Wow’s General Election Summary

As predicted, Labour has won the general election. What has come as a surprise, is the scale of the victory - this seismic shift in government means that the Conservatives have suffered their worst defeat in the party's history. 

With such a large majority, Labour could have the power to pass legislation with relatively little opposition. Specifically what this could mean for businesses isn’t clear, but we could see changes to employment legislation and almost certainly an increase in tax rates. 

After years of chaos, we could be in for a period of political stability, which regardless of your personal politics can only be a positive move for the country - the economy and businesses included. 

For our clients, we have outlined below what the financial landscape may have in store. If you are a Wow client, we’ll monitor and analyse these changes as Labour settles in. We’ll be in touch as and when things might affect you or your business, but you can always get in touch if you have any questions or concerns.

Based on Labour’s manifesto, we're expecting to see a shift in the following areas:

Income Tax

Labour has confirmed they will not make any changes to Income Tax or National Insurance (NI) rates and thresholds. With increasing salaries and money not going as far as it used to, this could be seen as a real-term increase. If you're a client, Wow’s tax team can support you and ensure that you are being remunerated in the most tax-efficient manner.

Unlike their political rivals, Labour has not expressed any desire to scrap NI - so we can expect to continue to pay NI throughout their time in power.

Corporation Tax and Company Tax Reliefs

Along with promising to keep Corporation Tax at 25% for the entirety of their time in government, Labour has also promised to change this rate when necessary, should other countries make tax changes which impact the competitiveness of the UK rate. 

Also bear in mind that:

• Labour has confirmed they will keep the recently introduced permanent full expensing for small businesses - they have indicated that further clarification on this topic will be revealed, likely in an upcoming financial statement. 
• Though not specifically mentioned in the manifesto, in Labour’s press release ‘Business Partnership for Growth’, Labour stated that Research and Development (R&D) tax credits will remain ‘stable’. It is expected that the new government will keep the current R&D scheme and continue to crack down on fraudulent claims. 
• There are talks of possible enhanced rates of R&D relief for specific sectors, the government will be looking at this on a sector-by-sector basis starting with the Life Sciences.

If R&D is something that you haven’t explored in the past, but think might apply to the work you’re doing in your business, please get in touch and a member of the Wow R&D team would be happy to explain the details and see if we can help. 

Other taxes

One of Labour’s most controversial manifesto points was to stop the VAT exemption on private schools. The result of this is that parents who have children in independent schools may face a 20% tax on the cost of their children’s education if this is passed on by the school. 

Based on what the new government said in their election campaign they intend on bringing this into place quite quickly. 

However, logistically we could see this delayed until the following academic year (September 2025). The earliest this change could be in place would be the start of the school spring term (January 2025) as it would only be in place once the law has been passed. 

As a Wow client, if you are concerned about the addition of VAT to your children's school fees please speak with either your Lead Adviser or the tax team and we can discuss how best to plan for this potential increase.

It’s also worth noting that:

• Very little has been mentioned in the Labour Manifesto regarding inheritance tax (IHT), other than the plan to scrap the use of overseas trusts for IHT planning. This could be an indication it is an area the government may look to explore change in the future. 
• Labour has also remained silent on plans for Capital Gains Tax (CGT) rates and relief. This is in stark contrast to their promise to keep income tax, NI, corporation tax and VAT at current levels. This suggests to us that this could be an area Labour targets to generate income. In the past, we’ve seen suggestions that CGT may be brought in line with income tax rates. 

Any changes to the rates and reliefs we’d expect to be gradual and not immediate. As a result, if any changes come in we hope that there would be an opportunity to plan for it.

Summary

Over the Conservatives’ reign, we’ve had a surprising number of Budgets and financial statements to cover for our clients here at Wow! Labour’s first Budget is expected ten weeks after the election, however, it could come sooner.

Going forward, the government has promised that there will be one Budget every Autumn, at least four months before the new tax year.

Labour is promising economic growth which we’d love to see - however the road to growth we anticipate will be long. We’ll continue to keep clients up to date with any relevant changes to the economic landscape, and as always we’re here to support you and your business whatever the circumstance or impact the change in government has.

Get in touch

If you’re a Wow client and would like to discuss any of the above, you can always contact your Lead Adviser or email the tax team directly (tax@thewowcompany.com). We’ll also be including further information and advice in this month’s Lead Adviser Briefing email, so keep an eye on your inbox.

For non-Wow clients, book a call if you’d like to speak to the team about how we could help your business. Please note we specialise in agencies and consultancies with £1m+ turnover.