The Daily Telegraph - Saturday - Money
Five money moves to make before a Labour win
With Tories running out of time to turn around opinion polls, Charlotte Gifford looks at how to protect your wealth from a Starmer government
The Autumn Statement was one of two final chances for the Conservatives to win back voters in time for the next general election. Jeremy Hunt on Wednesday announced tax cuts for 29m workers, as well as the biggest tax break for businesses in 50 years.
But it still might not have been enough to turn the tide for the Conservative Party. If an election was called today, 46pc of the country would vote Labour and only 25pc Conservative, according to the latest Ipsos opinion poll.
Rachel Reeves, the shadow chancellor, said after Hunt’s speech that the Tories’ time is up. “They have held back growth, crashed our economy, increased debt, trashed our public services, left businesses out in the cold and made life harder for working people. Our country cannot afford five more years of the Conservatives.”
Britain’s middle classes are now bracing themselves for a Labour win at the next general election, which must take place before January 2025. A major concern is what impact the change in government will have on household wealth.
Sir Keir Starmer, the Labour leader, has ruled out explicit wealth taxes, however his proposals to scrap the non- dom status, add levies to private schools and reimpose limits on pension savings have fuelled fears that many could face a rise in taxes and other costs. Here are the actions you could consider taking to protect your wealth from a Labour government.
1
PROTECT YOUR PENSION In the March 2023 Budget, Hunt made the shock decision to abolish the lifetime allowance ( LTA), a tax charge on pensions worth more than £1.073m.
Labour was quick to condemn the move, calling it a “tax cut for the rich”, and promised to reinstate the LTA if it won the next general election.
Around 250,000 people aged 55 to 64 could have an LTA issue if it is reintroduced at its previous level of £1.073m, according to estimates by pensions consultants LCP.
Previously, savings over the limit were taxed at 55pc if the money was taken as a lump sum or 25pc plus income tax if taken out gradually.
But reversing the change is far easier said than done, especially now that HMRC has confirmed the scrapping of the LTA in a policy paper published on Wednesday.
Fortunately, even if the cap is reintroduced, savers who have made the most out of Hunt’s rule change may still be able to protect their pension pot.
Since it was created in 2006, the lifetime allowance has been reduced multiple times. In response, HMRC has introduced protections so those over the new limit could claim an exemption.
2
CONSIDER SELLING ASSETS TO AVOID CGT
An attack on capital gains tax rates could be on the cards if Labour gets into power, despite the party’s claims.
Capital gains tax receipts have been skyrocketing as landlords and company owners sell up, hitting a record £18bn in 2022- 23. The Conservatives have already dramatically scaled back relief given to sales and payouts that incur capital gains and dividend taxes.
But under a Labour government, the tax take could grow ever bigger, accountants fear. In 2022, the Office of
Tax Simplification, a now disbanded Quango, called for the rates to be aligned with income tax rates in order to close the gap between earned and unearned income.
Currently, basic-rate taxpayers pay 18pc on their profits from the sale of a second home and 10pc for shares while higher-rate taxpayers pay 28pc and 20pc. To take advantage of today’s low rates, those sitting on large capital gains may want to consider selling up ahead of the next election.
3
PLAN FOR PRIVATE SCHOOL FEE RISES With a Labour victory looming, one of the biggest concerns for many middle-class parents is the prospect of rising private school fees.
Sir Keir has said if he becomes prime minister he will charge 20pc VAT on private schools in his first year.
The Labour leader previously planned to strip private schools of their charitable status but he has since backed down on this after the legal complexities became clear.
However, the U-turn may make Sir Keir “even more determined” to push ahead with the VAT proposals, said James Ward, of law firm Kinglsey Napley. One option – if you can afford it – is to pay for your child’s education upfront. A number of schools offer “fees in advance” arrangements, which could save parents potentially £ 60,000 in fees by allowing them to benefit from the current VAT exemption.
4
USE INHERITANCE
TAX RELIEFS
Labour is reportedly considering scrapping two valuable inheritance tax exemptions – agricultural and business property relief – designed to let families pass on farms and businesses without paying the 40pc levy.
It is unclear whether Labour is considering abolishing both exemptions in their entirety, or reforming them but keeping protections for farmers in places.
If the reliefs are scrapped, then families could be forced to sell their businesses and farms in order to pay inheritance tax.
5
LEAVE THE UK OR SHELTER ASSETS TO AVOID HIGHER TAXES FOR NON-DOMS High earners have already been leaving Britain in large numbers, attracted by the lifestyle – and low tax – of hubs like Dubai and America.
Labour plans to scrap the “non- domiciled” tax regime that lets wealthy individuals earn foreign income tax-free for up to 15 years.
A spokesman for Labour said: “After 13 years of economic failure under the Conservatives, working people are worse off with higher mortgage bills, higher taxes and prices still rising in the shops.
“Labour would get the economy growing again so we can boost wages, bring down bills and make working people in all parts of the country better off.”