlikely to have come as a surprise to landlords given the Renters Reform Bill broadly had cross-party support. “All of the main parties are committed to ending section 21,” said Ben Beadle, chief executive of the National Residential Landlords Association. “What matters is ensuring the replacement system works, and is fair, to both renters and responsible landlords.

“Given this, we agree with [Labour’s argument] that landlords need robust grounds for possessions in legitimate circumstances, and they need the system to operate quickly when they do. We stand ready to work constructively with a potential Labour government to achieve this and ensure a smooth transition to the new system. This needs to include giving the sector time to properly prepare for it.”

Nathan Emerson, chief executive at estate agent trade body Propertymark, agreed. He added: “Any aspiration to reintroduce the Renters Reform Bill must come with full disclosure and a realistic timeline regarding the required court reform before the removal of Section 21 evictions should ever become a reality.”

Leasehold reforms

Rishi Sunak’s government had aimed to bring in large scale reform of the leasehold system. But the election announcement meant the Leasehold and Freehold Reform Act was watered down so it could be pushed through by MPs ahead of Parliament being dissolved.

Labour wants to go further than this legislation - and the Conservative manifesto - and “bring the feudal leasehold system to an end”. It says it will enact the Law Commission’s recommendations for enfranchisement, right to manage and commonhold. In terms of its more immediate priorities, it says it will set out to ban new leasehold flats and ensure commonhold is the default for apartment blocks. The party also wants to crack down on “unregulated and unaffordable” ground rents and maintenance charges, as well as end ‘fleecehold’ private housing estates

The National Leasehold Campaign has called on Labour - and the other major parties - to set out “clear time frames” for when they will enact their pledges, if they get elected.

First-time buyer support

One of Labour’s key pitches to younger voters in advance of the manifesto announcement was its Freedom to Buy scheme. This would extend the existing mortgage guarantee scheme, which is designed to help people who can’t save enough for a deposit but can afford mortgage repayments.

This scheme also ties in with a policy to give first-time buyers (FTBs) first dibs on new build developments. It claims new estates are currently being “sold off to international investors” before a shovel enters the ground.

Experts have pointed out that while the scheme may address one of the obstacles facing FTBs, high mortgage rates and high house prices relative to incomes are bigger hurdles that need attention.

For example, Rightmove said Freedom to Buy would make the mortgage guarantee scheme more “attractive to lenders” and added that its continuation would be “helpful”. But the property listing site also said it should be the “first step amongst many” for FTB support.

Its property expert, Tim Bannister, said: ‘We welcome policies and innovations which are trying to help more first-time buyers onto the ladder. Creating a permanent mortgage guarantee scheme would at least give first-time buyers the certainty that the option will be there.

“However, we know from our own research that policies like the mortgage guarantee scheme have limitations, and are only able to help a very small pool of future first time buyers that fit specific requirements. One of the biggest barriers for first time buyers is being able to borrow enough from a lender, which a mortgage guarantee scheme doesn’t address.”

House building and planning reform

The main Labour pledge in this area is a plan to build 1.5 million homes over the next Parliament. It says it will get there by bringing in mandatory housing targets, as well as reforming the planning system. New builds will also have to meet higher standards and sustainability targets - although it appears to have committed to watering down nutrient neutrality protections.

It has identified that a lack of planning officers at local authorities is holding up development. So, it plans to increase the stamp duty surcharge on purchases by non-UK residents by 1%. While the amount raised - £40m - is peanuts in fiscal terms, the party claims it would be more than enough to appoint 300 new planning officers (a pledge that would cost £20m).

While Starmer’s party says it will “ensure local communities continue to shape house building in their area”, it has not ruled out intervening if it believes developments are being blocked. Likewise, while it says it will prioritise unlocking the ‘grey belt’ - i.e. old car parks and concrete wasteland - and will take a “brownfield first approach”, it says it will also take a “more strategic approach” to greenbelt development.

Alongside these pledges, it has committed to building another generation of new towns, and finding new ways in which different tiers of local authority can work together on housing across their boundaries.

The Institute for Government think tank described the house building programme as “ambitious” but added that its success would hinge on whether new MPs could be kept on board. It said: “Successive governments – of all stripes – have made ambitious promises but failed to deliver them in a country that wants more houses built nationally but doesn’t want to build them locally. This manifesto signals that Labour are serious about setting a better record.

“It makes no bones about prioritising new houses above local objections. The question is whether Labour’s plans will survive contact with Parliament, whatever size its majority. In recent years, backbench MPs made short work of first defeating Boris Johnson’s proposals to reform the planning system, then pressuring housing secretary Michael Gove into downgrading local housing targets to ‘advisory’ status (and many local areas have since taken this opportunity to scrap proposed developments).”

Also reacting to the planning reforms the party has proposed, head of policy and market insight at the National Federation of Builders, Rico Wojtulewicz, said: “Labour appears to understand how damaging a broken planning system is for society, the economy and growth. For the construction industry this means businesses will finally be able to plan, rather than operate hand to mouth. Such a change will ensure cashflow certainty for businesses’ reinvestment, which in practice means a reduction in construction insolvency, more directly employed labour and apprenticeships, and businesses getting back to constructing, rather than spending ninety percent of their time getting permission to start building.

“However, we have been here before with [ex-Housing Secretary] Robert Jenrick’s ‘Planning for the Future’ white paper, which was shelved after the Conservative government lost a by-election and backbenchers revolted over land use.”

Wojtulewicz added that there were some concerns about the “lack of detail” on some key policy proposals. For example, around biodiversity and nutrient neutrality.

UK for sale prices have remained flat in June as some sellers have adopted a wait-and-see approach amid the general election campaign, the latest Rightmove House Price Index (HPI has found.

Following a month in which house prices listed on the site climbed to a record high, there was a small £21 decline over the four weeks to 8 June. The average asking price is now £375,110 - 0.6% higher than it was in the same month in 2023.

The property listing website found that the top-end of the market registered a slight fall of 0.6% (£4,000) month-on-month to an average asking price of £689,810. It said this end of the market had seen a slight drop in the number of new sellers, which may have come as a result of the general election. However, other parts of the market appear to be working as normal, with the overall number of agreed sales up 6% and new buyer enquiries 5% higher compared to a year ago.

It comes as the major parties have begun to set out their stall to prospective buyers and homeowners. The Conservatives have said they would make the existing stamp duty cut permanent, if they get elected. Meanwhile, the Labour Party has pledged to extend the mortgage guarantee scheme with its Freedom to Buy commitment. We have also seen manifestos from the Liberal Democrats and the Green Party.

While Rightmove’s asking price data has shown that market sentiment remains relatively positive, other HPIs have suggested that house prices are struggling to grow. Lenders Halifax and Nationwide have both found that high mortgage rates have kept the market in check, with interest rate falls unlikely to be seen until the first Bank of England base rate cut.

Rightmove: asking prices ‘rising highest’ in cheaper regions

A north-south divide has emerged in every HPI so far - and Rightmove’s latest property market research has suggested that this trend is continuing. Prices tended to be up month-on-month in cheaper northern areas - but slid back in most southern parts of the UK.

The biggest monthly growth was recorded in the North East, where average property values rose 1% (1.9% year-on-year). Not far behind was the North West, where prices grew 0.9% (1.8% compared to June 2023). While asking prices remained flat month-on-month, the biggest yearly rise was seen in Yorkshire and the Humber where they went up 2.8%.

At the other end of the scale, the East of England registered a 0.5% fall, meaning properties are being marketed at 1.4% less than they were a year ago. London was the next worst performer, with prices falling 0.3% month-on-month. However, the capital has seen annual growth of 1.4%.

This year-on-year growth has mostly been led by rocketing house prices in the boroughs of Camden (+9.7%), Merton (+6%) and Hammersmith and Fulham (+5.3%). Areas that were a check on these increases included Brent (-2.9%), Hackney (-2.7%) and Kingston upon Thames (-2.6%).

On a national basis, it took an average of 60 days for homes to secure a buyer - the shortest amount of time since September 2023. The average level of stock per estate agency also hit a record high of 59.

Rightmove’s director of property science, Tim Bannister, said “improved market activity levels and conditions” should mean the number of transactions in 2024 exceeds the number in 2023. But he warned that the “extremely lengthy” completion process was creating a “frustrating barrier” for those seeking to move.

He said: “It may seem surreal to be thinking about Christmas in May, but we know that many would-be sellers picture celebrating the festivities in a new home, and to achieve that, now is the time to be coming to market. One strategy that is still giving some sellers the edge in this price-sensitive market, is working closely with an estate agent to price attractively right at the start of marketing, to give themselves the best chance of finding a buyer quickly.”

Market activity ‘stable’ despite general election

The website’s latest HPI also showed that the majority of the market has been unaffected by the general election campaign. It found that the number of agreed sales and buyer enquiries has remained on a par with what’s been seen so far in 2024.

Rightmove did register “possible election caution” among would-be sellers at the top of the market. It said some appeared to be putting their plans on ice to see how the campaign unfolds.

Over the last two weeks, it said the overall number of new sellers coming to the market had been just 1% up year-on-year, having been 6% higher compared to 2023 over the previous two weeks. At the top end of the market - i.e. homes with five-or-more bedrooms, or four-bed detached houses - the number of new sellers over the last fortnight was 3% down against the year, having been 11% up over the previous two weeks.

Bannister said of the figures: “It’s always difficult to predict how home-movers will react to sudden uncertainty. But looking back through our data, we can see that during previous election campaigns, market activity has remained largely steady. This election has followed a similar pattern so far, and the responses from our poll of over 14,000 people also supports the data, with the vast majority of respondents saying they will carry on with their home-moving plans.

“However, some potential sellers appear to be watching and waiting rather than taking action, evidenced by a dip in the number of new sellers coming to market, particularly at the top-end. This is understandable when many of these sellers have more flexibility over when they act, but overall, it appears to be business as usual for the mass-market.”

In terms of the housing pledges aired so far on the election campaign trail, Bannister said they were mostly “continuations of existing schemes, revivals of old policies, or ideas which are only likely to help very specific parts of the market”. He added that the major parties could go further to support the housing market, including by getting more first-time buyers onto the market.

But he also said that Bank of England rate cuts were now “likely to be of greater concern” than manifesto commitments: “Mortgage rates remain stubbornly elevated, with the current average five-year fixed rate now at 5.04%. While this has improved from the peak of 6.11% in July 2023, it is still higher than the beginning of the year when it was 4.94%.

“At the start of 2024, many will have been expecting, or at least hoping, to see some significant falls in mortgage rates by the halfway point of the year. If a Bank of England base rate cut can lead to lower mortgage rates, it will have a much wider and immediate impact on the market than the bespoke housing policies announced so far.”

Labour has re-confirmed its commitment to keep the state pension triple lock.

The Labour party’s manifesto, unveiled today in Manchester, stated simply: “Labour will retain the triple lock for the state pension.”

The triple lock means that the state pension rises every April in line with inflation, average earnings or by 2.5% – whichever is higher. In April this year, the state pension increased by 8.5% (the wage growth figure).

Keir Starmer had previously said he would protect the pensions triple lock “for the duration of the next parliament”.

The triple lock is a controversial policy. Some experts believe it is important to ensure pensioners’ incomes rise each year and to help avoid poverty in old age. But others warn of the huge costs associated with the triple lock, and that it could cause intergenerational unfairness. The Institute for Fiscal Studies, a think tank, has called for the triple lock to be scrapped.

Nonetheless, with exactly three weeks to go until the general election on 4 July, industry experts have broadly welcomed Starmer’s pledge to keep the triple lock.

Becky O’Connor, director of public affairs at pension provider PensionBee, comments: “The pledge by Labour to keep the triple lock is likely to be popular. The state pension is a vital safety net for most retired households and must be preserved at a meaningful level. This is relevant not only for today’s pensioners but also for future generations.”

A survey by TPT Retirement Solutions, a workplace pension provider, of 2,011 workers revealed that 63% of those aged 55 or older want the triple lock to be maintained.

But some experts warn of problems along the way for Starmer, if Labour were to form the next government. How long is the policy sustainable for? And what should be done about the triple lock triggering an income tax bill for pensioners?

We look at how Labour’s triple lock pledge shapes up against the Conservatives’ “triple lock plus” policy, and also the pension problems Starmer may have to deal with if he moves into 10 Downing Street.

Triple lock versus triple lock plus 

Starmer’s pledge to continue the triple lock essentially leaves the policy as it is. The state pension will be up-rated throughout the next parliament in line with inflation, average earnings or by 2.5% – whichever is higher.

In contrast, the Tories’ triple lock plus, announced last month, would maintain the triple lock but also hike pensioners’ tax-free personal allowance by however much the state pension is rising by. This is designed to minimise the number of pensioners that get dragged into the income tax net as a result of increases to the state pension.

At present, the maximum amount you can get from the state pension is more than £11,500 a year - £1,000 below the tax-free personal allowance for income tax (£12,570). It means that pensioners only need a modest amount of extra income, perhaps from a personal or workplace pension or from some part-time work, before they find themselves paying tax.

Under the Conservatives’ triple lock plus, the personal allowance pensioners receive would diverge from that of the working population. The party said it would save retirees £275 by 2030.

Helen Morrissey, head of retirement analysis at the investment platform Hargreaves Lansdown, said of Labour’s decision to stick with the triple lock: “Labour’s pledge to maintain the triple lock on the state pension was made weeks ago and it was made very clear it wouldn’t go down the road of turbo charging it as the Conservatives have done with its triple lock plus. 

“The decision not to try and trump the Conservatives on this will go down well with those who criticised the triple lock plus for favouring pensioners at the expense of working age people.”

Triple lock problems for a future government 

Pension experts warn that whoever forms the next government will have to make some difficult decisions over the state pension.

“If Keir Starmer emerges victorious after the 4 July election, he will face two clear state pension challenges,” comments Tom Selby, director of public policy at the investment platform AJ Bell. “Most immediately, Labour will need to consider how to deal with the problem that the full new state pension will soon be higher than the personal allowance, dragging more retirees into paying income tax.”

Between 2022-23 and 2023-24, official figures suggest that the number of those aged 65 and over who pay income tax rose from 7.73 million to 8.5 million, due to last year’s 10.1% bumper increase in the state pension.

According to the consultancy LCP, this year’s 8.5% state pension rise will likely result in an extra 650,000 pensioners paying tax, taking the total to 9.15 million in the 2024-25 tax year. In comparison, only 4.5 million over-65s paid income tax in 2010.

According to Selby, the second problem is a longer term one, where the next government needs to set a clear direction for the state pension, “moving beyond the random ratchet of the triple lock. Ultimately, we need to reach a lasting consensus on what the state pension should be worth and for how long on average people should receive it, allowing Brits to plan for retirement with confidence.”

Jon Greer, head of retirement policy at the wealth manager Quilter, thinks the continuation of the triple lock “is fraught with problems”. 

He notes: “The triple lock has served to safeguard against poverty for retirees. However, it presents a significant fiscal challenge that no party has been willing to fully address.

“If Labour win, then during its announced review of the pensions landscape, the triple lock should be put under a microscope. The central dilemma is finding a balance between protecting current pensioners and ensuring intergenerational fairness especially given the UK has an ageing population that will continue to make the state pension more expensive.”

Greer says one potential reform is linking pensions more closely to average earnings. “This approach would align pension growth with national economic performance, creating a more predictable and sustainable system.”

We have more detail on potential reforms to the triple lock in Is the state pension triple lock on borrowed time? We look at the alternatives. 

The UK housing market saw a dip in confidence in May, according to the latest survey from the Royal Institute of Chartered Surveyors (RICS). 

House prices and buyer confidence are partly driven by mortgage rates, which are linked to the Bank of England’s underlying base rate. Hopes for an interest rate cut have been pushed further out on the horizon in recent months, dampening short-term sentiment in the property market.

Many had been hoping for a June cut, but April’s inflation figure came in higher than economists were expecting. Core and services inflation proved particularly sticky, and wage growth is still coming in strong too. 

Against this backdrop, an August or September rate cut is now looking more realistic – particularly with a general election having been called for 4 July. The Bank of England will want to avoid its decision being politicised, and is likely to hold rates at their current level of 5.25% on 20 June. 

This is bad news for the property market, as mortgage rates continue to create affordability barriers. This backdrop is reflected in the latest RICS survey results. Property professionals reported a drop in buyer demand in May, as well as a slight fall in house prices in England.

With this in mind, we take a closer look at the UK housing market. Will the long-term outlook prove brighter once interest rates fall, and is now a good time to buy or sell a house? 

Confidence drops in UK housing market

Each month, RICS asks its members (agents and surveyors) a list of questions to gauge their mood on the property market. 

Using their responses, it generates a percentage balance figure on key metrics such as house prices, buyer demand, and the volume of new property listings. A figure below zero indicates more respondents have responded negatively than positively.

The latest RICS survey reveals a wobble in market confidence in May. New buyer demand fell to a net balance score of -8%, down from -1% in April. This is the worst reading since November last year. Meanwhile, the number of sales agreed fell to -13%, down from +4% in April. 

“The recent recovery across the UK housing market appears to have slipped into reverse of late,” says Tarrant Parsons, senior economist at RICS. He puts this down to the upward moves seen in mortgage rates over the past couple of months. 

While mortgage rates have stabilised from their highs last summer, the market remains volatile. Average mortgage rates on two and five-year fixed-rate deals crept up by 0.02% in May, according to Moneyfacts. In April, rates rose by 0.1%.

Rate cuts should boost the UK housing market

Confidence has taken a wobble in the short term, but the good news is the long-term outlook is more positive. 

Sales volumes are expected to rise modestly over the next three months, with RICS respondents posting a +6% net balance score (up from 0% last month). Over the next 12 months, respondents posted a +43% score (up from +33%).

Parsons says this optimism is “likely predicated on the Bank of England being able to start lowering interest rates in the coming months”. 

House prices typically rise when interest rates are cut, as affordability constraints loosen and buyer demand picks up. This is something to keep an eye on if you are thinking about the best time to buy or sell your house. 

That said, mortgage rates are expected to remain significantly higher than those seen towards the end of the 2010s. This, coupled with higher house prices, could continue to create a barrier to entry for first-time buyers.

“Generally, first-time buyers can only borrow up to 4.5 times their annual income, meaning those on average salaries can only secure mortgages slightly over £150k,” explains Karen Noye, mortgage expert at Quilter. This “doesn’t offer much choice in the current market,” she adds.

What’s going on with house prices?

The first question the RICS survey asks each month is: “How have average prices changed over the last three months?” In May, this question gathered a net balance score of -5%, indicating a slight fall in prices. 

It is important to remember that RICS results are based on sentiment rather than actual house price data – however the power of sentiment in driving markets should not be underestimated. 

The results do not vary widely from region to region in England, where “virtually all parts of [the country] returned either a flat or marginally negative reading.” Meanwhile, there was an upward trend in both Northern Ireland and Scotland. 

That said, all major house price indices are currently showing an uptick on an annual basis. Prices rose by 1.8% in the 12 months to March, according to the Office for National Statistics. Meanwhile, Halifax data suggests prices rose 1.5% in the year to May, while Nationwide data points to a 1.3% rise.

Is now a good time to buy or sell a house?

The latest RICS data reveals a slowdown in buyer demand – but this doesn’t seem to be stopping sellers from coming to the market. “The volume of fresh instructions coming onto agents’ books has now improved for six consecutive months,” RICS reports.

This is supported by the latest data from Zoopla, which reveals UK property supply hit an eight-year high in May. A mismatch between the number of buyers and sellers could mean it’s a buyer’s market. 

Whether buyers are able to take advantage of this will depend on how they are planning to fund their purchase. First-time buyers or those who have to remortgage could find themselves being priced out by higher mortgage rates.

The good news is that both major political parties have promised a string of measures to help first-time buyers, if they win the general election. 

Keir Starmer, who launched the Labour Party manifesto today, has promised to get 80,000 more young people on the property ladder by the next parliament. His party plans to do this by introducing a permanent version of the existing mortgage guarantee scheme, which is currently due to expire in June 2025. The party has also promised to build 1.5 million new homes.

Meanwhile, the Conservatives have promised to permanently scrap stamp duty for first-time buyers up to a threshold of £425,000. They have also promised to launch a “new and improved Help to Buy scheme to provide first-time buyers with an equity loan of up to 20% towards the cost of a new build home”.

We will be keeping tabs on these general election policies, including what they could mean for the property market, in the weeks to come.

The government have been busy spreading their message that the Autumn Budget will be "painful", that "tough decisions" lie ahead, and that we will have to accept some "short-term pain".

It seems a world away from the excitement of ushering in a new Labour government just over two months ago, when incoming prime minister Keir Starmer said wealth creation was the "number one priority". 

But as Starmer and chancellor Rachel Reeves settle into 10 and 11 Downing Street respectively, we are starting to see some big decisions emerge that will negatively affect our finances - with more likely to come in the Autumn Budget on 30 October.

The Winter Fuel Payment is being axed for all but the poorest pensioners, while VAT will be applied to private school fees from January.

Experts fear that other tax hikes could be around the corner. “Labour's ‘big three’ tax pledge - vowing not to raise income tax, National Insurance or VAT - is a double-edged sword because it inevitably creates suspicion about which other areas could be vulnerable,” comments Jason Hollands, managing director at wealth management firm Evelyn Partners.

“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.”

According to analysis by Hargreaves Lansdown, if all of the rumoured tax changes actually happen in the Budget, it could hike someone's tax bill by more than £200,000.

Sarah Coles, head of personal finance at the investment platform, says: "Warnings about the tax threats the Budget may hold have been deafening over the past few weeks, as every possible tweak has been called out. It’s enough to fill anyone with dread as to the horrors the chancellor has planned this side of Halloween."

We look at what steps you can take to prepare for the Budget and shelter your money from the Labour government.

Pensions: pay more in if you can

Labour have pledged to uphold the state pension triple lock, which means pensioners are on track to enjoy a £460 boost next April, thanks to wage growth figures released earlier this month.

However, there have been no assurances about not changing other pension policies or taxes, such as reducing pensions tax relief, changing the 25% tax-free cash, or even raising the state pension age.  

Hollands tells MoneyWeek: “It is well known that politicians from across the spectrum – including former Tory chancellor George Osborne – have been tempted to reduce the attractive upfront pension tax reliefs available for high earners, so the availability of such features should not be taken for granted and made use of, as far as possible, while they remain available. 

“Making a pension contribution is the single most straightforward way to reduce your income tax exposure, whether that is through a personal contribution or asking your employer to add to your pension in lieu of a pay rise or bonus, a process dubbed ‘salary sacrifice’.”

Basic-rate taxpayers currently get 20% tax relief on pension contributions, higher-rate taxpayers benefit from 40%, and additional-rate taxpayers get 45% relief.

While any changes to pension tax relief - if they were to happen - could be several tax years away, it makes good financial sense to save more for retirement if you can, taking advantage of the tax relief, and potentially cutting your income tax bill too.

There are also concerns that the chancellor may tinker with the 25% tax-free cash that savers can withdraw from their pension pots from age 55. It could be lowered to say 20%, or the maximum amount could be reduced. 

Chris Rudden, head of investment consultants at the digital wealth manager Moneyfarm, tells MoneyWeek that he's seen a few clients take their tax-free cash earlier than intended, perhaps because they have a large pension and they're worried about "rumours of a cut or a cap of say £100k".

However, he adds that savers need to be careful here as pensions are a very "valuable tax wrapper, and any changes are unlikely to be immediate, at the earliest it would be in April 2025".  According to Rudden, if pensions tax-free cash is reduced, "then a strong argument can be made for taking the 25% while you still can, but this needs to be invested in the same line with their goals, not festering in cash and it’s worth bearing in mind that the money will become taxable and probably should be drip-fed into ISAs."

We have more tips and advice on how to prepare your pensions before the Budget in Pension moves you should make before Labour’s Budget raid. 

Capital gains tax: shelter your investments now 

The Labour manifesto pledged to not raise four taxes: income tax, National Insurance, VAT and corporation tax. 

Starmer said: “I don’t believe it’s fair to raise taxes on working people”, adding: “We are pro business and pro worker, the party of wealth creation.” The party promises to “cap corporation tax at the current level of 25%, the lowest in the G7, for the entire parliament”.

Labour also pledged to not increase the basic, higher or additional rates of income tax.

The elephant in the room, according to financial experts, is capital gains tax (CGT). 

“The conspicuous lack of confirmation from the Labour manifesto that it would not raise CGT will spark significant concern among entrepreneurs and investors in the UK,” comments Rachael Griffin, tax and financial planning expert at wealth management firm Quilter.

Those who face CGT – primarily higher-rate taxpayers and entrepreneurs who realise gains from the sale of residential property, investments and other chargeable assets – have already seen their annual exempt allowance slashed by the previous Conservative government to just £3,000 a year. 

Griffin notes: “If Labour was to increase rates, it would serve as a double whammy with higher rates and lower exempt allowances considerably increasing the capital gains tax take.”

For those looking to mitigate the impact of CGT there are several strategies you can employ. 

Transferring assets to a spouse can be an effective way to maximise the use of both partners’ CGT allowance. Additionally, utilising tax-sheltered accounts such as ISAs and pensions can shield gains from CGT altogether. 

According to Hargreaves Lansdown, you can either sell, wait for 30 days, and buy the same assets; sell and buy different assets immediately; or do a Bed & ISA process to sell and buy the same assets immediately in an ISA – which protects them from capital gains tax in future too. 

Griffin adds: “Other more complex options include deferring gains by investing in Enterprise Investment Schemes (EIS), however these carry significant risk and it’s important to get professional financial help when looking at these types of options.”

Inheritance tax: start planning to avoid a future liability

Inheritance tax (IHT) got a brief mention in the Labour manifesto: “We will 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.”

This is part of Starmer’s aim to “address unfairness in the tax system”. Clearly, anyone using an offshore trust to avoid IHT will need to start thinking about alternative options now.

Whether Labour increases the rate of IHT (currently 40%) or reduces the nil-rate band (£325,000) over the course of the next parliament is unclear. 

Hollands points out that Labour have suggested in the recent past that it regards some of the reliefs available from inheritance tax as too generous, particularly business and agricultural reliefs. So it’s possible we could see some IHT reliefs disappear. 

But even if Starmer and Reeves do nothing - effectively continuing the freeze on IHT thresholds - more and more families are likely to be dragged into the inheritance tax net, mainly due to house price inflation.

If you’re worried about inheritance tax, it’s worth making the most of the gifting allowances to help reduce the value of your estate.

Gifts to spouses or civil partners are completely free of IHT and each tax year you can also give away up to £3,000 worth of gifts with your annual exemption. This means couples can gift £6,000 a year. In addition, there is no limit on excess income - above expenditure - that can be gifted.

You can also consider more significant gifts, but these will take seven years to see the full IHT benefit. 

Coles adds: "There’s a separate rule that means you can give away surplus income inheritance-tax free too. You need to pay it from your regular monthly income and have to be able to afford the payments after meeting your usual living costs. 

"If you have children in your life who are under the age of 18, you could consider paying into a junior ISA for them each year. This is counted as being given away immediately for inheritance tax purposes but is tied up until they reach the age of 18.”

ISA allowance: use it or lose it

There's an outside chance that ISAs could be targeted in the Budget. It would be a brave chancellor given the enduring popularity of these tax-efficient vehicles. But, on the other hand, ISAs cost the Exchequer almost £5 billion a year in tax relief, according to the accountants BDO - so cutting ISA benefits could be a handy way to help balance the books.

Experts agree that savers and investors should look to see if they can avoid tax by utilising their ISAs before 30 October. As Griffin puts it, "it has never been more important to maximise your £20,000 ISA allowance.”

The ISA allowance means you can protect your cash savings and investment returns from tax, while offering significant flexibility in how and when you can access your money – unlike a pension.

Hollands says: "With the tax environment becoming ever more hostile, people should make as much use of these as possible. Many people leave opening an ISA to the final months of the tax year, but if you have the cash available to bring this forward to before the Budget, it really does make sense to do so early this year.

"You can make withdrawals from an ISA at any point, so there really is no reason not to open your ISA early."

School fees: prepare for higher costs

The government have announced that they will add VAT onto private school fees from the start of 2025.

Hollands says it’s important families start planning for the extra cost now. “Those families staring at the prospect of VAT on already high private school fees are in a very difficult financial position. 

“Most will be reluctant to pull a child out of a school, disrupting friendships and if key exams are on the horizon. But it is vital to face up to the challenge and make a plan.”

Many private schools offer pay-in-advance schemes, enabling parents to pay for a few years upfront if they are able to do so. While this won't sidestep the addition of VAT, it may help secure a discount or protect against fee inflation.

Hollands adds: “It would be prudent to prepare for the financial hit in other ways, such as making economies elsewhere if necessary, even downsizing your home or having a frank discussion with grandparents or other family members to see if they can help out.”

Lifetime gifts to help cover school fees can reduce an eventual inheritance tax bill on an estate, so this could be an option to consider for wealthier grandparents with sufficient assets to gift - providing they do not jeopardise their own financial security.

We have more information in Private school fees: how to plan financially.

The Green Party manifesto for the 2024 general election has been launched, with the party making several eye-catching pledges.

Speaking from Sussex County Cricket Club’s ground in Hove, co-leaders Carla Denyer and Adrian Ramsay promised that a Green government would give nature legal rights and would renationalise water companies and the railways. Other pledges included plans to end the “hostile environment” faced by migrants and refugees, and to bring in a four-day working week.

The party also made several commitments that would affect personal finances, if it gets elected. As well as a wealth tax, it wants to implement a “maximum 10:1 pay ratio” for businesses and bring in a universal basic income.

The news comes after the Conservative Party unveiled its manifesto. On Tuesday (11 June), Rishi Sunak announced £17bn in tax cuts, including a further cut to National Insurance and the introduction of the state pension triple lock plus.

It also follows the Liberal Democrat manifesto launch on Monday (10 June), during which Sir Ed Davey’s party promised to make the UK a fairer place to live and work. Key pledges included closing capital gains tax loopholes and taxing share buybacks.

Labour is set to publish its manifesto on Thursday (13 June). Sir Keir Starmer’s party has already revealed a Freedom to Buy scheme and plans to add VAT to private school fees.

What’s in the Green Party manifesto?

Taxes

The Greens believe they can raise an extra £50bn to £70bn a year by reforming personal taxes. Pointing out that the number of billionaires in the UK has risen from 29 to 171 since 2010, they say they want to “fairly tax excessive concentrations of wealth” to fund public services and simplify the wider tax system.

One of its main policies is a new wealth tax. This levy would come in at a rate of 1% on all assets above £10m and 2% on assets over £1bn. The party has also targeted the wealthy by pledging to align the rates of income tax and capital gains tax (CGT). It also wants to align tax rates on investment income with income tax and National Insurance Contribution (NIC) rates for employees.

A further change to NICs that would be brought in if the party gets elected would see the main 8% rate extended beyond the upper earnings limit (£50,270). At present, anything above the threshold is taxed at 2%. This would mean that somebody earning £55,000 a year would pay £5.46 a week more in tax (£283.74 extra a year), while a worker on £65,000 a year would pay an extra £17 a week (£883 a year).

The Greens also want to equate the rate of pension tax relief with the basic rate of income tax. It says this means that everyone would only get a tax relief of 20%. The manifesto also includes a vague pledge to close inheritance tax loopholes that are exploited by the wealthy. Frequent flyers would face a punitive levy on their fares, while the party would seek to ban domestic flights where the journey can be undertaken in less than three hours by train.

But the manifesto does include one non-punitive tax measure. It says it would end VAT on cultural activities. This measure would lower the prices of, for example, museum admission and tickets to gigs in pubs.

Away from personal finance, the party's tax pledges include the introduction of a carbon tax. Set at £120 per tonne of emissions before climbing to a maximum of £500 per tonne over a 10-year period, it expects the levy would raise an extra £80bn. The policy, which is aimed at making decarbonisation a cheaper alternative for business compared to continuing with the status quo, would also initially align with other fossil fuel taxes, such as fuel duty and payments under the emissions trading scheme.

The manifesto promises to not hike the main rates of corporation tax, and says the Greens would continue a windfall tax on energy companies as well as bring in one on banks, which have benefited from high interest rates. These measures would raise £9bn a year by the next election, they claim. The Greens would also advocate for further windfall taxes in other sectors if extra profits caused by “market distortions” come in as being “risk free”.

As with the other parties, the Greens have earmarked more funding for HMRC to tackle tax avoidance and evasion. But, unlike the other parties, it has not set a figure for how much it plans to raise through this crackdown.

Pensions

The Green manifesto suggests the party would move away from the triple lock to a double lock system. It says it would ensure that pensions are “always uprated” in line with inflation and would keep pace with wage rises. It comes amid warnings that the triple lock system is unsustainable in its current form.

Public finances

In terms of a Green Party government’s stewardship of the economy, its manifesto says it’s “prepared to borrow to invest. It suggests the other major parties are “trapped in a self-imposed fiscal straitjacket” and following a “false economy”.

Justifying its stance, the party says investing in the climate now would “save vast costs in the future”. It adds that raising public services to a “decent” standard and ensuring infrastructure is “fit-for-purpose” are crucial for the future.

But, it also acknowledges that public spending can only go so far before it triggers “dangerous levels of inflation”. So, the party’s “overriding fiscal rule” would be to ensure inflation is not unduly increased by a Green government’s expenditure.

Property

Since the Lib Dems made several ambitious green housing pledges in their manifesto, all eyes have been on what the Green Party would announce. Its manifesto goes slightly further.

The party wants all new homes to meet Passivhaus - or equivalent - standards, and says new builds must come with solar panels and heat pumps “where appropriate”. Existing properties will go through a 10-year “street-by-street” retrofitting programme to boost insulation to EPC B standard or above (at a cost of £29bn). They will also be able to benefit from incentives to install low-carbon heating systems (costing £9bn). The party says it will create 150,000 new social homes a year through new construction and refurbishing older housing stock, whilst ending ‘Right to Buy’ so that social housing is kept “in perpetuity” for local communities.

For renters, the Green Party plans to allow local authorities to be able to control rents if they become unaffordable for local people. It wants to ban no-fault evictions, and to give tenants the right to demand energy efficiency improvements. These improvements would be funded by taxpayer loans, which would be repaid by landlords. The party has also committed to creating “private residential tenancy boards” that would provide an “informal, cheap and speedy” forum to resolve disputes between tenants and landlords.

In terms of property taxes, the party aspires to move away from “regressive” council tax and towards a Land Value Tax, which would ensure that owners of the “most valuable and largest land holdings” would pay the most. It would progress towards this goal by first re-evaluating council tax bands and then undertaking a survey of all landholdings.

Banking and investing

The Green Party says it wants to make the financial services sector “a force for good” by directing finance towards progressive businesses. It says all UK banking licence holders will have to present an investment strategy that will set out a clear route to divestment from fossil fuel-related assets by 2030. Non-bank financial institutions, such as pension funds, will also have to remove fossil fuel assets from their portfolios by the end of the decade.

It also wants to alter the Bank of England’s mandate so that its efforts are centred on funding a transition towards a sustainable economy and mapping out a greener banking system - alongside its existing responsibility to keep inflation in check.

Individual investors would also be encouraged to move away from fossil fuel equities under a Green government. The Financial Conduct Authority (FCA) would be tasked with developing goals to eliminate all fossil fuel-related stocks from the UK stock market. It would also bar any new fossil fuel listings or share allocations.

Elsewhere, the party says it would set up regional mutual banks in a bid to “drive investment in decarbonisation and local economic sustainability”. Communities would also be given ownership of “local sustainable energy infrastructure”, like wind farms.

Energy

As you’d imagine from the Green manifesto, there are a lot of commitments to move the UK towards a “zero-carbon society”. For example, the party wants wind to provide around 70% of the nation’s energy by 2030.

The party also wants to bring nuclear power to an end and invest in the country’s energy storage capacity and more efficient electricity distribution. Its community ownership model (see above) would lower energy bills, it claims, by allowing local areas to sell excess energy.

However, its energy bill cutting measures are almost-entirely focused on household energy efficiency measures (see property).

What’s been the reaction to the Green Party manifesto? 

According to the Institute for Fiscal Studies (IFS), the Green Party’s manifesto would increase the size of the state to “unprecedented” levels.

The non-partisan think tank’s deputy director, Helen Miller, said: “By the end of the next parliament they want to increase taxes by over £170 billion per year to fund a £160 billion boost to day-to-day public service spending. Even taking their figures at face value, overall borrowing would end up around £80 billion a year higher and we could expect debt to be rising throughout the next Parliament.”

While Miller said some of the Greens’ pledges “look sensible”, such as the plan to shut down inheritance tax loopholes, she was critical of others. She said it was “doubtful” a carbon tax would raise £90bn, given that “the more successful the tax is at changing behaviour, the less it would raise”. She said the party would have to introduce “additional tax raising measures” if it were to fund the permanent public spending hikes it's set out.

The senior IFS spokesperson said: “It is clear where the Green Party’s ambitions lie - a much bigger role for the state, better funded public services, and, of course, a swifter transition to net zero. It is unlikely that the specific tax raising measures they propose to help achieve all this would raise the sorts of sums they claim - and certainly not without real economic cost.”

In terms of specific policies, Laura Suter - director of personal finance at AJ Bell - said the capital gains tax reforms outlined in the manifesto would hit many investors and business owners. But, she added: “The government’s own estimates show that if the highest CGT rate rose by 10 percentage points it would actually cost the government £2 billion by 2026-27. That’s because big increases in tax tend to impact investor behaviour. For example, investors may hold onto assets for longer rather than realising gains, find different ways to shelter their gains from the taxman, or own second homes through companies to avoid the tax altogether.”

Suter said the stated changes to tax on investment income could “have a huge impact on self-employed people who pay themselves through dividends” and pensioners who draw an income from investments, as well as the wealthy investors the Greens are targeting. It currently sits at 8.75% compared to 20% for the basic rate of income tax, which the Greens want to equalise it with.

AJ Bell’s director of public policy, Tom Selby, also drew attention to the party’s pension tax relief proposal. He said it amounted to a “colossal pension tax raid” which would “fundamentally upend the UK retirement system”.

He added: “The proposal appears to have been put forward with little thought to the challenges it would create. Billions of pounds of higher and additional rate tax relief is paid to members of defined benefit schemes, with most of these workers now employed in the public sector.

“If a flat rate of pension tax relief at 20% was introduced, these employees – including doctors in the NHS – would presumably need to be clobbered with a tax charge of thousands of pounds in order to shift them to the proposed flat rate. This would inevitably lead to huge unrest, the potential for key staff exiting public sector roles and new waves of strike action.”

The UK economy did not grow at all in April, according to the latest GDP estimates from the Office for National Statistics (ONS). 

The soggy weather was largely to blame, as April showers threatened to dampen the UK’s fragile recovery from recession. The economy shrank by 0.3% in the final three months of 2023, but returned to positive growth (0.6%) in the first three months of 2024.

Although there was no growth in April’s monthly figure, the economy is estimated to have grown by 0.7% on a three-month basis (February to April). Over both periods, the services sector was the main contributor while construction was the main detractor. Construction output has now fallen for three months in a row.

As well as heavy rain, “the drag from higher interest rates took its toll on activity” in April, according to Alice Haine, personal finance analyst at Bestinvest. The Bank of England has been holding interest rates at a 16-year high since August 2023.

As monetary policy bites, the Bank will need to decide whether it is time to start cutting interest rates. The Monetary Policy Committee (MPC) is next due to meet on 20 June, but most experts think an August or September cut is more likely. 

Prime Minister Rishi Sunak will also be watching these figures closely. The Conservatives have ridden into the election campaign wearing the economy as their battle standard – and disappointing growth figures could quickly unravel some of Sunak’s claims about the Conservatives turning the economy around. 

We take a closer look at the implications for monetary policy, politics, and the cash in your pocket.

What’s going on with the UK economy?

The latest GDP figures come after the ONS revealed unemployment rose to 4.4% in the three months to April. This is the highest level since September 2021 and could be seen as evidence that higher interest rates are starting to bite.

“When borrowing costs are high, consumers are more likely to focus on covering key household bills and keeping up with mortgage and debt repayments leaving them with less spare money to spend elsewhere,” explains Haine. This can cause economic growth to stagnate.

However, while the lack of growth in April is disappointing, it is too soon to draw detailed conclusions. The February-April figure looks stronger at 0.7%, up from 0.6% in the first three months of the year.

What’s more, the ONS points out that “monthly growth rates can be volatile”. The indicator should be “used with caution and alongside other measures, such as the three-month growth rate,” it explains. 

Many sectors have been showing resilience in the face of higher interest rates – so limp growth in April really could be more of a bad weather blip than a sign of things to come.

When will interest rates fall?

Will the latest GDP data spur the Bank of England on with an interest rate cut in June? It’s unlikely, according to Danni Hewson, head of financial analysis at AJ Bell. She believes the phrase “rain stopped play” is the best way to describe April’s lack of growth. 

Hewson acknowledges that a worrying trend is developing in the construction sector, where output has fallen for three consecutive months. However, overall, she doesn’t think the growth outlook looks too dismal. 

“No growth is better than negative growth and taken alongside the latest wage figures there doesn’t appear to be much evidence to suggest that Bank of England rate setters will feel ready to change course quite yet,” she says. 

She adds: “There’s already a frisson of excitement in the air that big events like the Euros and Taylor Swift’s Eras tour will help deliver a decent boost to the economic picture by the time we get the half-year result.

“With inflation cooling and wage growth now being felt in people’s pay packets there is a sense that the momentum seen at the start of the year is likely to return.”

What do the latest GDP figures mean for the general election?

The story is less positive for the Prime Minister, though. Rain has been a running theme for Sunak through this election campaign. When he stood outside Number 10 in the pouring rain and called a general election, he did so on the basis that the UK economy was on the up. 

In his election statement, Sunak said: “Our economy is now growing faster than anyone predicted… This is proof that the plan and priorities I set out are working.” 

April’s GDP figures now give his opponents ammunition to discredit these claims – and we won’t have another GDP reading before voters head to the ballot box. What’s more, markets are now all but ruling out a June interest rate cut too. 

Lower rates would have been a PR dream for the Conservatives, who have credited themselves with slowing inflation. In a recent interview, The Times asked Sunak if a vote for the Conservatives was a vote for lower interest rates, to which he replied: “Of course it is, because we are the party who has committed to bringing down inflation, which is the necessary condition for bringing down interest rates. And I think people can see we have delivered that.” 

What do the latest GDP figures mean for you?

Some households may be concerned that April’s lack of growth is bad news for them, particularly coupled with the fact that unemployment has now risen to 4.4%. However, wage growth remains strong and, so far, the economy has proved resilient in the face of higher interest rates.

Although it now looks unlikely that interest rates will be cut in June, many are still hoping for a summer cut in August. Barring any major economic shocks, interest rates have likely peaked and the trajectory is downwards from here. This should ease pressure on mortgage holders and those paying off debts. 

For those with a large amount of money in savings, interest rate cuts are less positive. If you don’t need the money right now, it could be a good time to fix your savings to lock in higher rates for longer. 

Alternatively, if you are happy to tie your money up for at least three-to-five years, you could consider investing it in a diversified portfolio of stocks and shares. Investment markets come with risks, but they almost always outperform cash over the long term. 

The Investment Association reported strong inflows into global equities in April, as investors look to take advantage of the shifting macroeconomic backdrop. Equities typically perform well when interest rates are cut, as this tends to boost the economy and earnings. 

UK workers have been promised yet another National Insurance tax cut if the Conservatives are re-elected.

Chancellor Jeremy Hunt has already cut National Insurance (NI) twice this year and the Tory general election manifesto, published today, pledges another 2p reduction.

This would reduce the NI rate for workers from 8% to 6%, having already been cut from 12% to 10% in January and to its current level in April.

The Conservative Party remains behind Labour in the polls so there is no guarantee of this reduction.

Labour has said it won't match this cut in its general election tax plans.

But under the Tory proposals, someone earning £50,000 could be £749 better off with a 2p NI reduction.

“Whether this turns the dial enough for a party that is lagging badly behind in the opinion polls is yet to be seen,” says Shaun Moore, tax and financial planning expert at Quilter.

“This may be a case of too little, too late. The reality is that many people are looking to the difficulties that public services are facing at the moment and wondering how such a tax cut like this will impact the NHS, schooling and other state support. 

“Balancing individual financial relief with the sustainability of public services will be key in ensuring this change benefits the broader society if the party has the chance to enact it.”

How much could you save from another National Insurance rate cut?

Employees age 16 or over have to pay Class 1 NI once they start earning more than £242 a week from one job or are self-employed and making a profit of more than £12,570 a year.

The rate was cut from 12% to 10% in January following Hunt’s Autumn Statement and to 8% in April after the Spring Budget.

The Tory manifesto pledges to reduce NI by another 2p to 6%.

The savings will depend on how much you earn.

Someone on around the average salary in the UK of £35,000 will be £448 better off per year, according to analysis by Hargreaves Lansdown, rising to £754 once you earn more than £55,000.

However, Sarah Coles, head of personal finance at Hargreaves Lansdown, highlights that these savings could be offset by frozen tax thresholds, pushing more people into higher tax brackets through fiscal drag.

“There is no pledge to reverse the freeze either from the Conservatives or any other party,” she says.

Moore adds that cutting NI doesn’t help those receiving the state pension as they don’t pay the tax, although the Tories have pledged to increase this group's personal allowance.

“The Conservatives will be hoping that the triple lock plus policy, which pledges not to tax the state pension, gives pensioners enough to stop them feeling hard done by,” he says.

As we race towards the 4 July general election, both major parties are handing out sweeteners to win votes. And it’s not just the grey vote that they are trying to charm. In recent weeks, Labour and the Conservatives have both announced a string of policies that could impact parents. 

According to the Office for National Statistics (ONS), 43% of all families in the UK have one or more dependent children. That is a significant portion of the population. Any party that can secure the mass support of parents is likely to see significant success at the ballot box. 

With this in mind, we look at what the two main parties are offering parents. Plus, will the election impact the free childcare policy the government started rolling out earlier this year? 

Free childcare hours

In his 2023 Spring Budget, chancellor Jeremy Hunt announced a series of childcare reforms which offered free childcare hours to the majority of working parents. 

The first phase of the rollout began on 1 April this year, and gave 15 hours of free childcare per week to the parents of two-year-olds. This is set to be extended to nine-month-olds from September 2024, before being doubled to 30 hours from September 2025. 

There have been some challenges with staff shortages and limited nursery places. However, the new measures still represent a big win for working parents, as well as those who have been kept out of the workplace by astronomical childcare costs.

The good news is that both major parties have committed to keeping this scheme in place if they win the general election. Previously, there had been some doubt as to whether Labour would commit to the policy amid concerns about the strain it would put on the sector.

100,000 more nursery places, funded by ending tax breaks for private schools

On top of this, Labour has promised to convert over 3,300 classrooms into nurseries in schools with spare capacity (due to falling birth rates), creating 100,000 additional nursery places. This would go a significant way to addressing the shortages created by the rollout of the new free childcare policy. The party has also promised free breakfast clubs for primary school children.

This policy could be particularly beneficial for mothers, who are disproportionately impacted by unpaid caregiving responsibilities. The cost of caring sees many women being squeezed at both ends of their careers. Some (known as “sandwich carers”) go from looking after young children to caring for elderly parents, with only a short gap in between. 

As well as losing current income, this creates a significant hole in their pension pots. The pension gap is a “double whammy for women,” says Alice Guy, head of pensions and savings at interactive investor. “Not only do they earn less on average, but investment compounding works in favour of those who have bigger pots in mid-life,” she explains. 

While additional nursery places will be good news for most working parents, those with children in private school could be the ones paying the price. Labour plans to finance the additional nursery places by ending tax breaks for private schools – a step that has been criticised by prime minister Rishi Sunak as stoking a “class war”. 

Introducing VAT on private school fees could see them soar by as much as 20%. This increase would come on top of other, inflation-related fee hikes parents have already suffered in recent years. The latest figures from the Independent Schools Council (ISC) reveal that fees for the 2023/2024 academic year increased by 8%, on average. 

More families to become eligible for child benefit

Meanwhile, the Conservatives have promised to make more families eligible for child benefit payments if they win the general election. Currently, this allowance starts to get withdrawn as soon as one parent earns more than £60,000 a year. 

The Conservatives have pledged to double this to £120,000, as well as moving to a system where the entire household’s income is taken into consideration. This comes after Jeremy Hunt already lifted the threshold from £50,000 to £60,000 in his Spring Budget. 

Alice Haine, personal finance analyst at Bestinvest, says that this move would “eradicate the unfairness of the current system, which penalises single-income parents or couples where one partner earns a significantly higher salary than the other.”

Haine also points out that it might be worth registering for child benefit, even if your family isn’t eligible to receive the payment. This is because, even if you take time out of work to help raise children, you are still eligible for valuable National Insurance (NI) credits.

NI credits are used to calculate how much state pension you are entitled to – and registering for child benefit lets HMRC know to include these credits on your record. If you aren’t eligible to receive the child benefit money and just want the NI credits, you can tick a box on the form to confirm this. Alternatively, you can repay the child benefit money through your tax return. 

The cost of retirement has soared in recent years. Recent analysis suggests younger savers will need a pension pot of at least £1 million, if they want to enjoy their golden years in comfort. This comes at a time when the state pension is becoming increasingly expensive for the government to maintain. 

Nobody wants to talk about it in the lead up to the general election, with both Labour and the Conservatives promising to keep the state pension triple lock. The Conservatives have gone a step further, pledging to increase tax thresholds for pensioners too as part of the triple lock plus policy. However, some difficult decisions lie ahead for the next government. 

The inbox of the new pensions minister, whoever that ends up being, is “already overflowing with issues”, says Alice Guy, head of pensions and savings at interactive investor. “Millions are still heading for a poor retirement and the new government needs to do more to boost pension saving,” she adds.

Against this backdrop, independent bodies such as the Institute for Fiscal Studies (IFS) and the Social Market Foundation (SMF) have published papers outlining the key priorities for the next government. These address everything from managing the social effects of a rising state pension age, to expanding existing auto-enrolment rules on workplace schemes.

We highlight five key decisions that could be in focus. 

1. Arriving at a long-term plan for the state pension

Pensioners usually turn out in force at the ballot box – so naturally all major parties are vying for their share of the grey vote. The Conservatives typically do particularly well with retirees. This goes some way to explaining why they have announced their triple lock plus pledge, despite concerns that the state pension is already expensive enough even before this reform. 

Under the current triple lock policy, state pension payments are raised each year in line with inflation, earnings growth or 2.5% – whichever measure is highest. As a result, pensioners enjoyed a 8.5% boost from April this year. This took the weekly payment to £221.20 for full recipients of the new state pension (up from £203.85). Meanwhile, full recipients of the old state pension saw their weekly payments increase from £156.20 to £169.50.

This is great for pensioners but expensive for workers paying National Insurance. Estimates from the Office for Budget Responsibility (OBR) suggest the state pension cost around £125 billion last year (2023/4 tax year). 

Critics say this creates intergenerational unfairness. Younger workers are paying for a state pension that might not exist by the time they reach retirement. Meanwhile, they have not seen their wages go up by the same proportions, and have been grappling with the higher cost of living too. 

The IFS has said that the triple lock “increases the level and cost of the state pension in an uncertain, and ultimately unsustainable, way”. Instead, it argues that the government should decide on the “appropriate level of state pension”, before increasing it each year in line with average earnings growth or the rate of inflation (if higher). 

We highlighted some alternatives to the triple lock in a recent MoneyWeek article. 

2. Preparing for an older working population

The state pension age is currently 66 for both men and women (it used to be 65). It is set to rise again to 67 between 2026 and 2028, before rising again to 68 between 2044 and 2046. However, some experts think it is unlikely to stop there. A report from the International Longevity Centre earlier this year suggested it could rise to 70 or 71 by 2050. 

It makes sense for the state pension age to go up. When the old age pension was first introduced in 1909, women lived for around nine years after retirement while men lived for around eight years, on average. Today, some pensioners can expect to spend around a quarter of their life retired.

That said, the government will only be able to push the retirement age back so far before it starts running into difficulties. Many older employees will end up grappling with health issues which could impact their productivity and ability to work. 

“The next government will need to decide whether to provide additional support to those not able to work up to an increased state pension age, and how any such support should be targeted, while considering the effects on work incentives and government spending” the IFS has said. 

3. Increasing minimum pension contributions

Under current auto-enrolment rules, all employers are legally obliged to offer a workplace pension scheme. Eligible workers are opted in by default and receive 8% of their salary into their pension each year. Three percent is paid in by the employer while the remaining 5% is contributed by the employee.

The government passed the Pensions Act in 2023, which sought to expand the number of employees covered by auto-enrolment rules. For example, the new act includes under-22s and abolishes the lower earnings limit for qualifying earnings. However, the act has not yet been implemented.

These amendments are a positive step in encouraging workers to save for their retirement. However, those impacted would see their take-home pay decrease as a result of any new or increased pension contributions. 

The IFS says: “The next government needs to decide whether to go ahead with legislated increases in minimum pension contributions. If they do, they should carefully consider the timing, as well as potential alterations to the policy to help low earners adjust to lower take-home pay.”

The SMF goes a step further, arguing that members of workplace pension schemes should also be “given the right to choose the scheme into which their contributions are paid”. At the moment, an employer makes this decision on your behalf. 

4. Making a decision on pension tax relief

Your pension is one of the most tax-efficient ways to save for the future. To encourage savers to plan for the future, the government offers a range of incentives. The main one is pension tax relief – a measure which effectively refunds you the income tax you originally paid on the money when you first earned it. 

For example, if you are a basic-rate taxpayer and you put £80 into your pension, HMRC will gross it back up to £100 to refund you for the 20% tax you paid originally. Similarly, if you pay 40% or 45% tax, then you only have to pay £60 or £55 into your pension pot for the government to top it back up to £100. 

All savers get the 20% basic-rate tax back immediately. However, if you are a higher or additional-rate taxpayer, you will need to claim the rest back yourself. You can do this by filling out a self-assessment tax return form.

However, the SMF argues that “tax relief on pensions is inevitably regressive, with nearly 60% going towards higher and additional rate taxpayers.” It argues that this unfairly discriminates against the low paid and women. 

Instead, the think tank proposes a bonus framework. It writes: “We should replace all tax relief and NICs rebates with a simple bonus, detached from tax-paying status. Bonuses would be paid on individual and employer (post-tax) contributions, capped at £2,500 per year, say. A bonus rate of 25% would facilitate an incentivised annual savings capacity of up to £10,000, more than adequate for 95% of all adults.”

It is worth mentioning that this approach would be unpopular with high and ultra-high earners, who currently enjoy 40 and 45% tax-relief on their contributions. This could result in them putting less money into their pension pots, which would be bad news for the UK investment landscape. Governments are already trying to drive more pension investment into UK companies, after schemes have been diversifying into different regions in recent years.

5. Ensuring savers draw on their pensions appropriately

The cost of living has soared in recent years, and people are living for longer than ever before. Against this backdrop, some are having to “unretire” or risk running into poverty in old age.

With this in mind, the IFS has called on the next government to develop policies to help people draw on their private pension wealth appropriately. “This could mean requiring pension schemes to provide people with decumulation pathways, including solutions that combine annuities with accessible savings pots,” the IFS writes. 

It adds that the government could also “require schemes to provide default options, to ensure that these policies also work better for those who don’t engage actively with their pension.”

On top of this, the government needs to do more to encourage the self-employed to save appropriately for their retirement. Currently, only around 20% participate in a private pension scheme, the IFS reports. 

If you work for yourself, you aren’t covered by auto-enrolment rules. As a result, you risk running out of money in retirement if you don’t prepare your finances adequately. Some important steps could include signing up to a private pension scheme or saving regularly into a Self Invested Personal Pension (SIPP).

ISA investors have been given a boost after HMRC confirmed that new regulations will allow fractional shares to be used in the stocks and shares tax wrapper.

Officials from the Treasury, Financial Conduct Authority and HMRC had been working on plans to let investors put fractional shares in their ISA since the end of 2023, but progress was then halted by the general election. 

Today (23 October), HMRC said that regulation had been laid before parliament on 14 October to allow "certain fractional interests" to be bought in a stocks and shares ISA, junior ISA and child trust fund (CTF). The rules will take effect from 4 November 2024.

An HMRC spokesperson said: “The government has committed to changing the ISA rules to allow certain fractional shares. 

“Taking a pragmatic approach, we will not raise an assessment on managers or investors for fractional shares acquired before these changes are made.”

This means that in theory the ban on fractional shares has already been lifted, in advance of the 4 November date. Some ISA providers have been offering the investment to customers since HMRC announced that it would allow it.

What are fractional shares?

Fractional shares have become popular among influencers and are used on newer trading platforms and apps such as Freetrade, eToro and InvestEngine. They let investors buy a more affordable portion of a stock rather than the whole thing.

Fractional shares break up a stock to let investors buy a portion of one rather than paying the full share price. 

This means any returns are equivalent to how much they have invested.

They are popular in the US where share prices are particularly high and brokers argue that it lowers the barriers to entry for retail investors. For example, a single share in Netflix costs $764, while a share in Apple costs $234.

Fractional shares have become more popular since the emergence of trading apps that let you buy and sell shares from your smartphone. 

This caused an issue with HMRC last year as it warned that ISA regulations don’t cover fractional shares despite some investment platforms letting users put them in the tax wrapper. The Treasury announced changes to this policy in the 2023 Autumn Statement and later confirmed in the 2024 Spring Budget document that it was working on this with the Financial Conduct Authority (FCA) and HMRC.

So, I can hold fractional shares in my ISA?

HMRC has announced that "fractional interests of a whole share" are eligible to be held in a stocks and shares ISA, junior ISA, Lifetime ISA and child trust fund.

Certain conditions must be met, such as:

• The relevant whole share, including shares in an investment trust and shares in a fund, must be a qualifying investment for the purposes of the ISA regulations
• The relevant whole share is either: officially listed on a recognised stock exchange, or admitted to trading on a recognised stock exchange in the UK or the European Economic Area (EEA)
• The whole share is held in your name or the name of your nominee — you cannot delegate below the level of nominee
• The investor has beneficial ownership of the fractional interest
• Transfers or withdrawals of fractional interests are actioned within 30 days

For fractional shares, the general conditions regarding annual general meetings (AGMs) and voting rights do not apply. However, HMRC says that if an investor holds multiple fractional interests amounting to a relevant whole share, then the investor rights relating to a whole share will apply. There is more information in HMRC's guidance.

Should I invest in fractional shares?

Fractional shares can be a useful way to gain access to a company share that might otherwise seem too expensive.

Viktor Nebehaj, chief executive of Freetrade, comments: "Fractional shares enable investors to build a diversified portfolio and access a wider range of investments. We have always maintained that fractional shares meet the criteria to qualify to be held in an ISA."

However, there can be risks involved. Myron Jobson, senior personal finance analyst at Interactive Investor, tells MoneyWeek: “While fractional shares make it easier for modest investors to access expensive stocks, there’s a significant risk that they might focus too much on trading these small portions rather than concentrating on building a diversified portfolio.

“It is also worth noting that fractional shares are not transferrable, so you may need to sell these should you wish to move providers, which could occur a trading cost."

Another potential downside is that you often have limited voting rights. "Many companies grant voting rights only to holders of whole shares, meaning investors in fractional shares may have little to no say in corporate decisions. This can diminish the influence of smaller investors over the companies in which they are part owners," notes Jobson.

Sending your child to private school is a significant financial undertaking and not one many parents enter lightly. A good deal of financial planning is required – particularly given the rate at which costs are going up. 

This topic has been in the news recently thanks to soaring private school fees and the threat of VAT. The latest figures from the Independent Schools Council (ISC) reveal that fees for the 2023/2024 academic year increased by 8%, on average. This was largely driven by inflation, but also changes to the Teachers’ Pension Scheme. 

Now, the 4 July general election is fast approaching and Labour is comfortably ahead of the Conservatives in the polls. Keir Starmer’s party has promised to end tax breaks for private schools if they win the election, using the money to fund additional teachers in the state sector. 

School fees are currently exempt from VAT, which keeps costs down for parents. However, any change in policy under a new government could mean fees increase by up to 20%. 

We analysed the cost implications in a recent MoneyWeek article: “Can I afford to send my kids to private school?” In this piece, analysis from Jason Hollands, managing director at Evelyn Partners, revealed that even households with a six-figure salary could struggle to pay for school fees out of income. 

“Adding to this conundrum is the gradual fading away of the Baby Boomer generation, whose financial support has long facilitated private education for their descendants,” says Alexandra Loydon, director or partner engagement and consultancy at St. James’s Place. 

“As the next generation grapples with fewer financial resources, coupled with increasing life expectancy, the dilemma becomes even more acute,” she adds, pointing out that long-term financial planning becomes even more important against this backdrop.

We look at three steps parents can take to plan financially.

1. Use stocks and shares ISAs

A stocks and shares ISA is a useful investment tool. Over-18s have an annual allowance of £20,000 and you don’t have to pay any income or capital gains tax on any returns generated within the account. 

Imagine you and your partner both opened a stocks and shares ISA shortly after your child was born (each in your own name, as the rules on junior ISAs differ). Let’s also imagine you each agreed to stash an initial £5,000 in your respective accounts, investing it in a stock market tracker at an average annualised return of 8%. 

If each of you was to contribute a monthly sum of £100 thereafter, each of your pots would be worth £32,488 by the time your child was 11 and ready to start secondary school. That’s according to calculations carried out using Hargreaves Lansdown’s investment calculator.

In total, this would create a tidy pot of £64,976 – all of which is tax free. What’s more, this approach would still leave you with a decent amount of your ISA allowance to use for your own financial goals. 

The year your child was born (when you contributed the initial lump sum as well as the regular investments), each parent would still have £13,800 of their annual allowance left to use up. In a regular year, they would have £18,800 left. 

The average private day school now costs £18,063 per year in fees – although this doesn’t include extras like music classes and sports clubs. If this rate were to stay the same (which is of course unlikely given inflation), the total sum of £64,976 that you accumulated through regular saving and investing would cover around three and a half years of fees. 

Of course, that only gets you part of the way there as most children attend secondary school for seven years. There are also lunch fees, school trip fees and uniform costs to consider. If Labour wins the upcoming general election, you could see fee hikes of up to 20% as VAT is added too. 

Average annual returns of 8% aren’t guaranteed either, of course, but over a long-term investment horizon, stock markets almost always outperform cash. And having this pot can help supplement any school-related payments you are paying for out of your income.

“Diversifying an ISA portfolio with a mix of stocks, bonds, and other assets can mitigate risk and potentially yield higher returns,” says Loydon. “It's essential to start early and maintain a long-term perspective to maximise the benefits of compounding,” she adds. 

2. Set up an education trust fund

Similarly, you could consider an education trust fund. “These dedicated funds offer several advantages, including tax benefits and the ability to accumulate savings gradually,” Loydon explains. 

A trust fund is essentially a pot where you can stash money or investments on someone else’s behalf. In this instance, the beneficiary would be your child. 

As with an ISA, the earlier you start investing the more chance you have of benefitting from compound returns. Regular contributions can also help you build a sizable pot over time – and Loydon adds that this can potentially allow the use of additional tax reliefs too. 

Alternatively, grandparents may decide to open an educational trust and stash money into it to pay for their grandchildren’s education. Doing so would reduce the size of their overall estate, which could reduce the inheritance tax bill when they pass away. 

Before making any decisions on this, it is important to seek financial advice to understand whether an education trust is right for you. An advisor can also weigh up the pros and cons of different investment wrappers too – for example, would the ISA or trust route be best for you?

3. Look into scholarships, discounts and the most efficient way of paying fees 

Many schools offer the option of upfront payment. By paying for several years of school fees upfront, you can lock in a lower price before inflation – an attractive prospect if you’ve got the required cash. If you follow the ISA route outlined previously, for example, you could consider using your lump sum immediately to pay up in advance. 

Some parents will be looking into this route ahead of the general election, in case Labour wins and carries out its planned tax reforms. Paying ahead of time could allow them to circumnavigate the sharp fee hike. 

However, it is worth pointing out that a new government could legislate retrospectively to close off this loophole. Many schools offering upfront payment have introduced legal disclaimers to clarify that they cannot be held responsible if this happens. 

There are some other routes parents can go down too, though, particularly if their child has a strong academic record or if family funds are tight. “Scholarships and discounts provided by private schools can significantly alleviate the financial burden of tuition fees,” Loydon explains. 

She adds: “Many private schools offer these opportunities based on merit, financial need, or other criteria. To take advantage of these programs, it’s important to research extensively, meet eligibility requirements, and make sure the application is as strong as possible.” 

“It is also worth investigating applying directly to the school for financial aid and planning well in advance for exams and interviews that may be part of the scholarship application process.”

High-earning families could be able to keep more of their child benefit payments under a new Conservative government, Chancellor Jeremy Hunt has revealed.

Unveiling the latest sweetener to woo voters ahead of the general election on 4 July, Hunt said the Conservative Party would raise the high income child benefit charge (HIBC) threshold to £120,000, helping around 700,000 families hold on to more of the payments.

It comes after Hunt already raised the threshold from £50,000 to £60,000 during his Spring Budget. The Chancellor also said the system would move to an assessment based on household, rather than individual, income.

“Raising the next generation is the most important job any of us can do so it’s right that, as part of our clear plan to bring taxes down, we are reducing the burden on working families,” Hunt said.

The Conservatives claim this could save the average family £1,500 earners from keeping more of the payments and paying less or no tax on them. But there are already questions around the cost of moving to a household assessment system, or whether the HIBC should just be scrapped.

What is the high income child benefit charge?

Under the current system, child benefit starts to get withdrawn if one parent earns more than £60,000 a year. The parent has to repay the benefit at a rate of 1% of the amount for every £100 they earn above the threshold.

The threshold was increased in April 2024 from £50,000. The top of the taper is also now £80,000, which is the point where all the benefit is repaid.

The policy has attracted criticism as it focuses on one higher earning parent. This means one spouse could earn £65,000 and the other £30,000, and this would mean losing some of the child benefit payments. But another couple earning just under £60,000 each wouldn’t be hit.

This is why Hunt has also committed to moving to a system based on household income. “Unfairness has been baked into the current system which allows two-parent households with combined earnings of up to a penny under £120,000 to keep their full entitlement, whilst others lose the benefit entirely because one parent tops £80,000,” said Danni Hewson, head of financial analysis at AJ Bell.

How much could families save from child benefit threshold changes?

The savings will depend on how much each parent earns and, of course, if the Conservatives are re-elected. So far, it is unclear what the Labour Party would do about the charge.

According to calculations by Quilter, a couple with two children where one person earns £80,000 and another earns £20,000 would be able to keep all £2,212.60 of their child benefit when they previously would have kept none.

Similarly, one parent earning £70,000 while the other earns roughly the average salary in the UK of £35,000 will be more than £1,106.30 better off and receive all the payments.

“The Tories’ announcement that they will peg the high income charge to household income will be music to many parents' ears,” said Shaun Moore, tax and financial planning expert at Quilter.

“However, this is not a new problem, and it has taken years for the penny to drop in government that the current rules create a perverse environment where a high earning single parent could lose their full child benefit entitlement, despite having a much lower household income than two parents earning just below the lower threshold.”

There is uncertainty over the administrative issues of moving to a household income assessment though. It is unclear how long this would take to implement by HMRC, which is already struggling with issues such as running its own self-assessment helpline.

“The administrative practicalities of moving to household based assessment is going to be challenging because our tax system - by which child benefit withdrawal is administered - is based on individual income,” said Tom Waters, an associate director at the Institute for Fiscal Studies.

“Indeed, this may well be why child benefit has been withdrawn in the rather odd way hitherto. In any case, we already have a means-tested benefit for families with children that is based on household income - universal credit. It's not clear what the point is of having a second one, means-tested in a different way."

Labour has pledged to get 80,000 young people onto the housing ladder over the next five years through a ‘Freedom to Buy’ scheme, if it wins the general election.

The policy would be an extended, permanent version of the Conservatives’ mortgage guarantee scheme, which is currently due to expire in June 2025. Keir Starmer said his plan would “clear the way for the opportunity to own a home”.

Alongside the first-time buyer scheme, Labour said it would reintroduce housing targets and reform the planning system to increase the availability of homes. Other policies it has announced so far on the election campaign trail include plans to create a state-owned clean energy company, maintain the triple lock, and add VAT to private school fees.

This week, the party has become embroiled in a bitter tax row with the Conservative Party. Both parties have committed to not increase income tax, National Insurance and VAT in the next Parliament.

Starmer: Freedom to Buy will ‘turn home ownership dreams into reality’

Labour claimed Freedom to Buy will be a more comprehensive version of the mortgage guarantee scheme. It would incentivise lenders to offer high loan-to-value (LTV) mortgages by acting as a guarantor for prospective first-time buyers who cannot afford a big deposit.

The current iteration of the scheme, which applies to homes worth up to a value of £600,000, was initially announced by Rishi Sunak in the 2021 Spring Budget. The then-Chancellor used it as part of a bid to resurrect the housing market after the Covid-19 pandemic.

Starmer’s party claimed that because it was labelled as a temporary measure from the outset, high LTV mortgages have only been a peripheral part of the market. Figures from Zoopla showed that less than 1% of mortgage lending to first-time buyers has been over 95% LTV over the past five years. LTVs of 90% to 95% account for 20% of the new loans issued over this period.

By making the scheme permanent and giving lenders certainty, Labour said it would increase the availability and lower the cost of mortgages for low-deposit buyers - something similar schemes in Australia and Canada had achieved.

Starmer said: “After 14 years of Conservative government, the dream of home ownership is out of reach for too many hard working people. Despite doing everything right, they can’t move on and up. A generation face [sic] becoming renters for life.

“My parents’ home gave them security and was a foundation for our family. As prime minister, I will turn the dream of owning a home into a reality.”

Non-partisan think tank the Institute for Fiscal Studies (IFS) said the scheme had the "potential" to help first-time buyers. But it suggested it would not go far enough to solve the lack of home ownership among younger people.

Its senior research economist, David Sturrock, said: "The need to save up for a deposit is only one hurdle: prospective buyers also need to have a sufficiently high income to take out a (bigger) mortgage and afford the repayments.

"As a result, potential buyers who are in their 30s and from better-off backgrounds, and who are looking to buy outside of London and the south east, are more likely to be able to take advantage of this scheme.”

Labour to bring back new home targets

Starmer also said a Labour government would “get Britain building again” by bringing back house building targets. His party has pledged to build 1.5 million homes over the next Parliament, marking the return of the 300,000 new homes a year target successive Conservative governments have promised but failed to meet.

The Conservative 2019 general election manifesto pledged to build a million homes by the next general election - i.e. now. While the Conservatives have claimed they have met the overall target, we will not get official figures until later this year. What we do know is that the party is unlikely to achieve the 300,000 target as the construction of new homes ground to a halt in the second-half of 2023.

To hit the 1.5 million target, Labour said it would build on disused ‘grey belt’ land, fast track brownfield planning applications and unveil more new towns. The party added that it would reform compulsory purchase laws in a bid to "stop speculators frustrating housebuilding and squeezing value from infrastructure and affordable housing”.

Starmer also revealed that Labour would give “first dibs” on new developments to local people in a bid to stop international investors from snapping up new housing estates. He added that his party would "tax foreign buyers" who price young people out of the housing market, using the proceeds to "fund new planning officers" to approve homes next generation needs.

How has the property industry reacted to Freedom to Buy?

Labour’s plans have been met positively by several key players in the property market, including builders.

Richard Donnell, executive director at Zoopla, said: "Policies to support people to buy their first home are always welcome. One of the greatest challenges facing first-time buyers is the deposit needed to fund a purchase.”

However, Donnell echoed the IFS by warning that borrowers benefitting from the scheme “will still need to prove they can pay a stressed mortgage rate at a higher level than the actual rate they will pay”, meaning they may need to have high income. He added that the plans may only work in “lower-value housing markets” and could be “much harder to make work in southern England” where repayments could still be unaffordable for less-well-off buyers.

Barratt Developments, one of the biggest house builders in the UK, greeted the announcement positively. Its chief executive, David Thomas, said: “We welcome proposals that could help more people buy their first home in a challenging market.

“In order to support more people to buy their first home, it is also important that we improve the current planning system, which includes setting housing targets in local plans and recruiting more skilled planners, so local authorities and housebuilders can build the much-needed, high-quality and energy-efficient homes the country needs.”

Meanwhile, fellow house builder Vistry Group also backed the plans. Stephen Teagle, its CEO of partnerships and regeneration, said: “Vistry supports Labour's plans to increase the supply of much needed homes, including affordable housing and homes to buy, alongside their proposed Freedom to Buy offer.

“Access to affordable housing within thriving communities is essential for so many families currently denied choice. We are confident that the planning reforms set out by Labour will dismantle some of the current barriers to building more homes, enabling Vistry as one of the country's largest house builders to build more homes of all tenures over the coming years.”

Conservatives pledge to not increase stamp duty

On Thursday, the Conservative Party also made its first housing pledge of the general election campaign. In an article for the Daily Telegraph, which doubled down on Rishi Sunak’s £2,000 Labour tax attack, Chancellor Jeremy Hunt promised that a Tory government would not hike stamp duty.

Announcing a ‘Family Home Tax Guarantee’, Hunt committed “not to increase the rate or level of stamp duty”. He said he was “throwing down the gauntlet” to Labour to match the new pledge. Sir Keir Starmer’s party has said it wants to “reduce taxes on working people”.

His predecessor as Chancellor, Kwasi Kwarteng, introduced a permanent cut to stamp duty in the 2022 mini-Budget. Hunt made this policy temporary when he gave his follow-up Autumn Statement, with the current thresholds set to expire in spring 2025. He suggested at the time that he would create a different property tax system, although it seems this aspiration will not be a priority for a potential future Conservative government.

The May 2026 UK local elections spelled disaster for Labour and the Conservatives, with both parties losing hundreds of council seats across 136 councils.

Most of these were lost to Reform UK, the party co-founded by Nigel Farage, which he has led since 2024. They ended up with a staggering gain of 1,452 seats, bringing 14 more councils across the country under the party’s control.

Under the leadership of Farage, the party has become a real electoral force to be reckoned with, shoring up support from disaffected voters from most mainstream parties.

Reform has led in the opinion polls since April 2025, with polling by YouGov on 5 May finding that around 25% of the electorate would vote for the party if an election was called today.

The latest set of elections have shown that Reform is capable of translating dismay with the government into victory on a local level. But the question remains whether the party can turn local victory into national power during a general election campaign.

If they are able to manage this, it will have consequences on your money. We look at what the party has said it would do if brought into power.

Would Reform cut income tax?

In previous statements about the party’s economic policy, spokespeople for Reform UK have alluded to a sweeping set of tax cuts should they get elected.

In the party’s 2024 manifesto, they campaigned on an economic package that included cutting £150 billion of expenditure while funding £50 billion of other government spending.

One of these policies was a promise to raise the threshold at which you start paying income tax from £12,570 to £20,000, a move that the IFS calculated could cost around £40 billion.

However, in November 2025 the party distanced themselves from this policy and many more pledges stated in their 2024 manifesto, revising their policy platform after criticism that it was unrealistic.

Setting out Reform’s economic vision for the UK in November 2025, Farage said that while he would still like a £20,000 personal allowance threshold, this was no longer a promise.

Instead, he committed his party to only “relatively modest” tax cuts.

He said: “We want to cut taxes, of course we do, but we understand substantial tax cuts given the dire state of debt and our finances are not realistic at this current moment in time."

When asked for clarification on what that meant, he later said: “We will raise thresholds. I cannot tell you what the state of the economy will be as the next general election approaches.”

That comment means that an income tax cut as steep as the one previously pledged is unlikely if Reform wins the next general election.

Inheritance tax

Before Reform’s November economic policy reset, the party pledged to abolish inheritance tax entirely.

Reform’s deputy leader Richard Tice has now changed the language around this policy, saying the party still plans to get rid of the tax, but that it was an “ambition” rather than a promise.

The exception to this is when inheritance tax is due from family farms. Reform UK says it is still their policy that they will remove inheritance tax from them even after the November speech.

How much do you know about inheritance tax? Test yourself in our quiz.

Pensions

Like all major political parties, Farage has said the party will stand by the state pension triple lock, a mechanism that means the state pension increases each year by the highest of either earnings growth, inflation, or a flat 2.5%.

The triple lock is one of the biggest pressures on the public finances thanks to its immense cost, which is expected to reach £15.5 billion a year by 2030.

Many groups have warned that the triple lock is unsustainable as the cost of the state pension will only increase with an ageing population.

Speculation had been mounting that Reform would break away from the crowd and come out against the triple lock, but Farage clarified in April that the party will keep it.

In a press conference on 2 April, he acknowledged the high cost of the triple lock, and said its continuation would be funded through “the biggest cuts to the benefits bill ever seen in the history of this country”.

Robert Jenrick, Reform’s economic spokesperson, said he had found ways to save £40 billion from cuts to welfare, but details of this have not yet been released.

Energy bills

One of Reform’s major policies is to entirely scrap plans for net zero. Under current plans, the government is committed to reaching net zero carbon emissions by 2050.

That means that polluting forms of energy generation are being phased out and being replaced with more environmentally friendly ones like solar and wind.

Critics of net zero say the regime is pushing up household energy bills as customers have to pay levies to help fund the energy transition.

Reform says that if they are elected they will scrap the 2050 net zero target, which they claim will help cut energy bills.

They say: “Reform UK will prioritise energy security, expand domestic energy production, and scrap policies that drive bills higher while making Britain more dependent on foreign energy.”

But whether scrapping net zero will lead to lower bills in the long-term has been questioned, as critics say that the best way to reduce reliance on imported energy is to produce renewable energy in the UK.

Crypto

Unlike any other major political party in the UK, Reform is a strong proponent of cryptocurrencies, saying it wants to “[make] Britain a Crypto Hub.”

The party’s “Cryptoassets and Digital Finance Bill”, a draft piece of legislation published last year, sets out Reform’s crypto policy.

The draft bill says, among other things, Reform will introduce a single 10% capital gains tax on crypto, a sovereign Bitcoin reserve fund managed by the Treasury, and permit the paying of taxes in cryptocurrency.

Immigration

While Reform UK’s economic platform is mostly made up of broad principles rather than concrete policies, their immigration policies have much more detail available.

Reform has pledged to entirely stop all refugees coming into the UK via small boats.

While former prime minister Rishi Sunak’s government had struggled to do this, Reform says they will succeed by leaving the European Court of Human Rights, which will give them more power to deport migrants who reach the UK outside of legal routes.

Reform said it will also take on a large-scale programme to “identify, detain, and deport illegal migrants in the UK”.

Where will the money come from?

The policies pledged by Reform UK involve a lot of tax cuts or additional spending. That raises the question of where the money will come from.

When out of government it is very easy to say that your party would cut taxes, but doing it in practice is far harder.

So far, Reform has said it will make cuts to welfare spending. As mentioned earlier, Jenrick says he has found £40 billion of spending cuts, though it has not been made public where these might come from.

The party also said it will make deep cuts to the foreign aid budget, capping it at £1 billion a year. That is around 90% less than the current foreign aid budget. Reform says such a cut would save around £30 billion over the course of a five-year parliament.

Reform has pledged to make major cuts to the civil service, announcing plans in December 2025 to cut around 68,500 jobs if the party wins. They say this will bring about savings of around £5.2 billion a year.

Who is Robert Jenrick, Reform UK’s economic spokesperson?

If Reform wins the next general election, Robert Jenrick is set to become the chancellor of the exchequer, in charge of the economy.

Jenrick was a member of the Conservatives until January 2026. He held the position of shadow justice secretary under Kemi Badenoch’s leadership of the party and had previously been immigration minister from 2022 to 2023 during Rishi Sunak’s government.

In January he was sacked by Badenoch after it came to light that he had held discussions with Farage about the terms of a possible defection to Reform UK.

He defected to Reform later that day and was officially appointed as Reform UK’s economic spokesperson on 17 February.

While no concrete economic plan or manifesto has been drawn up yet, Jenrick will be one of the key figures (along with Farage and deputy leader Richard Tice) involved when it is being made.

Prime Minister Rishi Sunak and Labour leader Keir Starmer went head to head on Tuesday night in the first of the general election TV debates. 

We are now starting to get a clearer picture of the key issues and policies for Labour and the Conservatives – including how these could impact different sectors within UK investment markets.

Sunak wanted to talk about tax, but other battlegrounds that loomed large included the cost-of-living crisis and the NHS. While they had slightly less air time, climate change and the economic hurdles faced by first-time buyers also made an appearance. 

One topic that didn’t come up in much detail during the debate (other than through the lens of the Conservatives’ new national service policy) was defence. 

Nevertheless, this is likely to be another important topic in the coming weeks, with Sunak having already pledged to increase UK defence spending to 2.5% of GDP by 2030, if he is re-elected. 

We focus on each of these areas and the sector implications for UK equity investors.

How will the election impact the energy sector?

When it comes to the energy sector, we have to consider both the old world and the new. On the one hand, a Labour victory could be bad news for oil and gas companies. As one of his six “first steps for change”, Starmer has pledged to set up a publicly-owned clean power company to “cut bills for good and boost energy security”. 

The party plans to pay for this using a windfall tax on oil and gas companies. A temporary windfall tax known as the Energy Profits Levy is already in place under the Conservatives, but Labour has previously indicated it could increase the levy from 35% to 38%.

Meanwhile, the Conservatives are typically seen as being more friendly to the oil and gas industries. Sunak has said he would use the UK’s fossil fuel resources in the North Sea to bolster the UK’s energy security.

“We’ve seen in the last couple of years what has happened when we’re held hostage by dictators like Putin. We can’t have that happen,” he told factory workers in Milton Keynes.

On the other hand, a Labour victory could be good news for renewables. The party’s proposed clean power company, also known as Great British Energy, promises to “invest in clean energy across [the] country”. Labour says this will include “making the UK a world leader in floating offshore wind”. 

Utilities companies that have the infrastructure needed to support transition could be set to benefit from a Labour government too. For example, the party says that upgrading the national grid is “key” to the success of its plans “so that we have the infrastructure we need to move forward”.

“The renewable energy sector would be an obvious beneficiary of a Labour government,” says Darius McDermott, managing director at FundCalibre. In his view, a Labour government would be highly dependent on the private sector in bringing its plans to life.

He explains: “Labour is set to inherit a cash-strapped operation, and therefore will need the help of the private sector to support its renewable energy ambitions. Consistent, well-targeted public funding could crowd further private capital into the sector through co-investment, providing a major boost to the UK’s renewables sector.”

Energy secretary Claire Coutinho accused Labour of not being “honest about the costs” associated with their net zero targets.

How will the election impact housebuilders?

Another area of focus in the first election debate was the extortionate cost associated with getting on the property ladder – a tough hurdle for first-time buyers. 

Starmer said he has plans to build more houses. As a result, some market commentators believe the sector could do well under a Labour government. MoneyWeek’s former executive editor, John Stepek, points to these arguments in a recent newsletter for Bloomberg. 

He says: “Analysts Tobias Woerner and Charlie Campbell reckon it might be worth looking at housebuilding and its related sectors, including brickmaking and builders’ merchants. 

“Why? Because Labour is keen to ramp up housebuilding, and could probably do so quite quickly by reintroducing mandatory targets for local areas, says Campbell. As a result, you’d see demand for building products go up again from its recent low point.”

Stepek agrees this is a solid rationale, but says the case for housebuilders “would exist even if we weren’t heading for an election”, as housebuilding is cyclical and interest rates have now stabilised. Indeed, rates should be on a downward trajectory from here, which should be good news for the sector.

Would a Conservative victory be good news for the defence sector?

Sunak has pledged to increase UK defence spending to 2.5 percent of GDP by 2030, if he wins the election. This could be good news for the defence sector. As Jason Holland, managing director at Bestinvest, notes, “the UK is a major player in the global aerospace and defence sector”. Big names include BAE Systems, Rolls-Royce, Babcock International and QinetiQ. 

Meanwhile, Starmer has said the UK would be “fit to fight” under a Labour government, but the exact nature of the party’s plans are not yet clear (other than its commitment to Trident). 

“Rising UK defence spending could boost the domestic defence sector, creating both jobs and hopefully providing a welcome lift to the broader UK stock market,” Holland explains. He adds that aerospace and defence stocks “represent about 3.8 per cent of the FTSE 100 and 3.4 per cent of the wider UK market, compared to 1.5 per cent of the S&P 500”. 

Historically, many investors have decided to steer clear of this sector on account of environmental, social and governance concerns. However, since Russia’s invasion of Ukraine a couple of years ago, the focus has shifted towards security and defence, with some investors now seeing the sector in a different light. 

If you've been following the general election campaign trail, you will have heard Rishi Sunak make a stark claim about Labour tax rises.

The Prime Minister has repeatedly claimed that a Labour government would raise taxes by more than £2,000 for working households, if it wins the election. He first raised it during the ITV leaders debate on 4 June and also brought it up at the Conservative party manifesto launch on 11 June.

Labour says the figure is not true. The Tories have also come under fire for claiming the civil service came up with the costings - something the politically impartial body has denied.

It’s hardly the first controversial claim we’ve seen or heard being made on an election campaign trail. Vote Leave’s ‘£350m a week for the NHS’ Brexit referendum promise and Boris Johnson’s ‘40 new hospitals’ pledge are two recent examples of politicians using contested figures while out campaigning. But such claims - truthful or not - can form narratives that define elections.

Both major parties look set to keep the UK tax burden at a record level. Tax rises will be baked in by an income tax threshold freeze - brought in by then-Chancellor Rishi Sunak in 2021 - even if the Tories win and cut National Insurance again. The Lib Dem manifesto and the Green Party's document have also outlined tax hikes.

But, where did Rishi Sunak get the £2,000 figure from - and what’s been the reaction to it? We’ve rounded up what you need to know.

Where does Rishi Sunak’s £2,000 Labour tax figure come from?

During the ITV election debate between Rishi Sunak and Sir Keir Starmer, Sunak said Labour’s policies would lead to a £2,000 tax rise for families. He told the ITV audience: “Labour will raise your taxes. It’s in their DNA. Your work, your car, your pension – Labour will tax it.”

Starmer responded by saying that the Prime Minister had “put pretend Labour policies to the Treasury” to come up with that figure. His party looks set to keep income tax, National Insurance and VAT levels where they are if, as the polls suggest, it wins the 4 July vote.

But it wasn't the first time the controversial £2,000 figure had been used. It actually originated from before the election. On 17 May, just days before the poll was called, the Conservatives published a dossier called ‘Labour’s Tax Rises’.

In this document, it said Labour’s plans for tax and public spending came with a £38.5 billion budgetary black hole. The party’s “unfunded spending would be equivalent to £2,094 per working household over the next four years”, the document claimed. This would work out as a £500 tax hike every year.

The first reason why this statement is controversial is that it is based purely on assumptions about what Labour's plans could be. We don't know what policies Labour will bring in, whether it will pay for them by putting up working taxes, or how ambitious the party will be with its spending.

Labour hasn’t published its manifesto yet, which will set out the party’s full plans and costings for government. It will be this document that we can use to judge their fiscal aptitude by.

The second reason is that, in the report’s foreword by Chancellor Jeremy Hunt, he states that the figures are “based on formal costings by HMT” - the implication being that Treasury civil servants had drawn them up.

While the costings will have been created using data compiled by Treasury civil servants, the final figures and interpretation of them is entirely down to the Conservatives. In a letter sent to Darren Jones, the shadow Chief Secretary to the Treasury, James Bowler - the top civil servant in the department - said: “Civil servants were not involved in the production of presentation of the Conservative Party's document 'Labour's Tax Rises' or in the calculation of the total figure used.”

A third and final reason why the £2,000 figure cannot be trusted is that it has been calculated very crudely. The Tories have taken the difference between tax raising measures and public spending (£38.5bn), and divided it by the number of working households in the UK (18.4 million). Of course, the tax system in the UK is a lot more complicated, with some households paying more than others.

How has Sunak’s Labour tax policy claim been received?

Leading Conservatives, including Claire Coutinho and Laura Trott, have doubled down on the Labour tax claim, while the party's social media accounts have been pushing the line: "If you think Labour will win, start saving".

On Thursday (6 June), Jeremy Hunt went further, penning a piece for the Daily Telegraph that challenged Labour to match Conservative promises to not hike capital gains tax, stamp duty or council tax. Labour has so far not responded to the policy commitments.

Instead, Labour has described the £2,000 claim and Hunt's challenge as "desperate". Labour leader Sir Keir Starmer also accused Rishi Sunak of “lying” on Wednesday (5 June) - a rare accusation in politics. He added: “What you saw is the prime minister with his back against the wall desperately lashing out and resorting to lies.”

In the run up to the TV debate, the Office for Statistics Regulation (OSR) sent a letter to all the major parties. Its chair, Sir Robert Chote, wrote: “We believe official statistics should serve the public good. This means that when statistics and quantitative claims are used in public debate, they should enhance understanding of the topics being debated and not be used in a way that has the potential to mislead.”

After Sunak made the £2,000 claim, the OSR opened an investigation into it. In its conclusion, published on Thursday (6 June), the independent public body criticised the way the claim was presented to the public, suggesting it misled voters.

Its report said: "Without reading the full Conservative Party costing document, someone hearing the claim would have no way of knowing that this is an estimate summed together over four years."  Independent fact-checking charity Full Fact described the £2,000 figure as "unreliable".

The Institute for Government (IfG) think tank is also unhappy with the Conservatives for not using its figures as they were intended. Part of its dossier claims that 'insourcing' - i.e. the act of taking services back under public control - would cost almost £6.5bn over four years. This is based on the assumption that “services are 7.5% less efficient if they are insourced” - the 7.5% figure coming from a 2019 IfG report.

However, the think tank's report was specifically about cleaning contracts. Its deputy director, Emma Norris, said on X/Twitter: “Our work does not support Sunak’s £2k tax rise claim. We said *in some cases* cost savings could be associated with outsourcing. But the evidence is limited and cannot be applied to all services. We make this clear in our work, but the Conservative claims last night ignored this."

What has Labour said about Conservative tax policy?

The Conservatives have not been the only ones making suspect claims about their main rivals’ tax and spending plans. Labour has had a go as well.

On 25 May, just days after the election was called, it published a document called “Conservatives’ Interest Rate Rise”. In it, the party claimed Jeremy Hunt “committed” to scrapping National Insurance Contributions in his Spring Budget speech. It said this would amount to a £46bn a year commitment that hasn’t been costed. What Hunt actually said in his Budget speech was that it was his party’s “long-term ambition” to scrap it, and later admitted that it would not happen until after 2030 at the earliest.

Labour’s document also listed other policies it said it expects to see in the Conservative manifesto, such as the abolition of inheritance tax. As with the Conservative attack on Labour’s tax plans, this is almost entirely based on assumptions of what will be in the Tory manifesto rather than anything concrete.

So, when Labour claims that the Conservatives have an annual £71 billion funding gap that would lead to a hike in interest rates, we have to take it with a pinch of salt. Until we have both parties' manifestos in front of us, we cannot draw any conclusions about costings.

The 4 July general election is just around the corner and promises to spice things up as we head into the summer.

As polling day approaches, you are probably already being bombarded by politics at every turn – from social media to the newspapers. But will it rear its ugly head in your portfolio too? This is an important question for many UK equity investors. 

The asset class has been unloved by investors for many years but has picked up in 2024, with the FTSE 100 soaring to record highs. The question now is: what are its fortunes going forward? 

So, could the election put the FTSE off its stride? Would a Labour or a Conservative government be better for investment markets? And does politics even have that much of an impact on equity market performance? We’ve looked at some of the key considerations. 

Can politics impact investment markets?

Politics undoubtedly has an impact on financial markets. Three moments in recent history will show you that.

First, consider the Brexit referendum. This is a prime example of where UK voters went to the ballot box and it had a significant (and sustained) impact on markets. UK equities are finally seeing some strength now, but their performance for the past eight years has been decidedly limp.

Secondly, look at Liz Truss’s disastrous mini-Budget in September 2022. A string of unfunded tax cuts caused the cost of UK borrowing to soar. The fiscal event also fuelled inflation and pushed mortgage rates up – the effects of which we are still feeling today. 

Finally, while it is in no way comparable to a UK general election or fiscal event, consider Vladimir Putin’s decision to invade Ukraine. 

Describing this as a political move understates the devastation it has caused at both a human and economic level. Nevertheless, it is an extreme example of how geopolitics can impact markets.

Europe’s overreliance on Russian gas caused an energy shock, which pushed up global inflation. In turn, this higher inflation prompted interest rate hikes from the major central banks. And rising interest rates caused all major asset classes to suffer losses in 2022. 

In other words, politics, economics and markets are closely intertwined. But where do general elections sit in all this? And should you be worried as the 4 July polling day approaches?

What impact can general elections have on UK equities?

Of course, none of the events described previously is directly comparable to a general election. Each could reasonably be described as a black swan event. Meanwhile, general elections are far more quotidian. They happen at least once every five years.

Nevertheless, research from AJ Bell suggests elections do have a market impact beyond the immediate ripples that surround polling day. The good news is that this impact is generally positive, according to the investment platform. 

Investment director Russ Mould says: “A study of all sixteen of the general elections since the inception of the FTSE All-Share in 1962 shows that the UK stock market is by no means frightened of a change in government and it may even welcome it."

“On average, the FTSE All-Share has recorded a double-digit percentage gain in the first year after an election which sees one prime minister ejected from office and another, new one ushered into it.”

He adds: “There are also greater average gains when a government changes relative to when it remains the same.” This could be good news for investors, given the polls suggest 10 Downing Street will have a new occupant come 5 July.

Source: AJ Bell and LSEG Datastream data. *1964/66 to 1970 Wilson governments and 1974/74 to 1979 Wilson/Callaghan governments counted as one term. 2019 Conservative government to 22 May 2024. 

Of course, in reality, it is not quite as straightforward as all that. When assessing the source of market returns, it is nearly impossible to distil political factors from other market drivers. 

John Stepek, MoneyWeek’s former executive editor, makes this very point in a recent edition of Bloomberg’s “Money Distilled”. He highlights some of the analysis that has been doing the rounds since the election was called. This looks at a range of Labour and Conservative governments throughout history and compares stock market performance throughout their terms.

“The FTSE 100 stuff is fun,” Stepek says, “but it’s not meaningful. You can’t reasonably compare the 1970s to the 1990s [...] and pretend that the critical variable was the political party in power at the time.”

In reality, markets operate in a delicate and complex ecosystem. Performance is dependent on a thousand different variables – from how individual companies are run, to where interest rates are heading, to how fast an economy is growing.

Things like politics and regulation are enormously important, but they don’t drive markets on their own. Investor sentiment is enormously important too. And while politics can both spook investors and boost their confidence, sentiment is notoriously difficult to predict.

Stepek points to comments made by economist Paul Krugman in the aftermath of the 2016 US election to make this very point. He says: “Krugman infamously told the New York Times on the day of the election that markets would ‘never’ recover and predicted an endless global ‘recession’. But within hours he’d been proved wrong, as prices flipped around and surged to new highs.”

The old adage about expecting the unexpected is generally good advice. In situations like this, diversification is an investor’s best friend.

How should I prepare my portfolio for the general election?

If what we have said previously is true, what is the logical conclusion? Should you sit pretty and do nothing every time voters head to the polls?

In short, probably not. Not all elections or political moves are equal. Markets like stability and, as we saw with Liz Truss, sudden U-turns on taxation and spending can cause big problems.

However, the good news heading into this election is that neither major party appears to have any big surprises up its sleeve. Both the Conservatives and Labour have said they are committed to maintaining economic stability. Both parties want inflation to continue to slow, and interest rates to start to come down.

What’s more, both know they will need to keep a lid on spending and adopt a sustainable approach to taxation if they are to achieve this. But that isn’t to say there hasn’t been a healthy degree of mudslinging.

Sunak has said that Labour has “no plan”, while casting the Conservatives as the party that will usher in lower interest rates (despite the fact that it is the Bank of England that makes monetary policy decisions). Meanwhile, Labour has said that the Conservatives’ plans on things like the triple lock plus pledge are “unfunded” and could result in further rate hikes down the line.

However, on key issues like income tax, both parties have committed to freezing thresholds until 2028. There is no desire among the Conservatives to repeat the mistakes of the past in an attempt to win votes. Likewise, while critics have often cast Labour as an anti-business party, shadow chancellor Rachel Reeves has been at pains to shake this image going forward.

“The prospect of a government spearheaded by Sir Keir and Rachel Reeves is unlikely to spark the sort of fear that would have been inspired by an administration whose driving forces were Jeremy Corbyn and John McDonnell,” says Mould. In fact, Reeves wants Labour to be known as the “party of growth” and the “natural partner of business”. 

In short, after a rocky few years, both parties appear to be charting a similar path in their commitment to financial stability. So while the election will undoubtedly cause short-term ripples, investors will be hoping to escape any long-term disruption.

Finally, while the election can feel all-consuming, there are other equally important factors you should be keeping an eye on at the moment when managing your portfolio. For example, the timing of interest rate cuts is likely to have even more of an impact on stock market performance.

Very few people spend as much time analysing the make-up of the Monetary Policy Committee (MPC) as they do the House of Commons, but arguably the MPC has far more of an impact on the performance of our portfolios.

With UK equity markets exposed to a broad range of global factors, the decisions of other central banks such as the Fed will have an important bearing too. In short, as well as keeping a close eye on domestic politics, investors should broaden their gaze to ensure they’re seeing the full picture.

The race for 10 Downing Street is over, with the Labour Party having won the general election 2024.

Sir Keir Starmer has romped home with a 170-seat majority that should give him significant leeway to fully implement the policy agenda he set out in his manifesto. This included pledges to reform wealth taxes, boost the property market, and widen access to physical banking.

The Labour leader has now moved into 10 Downing Street after formally being appointed Prime Minister by King Charles III. He will put together a cabinet team over the coming hours, after which his government will begin to lay out its policy agenda.

But what are the key dates you need to be aware of now the election result has been revealed? Here's everything you need to know.

When are the key 2024 general election dates?

5 July - general election result

We know that Sir Keir Starmer has formed a majority Labour government following his landslide election victory over Rishi Sunak. The key thing to look out for now is the appointment of the cabinet.

The major roles - like Chancellor of the Exchequer - will begin to be filled this afternoon, with less-important ministerial posts divvied out over the weekend. So, expect to see the likes of Rachel Reeves, Yvette Cooper, and David Lammy walking up Downing Street over the coming hours.

Tuesday 9 July

The next date for your diary is Tuesday 9 July. This is when Parliament will formally return.

MPs will line up to swear an oath to the King, before electing a speaker. The following few days will see your constituency MP learning the ropes - or getting their feet back under their old desk - before the Parliamentary calendar kicks off in a meaningful way.

Between this date and the King’s Speech (see 17 July), we may see some opposition party leaders step down from their roles. Rishi Sunak has already vacated the Conservative leadership, but has said he will remain in place until his successor is appointed by his party.

Next week, MPs will also decide who chairs the Select Committees that hold the government to account, as well as who should sit on them (parties are usually allocated committee seats depending on the number of seats they hold).

Wednesday 17 July

Wednesday 17 July will be the date when we get a full picture of what the new government’s priorities will be. King Charles will take part in the state opening of Parliament, which will see him read out the legislative agenda for the political year ahead. This speech is written by the government.

The King’s Speech is then debated by MPs over several days. We can expect to see the next government’s first bills begin to make their way through Parliament from 17 July onwards, but it could take several weeks before any meaningful change occurs.

It’s likely there will be a Parliamentary recess at some point, potentially in late-July or August. Start and end dates for this break in the political calendar have yet to be determined.

September/October

The last important post-election date you need to know about will be the new government’s first Budget - or fiscal event.

Given the market sensitivities around the Office for Budget Responsibility’s (OBR’s) assessment of the economic impact of policy announcements, there will be at least 10 weeks between the election and the date of the fiscal event. This is the amount of time it will take for the independent public body to produce its report.

Assuming the new government issues an instruction to the OBR on 5 July, the Budget or statement will not be able to take place until Friday 13 September. If the next government is superstitious, they may opt to move the Chancellor’s speech until the following week. There have been reports that Labour could wait until October to do a fiscal event.

It seems highly unlikely that either party would do a Budget without the OBR’s report. After all, it was one of the key reasons behind Liz Truss’s downfall after the calamitous mini-Budget in 2022.

Who was in power during the 2024 general election campaign?

After the dissolution of Parliament on 30 May (this has to happen 25 working days before an election), there were no MPs. Anyone who was an MP and wanted to stand again became known simply as a ‘candidate’. So, almost all constituency work ground to a halt until the polling date passed.

Despite there being no MPs, government ministers technically remained in their positions for what is known officially as the ‘pre-election period’. So, for example, Jeremy Hunt was still the Chancellor of the Exchequer up until 4 July. But there are restrictions about what ministers can do in their roles that are set out by convention.

According to the Institute for Government think tank, they aren’t meant to announce major new policies. They can act on an issue if delaying it until after the election takes place would be “detrimental to the national interest” or lead to a waste of public money. So, in theory, ministers keep things ticking along so that they - or a new government - can pick things up with as little disruption as possible after the polling date.

Government resources cannot be used for party political purposes, and ministers are not allowed to undermine the impartiality of the civil service. Announcements and communications are also restricted. Any breach of these conventions is likely to be a breach of the ministerial code, with the sanctions for breaking these ‘rules’ up to the incumbent Prime Minister.

The Lib Dem manifesto for the 2024 general election has been launched by the party's leader, Sir Ed Davey.

Titled 'For a Fair Deal', the document is centred around how the Liberal Democrats believe the UK can become a fairer society. It accuses the Conservative Party of "neglect" and of being "out-of-touch", adding that voters have been "let down and taken for granted" by Rishi Sunak's party during its time in government.

The manifesto aims to fix the NHS and social care, repair the "broken relationship" between the UK and EU - a key dividing line between the Lib Dems and the two main parties - and reform democracy by introducing proportional representation. It also contains several financial pledges.

Plans include closing capital gains tax loopholes, keeping the state pension triple lock, "properly" compensating WASPI women, taxing share buybacks, and raising the income tax personal allowance "when the public finances allow". There are also pledges to resurrect key elements of the Renter's Reform Bill, which was lost when the election was called, and raising house building targets to 380,000 a year.

It comes as the Liberal Democrats find themselves sitting fourth (on average) in the polls. But, despite being behind Nigel Farage's Reform UK party, the Conservatives' old coalition partners are expected to gain significantly more seats than the hard-right party.

Sir Ed Davey's party had 15 MPs in the House of Commons before parliament was dissolved on 30 May. Daisy Cooper is the Lib Dem deputy leader, while Sarah Olney is is Treasury spokesperson. The party says it has more than 90,000 members.

So, what money policies have the Liberal Democrats made in their election manifesto? We've rounded up the key points you need to know.

We have produced similar articles on what a potential Labour government could mean for your money, and what a Conservative win could mean for your finances. The UK's top two parties are set to reveal their manifestos this week.

How has the Lib Dem manifesto been received?

The Lib Dem manifesto (see the key pledges below) has so far had a mixed response from commentators. The general reaction has been that it is light on detail in some areas, and cuts a fine line between higher taxes and hoping something new will come along - although the party has definitely avoided a third possible path: austerity.

Paul Johnson, director of non-partisan think tank the Institute for Fiscal Studies (IFS), said there are “clear risks” that the party would be unable to raise £27bn a year (as it states in its costings document). He added that some of the tax raising measures the Lib Dems have settled upon “are an economically bad idea” - particularly its share buyback plans.

Johnson said: “[They] want to top up existing spending plans so that the state remains at around its current size, relative to national income - and hence considerably bigger than it was pre-pandemic. They propose a top-up to day-to-day spending plans to be funded by some big tax increases, on top of those currently in the pipeline.

“By focusing on taxing banks, energy companies and tech giants, many of these tax rises are intended to look ‘victimless’ - but of course they are not. We are already raising more from taxing companies than at any time in decades.”

He added: “Outside a few substantial pledges – notably the introduction of free personal care in England – the Liberal Democrats are promising a long list of small additional things they want the state to do. Together they would likely make it harder to address the big challenges with funding our core public services.”

Focusing on the share buyback tax, Russ Mould, investment director at AJ Bell, said it's “hard to predict” how companies would approach it. He added: “They could, in theory, simply increase their dividend payments and return cash via that mechanism instead, although that could raise the stakes during the next economic downturn as shareholders tend to take news of a dividend cut much harder than they do the announcement of a postponed or cancelled share buyback. They could conceivably invest more in their underlying businesses, although one change in tax may not be enough to shift their thinking on its own.”

But Mould suggested fears that firms could abandon the UK in the face of the tax might be too simplistic. He said: “The danger here could be that more UK plcs choose to leave London and head for New York. But it may not be quite so simple – at least if President Biden wins a second term in the White House in November.

“The USA already has a 1% buyback tax, which dates back to 2022 as part of the Inflation Reduction Act, and President Biden plans to hike that to 4% in his second term. If that happens it could persuade companies who are thinking of defecting to the New York Stock Exchange to think again.”

One of the Lib Dem manifesto’s other key pledges, preserving the state pension triple lock, has come in for criticism from the provider PensionBee. Beck O’Connor, its director of public affairs, said: “The state pension is a vital safety net for most retired households and must be preserved at a meaningful level. This is relevant not only for today’s pensioners but also for future generations.

“To preserve the State Pension, some form of index-linking is necessary as without decent and reliable rises to the state pension, it will be today’s young workers who suffer most when they reach their sixties and seventies, as personal and workplace pension savings are not currently at a level where they could even come close to replacing state pension benefits.”

But PensionBee said the Lib Dems’ plans to ensure gig economy workers don’t miss out on private pensions could help them to build up their retirement savings at an earlier date and reduce their reliance on the state pension in the future. It added that its commitment to Waspi compensation is “reassuring”.

Lib Dem manifesto pledges

Taxes

The Lib Dems have promised to “fund public services through fair taxes”, and to crack down on tax avoidance and evasion by bolstering the resources at HMRC’s disposal to the tune of £1bn a year - a move it believes could raise £7.2bn a year for the public purse by the end of the next Parliament. However, the party has also said it would pursue an income tax cut “when the public finances allow” by raising the personal allowance threshold.

One of its other headline policies is to “fairly” reform capital gains tax (CGT). It says it wants to “close loopholes exploited by the super wealthy” by adjusting CGT rates and “basing them solely on capital gains”. The party would also increase the CGT tax-free allowance from £3,000 to £5,000. This reform alone would raise more than £5.2bn a year for its investment plans by the 2028/29 financial year, it claims.

Sir Ed Davey’s party adds that it wants to reverse “Conservative tax cuts” for big banks by taking the Bank Surcharge and Bank Levy back to 2016 levels - a pledge it says would raise £4.3bn per year. It also plans a 4% tax on share buybacks by FTSE 100 companies (this would raise £1.4bn, it says), a “proper” windfall tax on oil and gas profits (£2.1bn), and a hike to the Digital Services Tax on social media firms and tech giants from a 2% rate to a 6% one (£2.1bn).

Other tax pledges the Lib Dems have made include a 16% “sewage tax” on water company profits (£260m a year by 2028/29), a new levy on tobacco company’s profit margins (£290m), and a “super tax” on private jets as well as the removal of their VAT exemption (£380m). The party claims it can raise £3.6bn by reforming the taxation of international flights so that frequent flyers pay more than “ordinary households” who take up to two return trips abroad a year.

The Lib Dems say they would review IR35 forms so that self-employed people would get fairer treatment. And it wants all products to carry a “short, clear version” of the terms and conditions they come with.

Pensions

The Liberal Democrats say they would implement “proper support” for people in retirement. Top of the party’s list of pension pledges is a commitment to maintaining the triple lock in its current form - despite warnings that the policy is becoming unsustainable to fund. Both the Conservatives and Labour have made the same promise, with the Tories announcing an extra layer to the policy, which it has called triple lock plus.

Another key pledge from the Lib Dems is to “fairly and properly” compensate WASPI women. However, it has not outlined a compensation package in its costings. The Parliamentary and Health Service Ombudsman said the cost of compensation could come in at £10.5bn.

Other aspirations the party has included in its manifesto include: ending the gender gap in private pensions, investing in state pension helplines to “ensure quicker responses to queries and resolution of underpayments”, and overhauling the processing system so that top-up payments are not lost. The party says it will also move to ensure gig economy workers don't lose out on pensions, and that it will require pension funds and managers to show that their portfolios are in line with the Paris climate change targets.

The Lib Dems also aim to help the elderly by introducing free personal care via a similar system to the one that operates in Scotland. This scheme would cover costs like nursing care and daily support, including hygiene and medication, for older and disabled people with high needs. They would also raise care workers’ pay, by introducing a carer's minimum wage, at £2 above the standard minimum wage. The party's costings suggest these policies could form part of an annual expenditure of up to £8.4bn on NHS and social care by 2028/29.

Investing

Should the Lib Dems get into power, they have made several pledges that could affect investors. One of the most eye-catching is a plan to forge a “clear, workable and well-resourced” framework for artificial intelligence (AI). It says this would give investors certainty while also promoting innovation.

Alongside this idea, Sir Ed Davey’s party wants to force all large firms listed on UK stock exchanges to implement net-zero goals, and report on their progress towards them. Financial services would face tougher regulation on the environment, with pension funds and managers required to demonstrate that their holdings are consistent with the Paris climate agreement. Regulators would be able to act if banks and large investors were not “managing climate risks properly”, the party states.

Meanwhile, all companies would have to have a “formal statement of corporate purpose” that factors in employee welfare and environmental standards, alongside a commitment to benefit shareholders.

The manifesto also sets out a plan to extend the remit of the ‘public interest test’ for when large or strategically important firms face a takeover by an overseas entity. This would include assessing the firm’s benefit to the UK economy, as well as the country’s workers and consumers. A Lib Dem government would also encourage listed firms with more than 250 employees to give their workers the right to request a shareholding in them. It will also push utility companies with a monopoly to adopt a public benefit model.

Energy

Under the Liberal Democrats, there would be a great deal of energy reform, the party’s manifesto suggests. It wants to make homes “warmer and cheaper” through a 10-year “emergency upgrade programme”. This scheme would see a rollout of free insulation and heat pumps for low-income households.

This scheme would form part of a wider effort to bring down energy costs for households. The manifesto says it also wants to create a heat pump installation scheme that covers the “real costs” of installation. The Conservative government’s Boiler Upgrade Scheme, which provided grants towards some of the costs associated with the installation of heat pumps, never met its targets.

The party has set its sights on driving "a rooftop solar revolution” by boosting incentives for households to get solar panels installed - for example, by guaranteeing a “fair” price for any electricity that gets sold back to the national grid. People would also be incentivised to buy EVs. The Lib Dems want it to be “cheaper and easier” to switch to them, and would resurrect the requirement for all new cars and small vans to be electric from 2030 onwards. It has suggested the cost of all of these measures would be covered by the £2.1bn it expects to raise through a heftier fossil fuel windfall tax.

These green energy pledges would be driven by the appointment of a “Chief Secretary for Sustainability in the Treasury”, who would work across government departments and with devolved administrations to push decarbonisation.

Property

The green revolution would also apply to the property market, if the Lib Dems get elected. As well as setting out a requirement for all new homes to be “zero-carbon”, the party will resurrect some of the key elements of the Renter’s Reform Bill. Landlords would be required to upgrade the energy efficiency of their lets to EPC C or higher by 2028.

An immediate ban on no-fault evictions would be brought in, with three-year tenancies becoming a default. A Liberal Democrat government would also create a national register of licensed landlords.

Other policies include a commitment to abolishing residential leaseholds and capping ground rents to a peppercorn fee. This would build on the watered down Leasehold and Freehold Reform Act, which managed to make it through Parliament before it was dissolved for the general election.

The Lib Dems added that they would implement more ambitious housing targets than Labour, with an aim to construct 380,000 new homes per year, including 150,000 social homes. The Conservative government has struggled to hit its house building targets over the last 14 years.

Its social housing plan would include a Rent to Own scheme that would allow people who cannot afford a deposit to own outright a property they have rented for a 30-year period, the manifesto says.

Public spending

The Lib Dems claim they can raise almost £27bn a year for the public purse by 2028/29 through their tax reforms (see ‘Taxes’ above). They also reckon they can save the taxpayer around £630m a year by cracking down on the use of external consultants in government.

One of its most eye-catching plans to raise tax revenues is to allow asylum seekers to work after three months. The party says this would cut the asylum backlog, saving the taxpayer almost £4.3bn whilst also bolstering tax and national insurance revenues.

And, in a clear dividing line with the two major parties, the Liberal Democrats have pledged to work more closely with the European Union. Their manifesto says they wish to remove "as many barriers to trade as possible" with the bloc, which the UK left in January 2020. Doing so would "help restore the UK economy" the party claims.

Overall, the manifesto makes a commitment to generate “stability, certainty and confidence” that it says are key to economic growth. It aims to do so by protecting the independence of the Bank of England and committing to accompany all fiscal events with Office for Budget Responsibility (OBR) forecasts.