On Thursday 4th July, Britain went to the polls for the general election. The Labour Party won a resounding majority, ending 14 years of Conservative rule. Over recent years, Labour has sought to portray itself as a safe pair of hands, to be trusted with the nation’s finances. To do this, it was relatively clear what tax changes it would make – and not make – if elected.

In this post, we look at what tax changes to expect under the new government.

Income tax changes

Labour has said it will not raise income tax. However, it has said it will keep income tax bands frozen until April 2028. This will drag more people into tax. This is because factors like inflation and growing wages will push more people into the basic, higher and additional income tax bands.

That said, Labour has proposed one change that will affect private equity fund managers. Such managers are usually remunerated by something called ‘carried interest’. Managers essentially get a share in the profits of a fund. These payments are subject to capital gains tax. The new Chancellor, Rachel Reeves, has said that carried interest will become subject to income tax instead – unless the private equity managers have put their own capital at risk. This will mean managers paying significantly more tax.

National insurance and VAT

Labour has committed to not increasing national insurance and VAT. In theory, these should remain at least static for the duration of this parliament.

Capital gains tax

Prime Minister Keir Starmer has not made any specific announcements regarding CGT. However, unlike with income tax, national insurance and VAT, Labour has not categorically ruled out CGT tax changes.

VAT on school fees

One of Labour’s flagship policies is to make private school fees subject to VAT. This will push up costs for parents, although some may be absorbed by individual schools. Some parents are trying to ‘lock in’ a lower price by paying several years’ worth of fees in advance. However, this could be a risky response to the tax changes. There are currently reports that Labour plans to close this pay-in-advance ‘loophole’.

SDLT tax changes

There will be a very specific change to stamp duty land tax (SDLT). Currently, if you’re not a UK resident for SDLT purposes, you pay a 2% SDLT surcharge on UK property purchases. This will increase to 3%.

Non-dom tax changes

In the Spring Budget 2024, the then Chancellor Jeremy Hunt announced major reforms to the non-domiciled tax regime. These were not passed into legislation because of a lack of parliamentary time. However, Labour has said that it will close “the loopholes which allow some ‘non-dom’ mega rich people who live in the UK to avoid paying tax.” As a result, expect new legislation in this parliament to make major tax changes to the non-dom system.

Inheritance tax changes

Labour has largely kept silent on the topic of inheritance tax. However, it does intend to close one loophole. The party has said: “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”.

Windfall tax

Labour will make changes to the energy profits levy to raise additional income. The levy will be extended until the end of this parliament. The rate will go up three percentage points. Labour will also remove what it calls ‘unjustifiably generous’ investment allowances.

Tax avoidance

Labour says it wants to clamp down on tax avoidance. It has various plans to do this, including boosting HMRC compliance staff numbers and activity. It will also consider legal changes that help deter tax evasion.

Business tax changes

Labour hasn’t yet published detailed plans for business tax changes. However, it has said it will cap corporation tax at 25% for the duration of this parliament. It has also announced that it will “publish a roadmap for business taxation, setting out our plans on business tax over the duration of the parliament.” We will report on these tax changes as they occur.


Labour has been clear about its tax plans, which does help with planning and provides a level of certainty. However, some people will face major tax changes – particularly those who pay school fees, are private equity managers or who have non-dom status. If you would like any tax planning advice, talk to one of our friendly experts today.

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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    About Karen Jones

    Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.

    With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.

    Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”

    Karen’s specialist skills:

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