The Labour Party has won a big victory in the general election on 4 July 2024, and Rachel Reeves, the new Chancellor, has promised a fresh approach to growth. Here's a look at what Labour's plans could mean for businesses and taxes.
Boosting the Economy
Labour's top priority is kickstarting economic growth. They plan to launch a National Wealth Fund to invest in new industries and attract private investment. An Industrial Strategy Council will be set up to provide expert advice and end short-term economic policies.
Business Taxes:
Labour wants to give investors certainty by introducing a business tax roadmap for the next parliament. They promise not to raise the main rate of corporation tax above 25%, keeping it the lowest in the G7. They also plan to keep full expensing and the annual investment allowance for companies and self-employed individuals.
Business Rates:
The current business rates system will be replaced to level the playing field between high street shops and online giants. Labour will also support small businesses by tackling late payments and reforming the British Business Bank to make it easier for SMEs to access capital.
Taxes on Working People
Labour has pledged not to increase National Insurance Contributions, income tax rates, or VAT. However, they didn't mention changes to income tax thresholds, which may still be frozen until 2028/29, leading to more tax being paid due to fiscal drag.
Non-Domicile Rules
Labour plans to abolish the non-domicile regime. They broadly agree with the Conservatives' recent measures, including taxing overseas income after four years and worldwide assets after ten years of residence. Labour also plans to increase the stamp duty surcharge for non-UK residents buying property.
Closing the Tax Gap
Labour aims to raise £5.23 billion per year by 2028/29 by closing tax loopholes and reducing tax avoidance. They will invest £855 million annually in HMRC to strengthen its powers, improve technology, and focus on tax avoidance by large businesses and wealthy individuals.
Planning System Reforms
Labour will consult on reforming the National Planning Policy Framework to boost housebuilding and infrastructure. They will restore mandatory housing targets, support local authorities with more planning officers, and prioritize developing brownfield and grey belt land. The ban on new onshore wind projects in England will end, with decisions on large developments taken nationally.
Employment and Skills
Labour plans to introduce new employment rights legislation within 100 days, including banning zero-hours contracts, ending fire and rehire practices, and providing basic rights like parental leave and sick pay from day one. They also aim to ensure the minimum wage is a genuine living wage for all adults and replace the Apprenticeship Levy with a more flexible Growth and Skills Levy.
VAT on Private School Fees
Labour plans to end the VAT exemption on private school fees and remove business rates relief for private schools, raising an estimated £1.51 billion by 2028/29.
Energy Profits Levy
Changes to the Energy Profits Levy on oil and gas companies include extending the sunset clause, increasing the rate by 3%, and removing certain investment allowances. These measures are expected to raise £1.2 billion per year by 2028/29.
When Can We Expect a Budget?
Labour is not expected to hold an Emergency Budget but will announce a date for a full Budget with a forecast from the Office for Budget Responsibility. We might see some measures introduced earlier, like the business tax roadmap or employment rights legislation.
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Understanding these changes can be complex, but we're here to help. If you have any questions about how these updates affect your business, then just get in touch.