Tony Wickenden: Unveiling Labour's Tax Plans for 2024

As the upcoming general election draws nearer, the public is eagerly anticipating the tax policies that will shape the future. While we will have to wait for the manifestos and party conferences to get a...

Tony Wickenden

As the upcoming general election draws nearer, the public is eagerly anticipating the tax policies that will shape the future. While we will have to wait for the manifestos and party conferences to get a clearer idea, it's worth exploring what the Labour Party might have in store, considering its current standing in opinion polls.

Former Labour leader Jeremy Corbyn and shadow chancellor John McDonnell proposed some radical policies that left people with a sense of unease. However, it is important to note that current leader Kier Starmer and shadow chancellor Rachel Reeves are keen to differentiate themselves from their predecessors.

Reeves has so far mentioned a few targeted tax increases that are not significant revenue raisers. These include ending or reducing the tax benefits of non-domicile rules, treating carried interest as earned income rather than capital gain, removing charitable status for private schools, and reinstating the lifetime allowance rules. However, her stance on capital gains tax rates and relief for high earners' pension contributions seems contradictory, as she had previously mentioned increasing taxes on wealth.

In an interview with the Financial Times, Reeves clarified that she has no plans to align capital gains tax rates with income tax rates or restrict relief for high earners' pension contributions. Additionally, she stated in an interview with The Telegraph that raising the top rate of tax and implementing any form of wealth tax are off the table. Reeves emphasized that there are no current plans, leaving room for potential future changes.

Labour faces criticism from the Conservatives, who claim that it is a tax-and-spend party. The expansion of the Ulez charging zone, which potentially cost Labour a by-election victory, is an example of this narrative. To counter these allegations, Reeves and Starmer are adopting a cautious approach, often referred to as the "Ming Vase strategy," where they carefully navigate the political landscape to avoid missteps that could jeopardize their chances of winning the election.

Reeves' comments have generated some discontent among the left-wing of the Labour party, which supports a wealth tax. It remains to be seen how these concerns will be addressed at Labour's pre-election conference in Liverpool on October 8th.

Despite the differing opinions within the party, financial planners and clients can find reassurance in the stability of capital gains tax rates. The proposal to tax capital gains in the same way as income, put forward by the Office of Tax Simplification, sparked concerns that have since been allayed. While the wealth tax debate has resurfaced with the efforts of various groups, Reeves' latest statement will be welcomed by those who could potentially be affected.

Undoubtedly, as we approach the election, questions about taxes and the actions to take will become increasingly prevalent. It is crucial for individuals to stay informed and understand the potential implications of different tax policies.

Tony Wickenden is the managing director of Technical Connection.

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