Author: Talking Finances

In a decisive and historic victory, the Labour Party won the 2024 UK general election with a significant majority and Keir Starmer has become the UK prime minister after 14 years of Conservative government.

The new chancellor, Rachel Reeves, has already pledged to “fix the foundations” of the British economy in a bid to drive growth.

Read on to find out what a Labour government could mean for your finances.

National Insurance, Value Added Tax (VAT), and Income Tax set to remain the same

In their 2024 manifesto, Labour said they would not “increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT”.

Despite this, millions of people seem likely to face a higher Income Tax burden over the next five years as a result of fiscal drag. The party are set to continue the Conservatives’ freeze of the Personal Allowance and the thresholds at which higher- and additional-rate Income Tax are charged.

Notably, the party has offered no assurances about Stamp Duty, Capital Gains Tax (CGT) and Inheritance Tax, other than ruling out applying CGT to primary residences. Consequently, there is the potential for reforms or tweaks to these in the administration’s first Budget.

Indeed, Keir Starmer has already indicated that he will let the temporary increase in the Stamp Duty threshold for first-time buyers return to its previous level of £300,000 in April 2025 (it is currently £425,000).

What Labour are likely to do in the first Budget is to address what it calls “unfairness” in the tax system, and these could be some of the measures Rachel Reeves presents:

• Abolishing non-dom status and replacing it with a modern scheme for people genuinely in the country for a short period.
• Ending the use of offshore trusts to avoid IHT.
• Ending private schools’ VAT exemption and business rate relief. They plan to use this additional tax revenue to train more teachers, citing an estimated shortage of 6,000.

With Labour keen to increase investment in the UK economy, Jeremy Hunt’s proposal for a “UK Individual Savings Account (ISA)” could potentially make an appearance in the Budget too.

Maintaining the State Pension triple lock, and a likely “pensions review”

Labour has committed to keeping the State Pension triple lock in place.

The triple lock ensures that the State Pension rises each year by the highest of:

• Inflation, as measured by the Consumer Prices Index (CPI) in the September of the previous year
• Average increase in wages across the UK
• 2.5%.

The commitment means that the policy is likely to stay in place until at least 2030 at least.

During the election campaign, Labour also confirmed that, in a change from their previous stance, they have no plans to reintroduce the pension Lifetime Allowance (LTA).

The LTA capped the amount you could hold in your pensions without paying an additional tax charge when you accessed the funds. Chancellor Jeremy Hunt removed the additional LTA tax charge in April 2023, before abolishing the LTA altogether in April 2024.

Labour has said it will not reintroduce the charge to provide certainty for savers, and because they say it would be too complex to bring back the former rules.

On private pensions, the party has been more vague, promising reform after a review is conducted into the current system. Labour could well announce this review in the next few weeks – perhaps even in the first King’s Speech.

While Labour hasn’t outlined a detailed vision for change, its manifesto said the new system would be centred around delivering “better outcomes” for savers and retirees, as well as bolstering “security in retirement”.

This means there could be reforms further down the line, although these are unlikely to take place before the start of the 2025/26 tax year at the earliest, depending on the scope of the review.

Labour have said that they will act to increase investment from pension funds in UK markets.

The party plans to adopt reforms that “will ensure that workplace pension schemes take advantage of consolidation and scale, to deliver better returns for UK savers and greater productive investment for UK PLC”.

Interest rates set to fall, and ambitious housebuilding targets

One piece of good fortune the new Labour government will benefit from is that there will likely be a cut in interest rates within their first few weeks of office.

With inflation having finally reached the Bank of England (BoE) target of 2%, the BoE is predicted to cut interest rates at its next policy meeting in August. That will likely reduce the cost of your personal and business borrowing if you’re on a tracker- or variable-rate deal.

While you won’t immediately benefit from any cut if you’re on a fixed-rate mortgage, this could help you secure a cheaper deal when you come to next take out a home loan.

To tackle a property shortage, Labour has pledged to ensure that 1.5 million homes are built over the next five years.

The party wants to allow local authorities to earmark more green belt land for homes, while other planning policies the new government have outlined include:

• Reintroducing mandatory local housing targets scrapped by the Conservatives
• Funding additional council planning officers
• Reviewing green belt boundaries to prioritise brownfield and “grey belt” land to meet housebuilding targets
• Publishing new design codes, to try to raise the quality of the properties built.

One key pillar of the Labour manifesto was to help more young people onto the property ladder.

They say that they want to “give young people first dibs” on new housing developments and introduce a permanent Freedom to Buy mortgage guarantee scheme.

This permanent mortgage guarantee scheme will help prospective homeowners who struggle to save for a large deposit. Labour says their plans would support 80,000 young people to get on the housing ladder over the next five years.

Enhancing employee rights and the minimum wage could affect your business

If you own or run a business, Labour has confirmed a “new deal for working people” and says it will introduce legislation within the first 100 days of office. These plans include:

• Banning zero-hours contracts
• Ending “fire and rehire”
• Introducing parental leave, sick pay, and unfair dismissal rights from day one.

Labour also intends to reform the minimum wage, so it becomes a “genuine living wage”. Additionally, they plan to remove the age bands, so every adult is entitled to the same rate of minimum wage – potentially pushing up your salary costs if you employ under 21-year-olds. Note that there has been no clarification on whether an “adult” includes over-16s or over-18s.

An Autumn Budget?

The first significant date in the new government’s calendar will be the King’s Speech on 17 July. This will set out the next government’s legislative agenda and is when you’ll find out exactly what the new administration’s policy priorities are for the coming year.

Labour has previously said it would not deliver a Budget without forecasts from the Office for Budget Responsibility (OBR). Considering that it takes around 10 weeks for the OBR to assess the economic impact of policy announcements and produce a report, the earliest that the Budget could take place would be mid-September.

However, the Labour Party Conference will take place from 22 to 25 September, with the Conservative conference following between 29 September and 2 October.

Consequently, an October or November date is perhaps more realistic for the party’s first Budget. Rachel Reeves has confirmed she will set the date before the summer parliamentary recess.

Labour has also committed to one major fiscal event a year, giving families and businesses due warning of tax and spending policies.

It seems likely that, whatever reforms the party announce in their Autumn Budget, the timetable means that these will come into force at the start of the 2025/26 tax year. This should give you the opportunity to plan ahead of any proposed changes.

Markets have historically reacted positively to a change of government

With the likely result of the election already priced into markets, there was little movement in the FTSE 100 as news of Labour’s victory filtered through. The pound was largely unchanged against the dollar.

However, research by AJ Bell suggests that a change of government can be positive news for markets.

On average, the FTSE All-Share has recorded a double-digit percentage gain in the first year after an election result where one prime minister is ejected from office. There are also greater average gains when a government changes relative to when it remains the same.

Markets tend to dislike uncertainty, so a decisive election result could lead to a period of financial stability that may spark renewed investor interest in the UK.

Moreover, if Labour’s pension review leads to greater investment in UK companies, this could further enhance the attractiveness of UK equities.

Get in touch

If you have any questions about how the Labour administration could affect your finances, please get in touch.

The content of this article is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

Information is taken from the Labour Party manifesto.

When you think about what you want the future to look like, it’s probably not the value of your assets that comes to mind first. Instead, you might think about the experiences you want or the wellbeing of your loved ones

Yet, to build the life you want, money is usually an important factor. While you often hear that “money can’t buy happiness”, the reality is that your financial circumstances are likely to play a role in whether you can secure the lifestyle you want.

By making your financial plan as much about happiness as your wealth, you could work towards your long-term goals and improve your overall wellbeing.

Combining your financial goals and happiness could improve your wellbeing

There are several excellent reasons to consider both your wealth and happiness when creating a financial plan.

First, financial stress can be detrimental to your wellbeing.

According to findings from the National Debtline, almost half of people in the UK were worried about money at the start of 2024 – the equivalent of 24.9 million people. Only 22% of people said they were not at all worried and felt able to cope financially.

Indeed, a report from Aegon found even among top earners, 1 in 3 people worried about their finances. So, taking control of your finances could improve your overall mental wellbeing.

In addition, it could focus on how you use your wealth to deliver outcomes that boost your happiness over the long term.

Rather than focusing simply on wealth creation, a financial plan would consider what steps you need to take to be able to reach your goals.

For example, after reviewing your finances, you might decide to reduce your working hours to phase into retirement sooner than expected. While that could mean the value of your pension is lower than if you continued to work, the free time you’d gain could be far more valuable. You might use the freedom to spend more time with your grandchildren or indulge in a hobby that brings you joy.

Making happiness a key part of your financial plan may allow you to make decisions that balance getting more out of your life with financial security.

3 valuable ways making happiness part of your financial plan could improve it

1. It gives you a chance to define what makes you happy

While you might work hard to build a fulfilling life, when was the last time you really considered what makes you happy?

According to the Financial Wellbeing Index from Aegon, just 1 in 4 people are very aware of the day-to-day experiences that give them joy and purpose in life. Similarly, only 1 in 4 people have a concrete vision of the things and experiences their future self might want.

This disconnect could mean some people are making decisions that don’t align with the future they picture for themselves.

By basing your financial plan on happiness, it provides an opportunity to set out what could improve your wellbeing now and in the future.

2. It could enhance your motivation to follow a long-term plan

Sticking to a financial plan over a long period can be difficult. However, knowing that your efforts will help you create the life you want may improve your motivation and help you stay on track.

If you daydream about retiring early, having a financial plan that’s been tailored to this goal might mean you’re less likely to pause pension contributions to fund short-term expenses.

So, putting your happiness at the centre of your financial plan could improve the outcomes.

3. It may help you calculate how much is “enough”

While money can’t buy happiness, it certainly can play a role in creating a life that will make you happy. Effective financial planning could help you calculate how much is “enough” for you.

Whether your goal is to retire early, have the financial freedom to travel more, or spend time with your family, financial security is often important for peace of mind. A financial plan could help you get your finances in order, so you can focus on what’s more important – enjoying your life.

Contact us to devise a financial plan that focuses on your happiness

If you’d like to work with us to devise a financial plan that places your happiness and wellbeing at the centre, please contact us. We’ll work with you to understand your goals and circumstances to build a tailored plan that suits your needs.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The amount the government collects through Inheritance Tax (IHT) is on the rise, and freezes to allowances mean it’s expected to increase further. If your family could face a bill when you pass away, life insurance could provide a valuable way to cover the expense.

According to MoneyAge, the amount collected through IHT hit a record £7.5 billion in 2023/24.

An IHT bill could not only mean passing on less wealth to your loved ones, but it may be stressful too. The portion of your estate that exceeds thresholds could be liable for IHT at a standard rate of 40%, and your family might need to consider which assets to sell to cover the expense.

Understanding whether IHT may be due on your estate could help you make provisions that will ease the burden for your family.

If the value of your estate exceeds £325,000, it could be liable for Inheritance Tax

IHT is paid if the value of your estate exceeds thresholds when you pass away.

In 2024/25, the nil-rate band is £325,000 – if the value of all your assets is below this threshold, no IHT will be due. In addition, many estates can use the residence nil-rate band, which is £175,000 in 2024/25 if your main home is passed on to direct descendants.

So, you can often pass on up to £500,000 before you need to consider IHT. If you’re planning with your spouse or civil partner, you can also pass on unused allowances to them.

Importantly, the nil-rate band and residence nil-rate band are frozen until 2028, which is predicted to lead to more estates becoming liable for IHT.

Indeed, the Institute for Fiscal Studies estimates that by 2032/33, 1 in 8 people will have IHT due either on their death or that of their partner. As a result, IHT revenues are predicted to double over the next decade.

Life insurance can provide a useful way to pay Inheritance Tax

Life insurance won’t reduce how much IHT your estate is liable for. However, it could provide a straightforward way for your loved ones to pay the bill.

When you take out whole of life insurance, you’ll need to pay regular premiums to maintain the cover. When you pass away, a lump sum will be paid to your beneficiaries, which they can then use to pay IHT. It could mean your family doesn’t need to break up your estate or sell assets to settle the bill.

The cost of the premiums will depend on a variety of factors, including your age, health, and lifestyle. In addition, the level of cover you require will also affect the cost.

You can select the level of cover that suits your needs, so understanding the size of a potential IHT bill is important.

A good place to start is by assessing the value of your estate now. Your estate covers all your assets, from property and investments to material items.

You’ll then want to consider how the value of each asset could change during your lifetime. For example, the value of your property will likely rise.

If you’re not using savings and investments to supplement your retirement income, they could also increase in value over the long term. On the other hand, there may be assets you’ll deplete during your lifetime, such as your pension.

As a result, the potential size of an IHT bill could be difficult to calculate. A financial planner could help you get to grips with how the value of your estate might change in different scenarios so you can choose the right level of life insurance for you.

You may want to place life insurance in a trust if it’s for Inheritance Tax purposes

If you’re considering using life insurance to provide your family with a way to pay a potential IHT bill, it’s sensible to place the life insurance in trust.

Using a trust means it sits outside of your estate and won’t be included when calculating how much IHT is due. If you didn’t take this step, the lump sum that the life insurance pays out might be included in your estate, which would lead to a larger IHT bill.

You can set up a trust yourself but they can be complex and there are several different types. Seeking the services of a legal professional could minimise the chance of mistakes occurring and ensure the trust you set up suits your purposes.

Get in touch to talk about your estate plan

Life insurance could provide your loved ones with a simple way to pay an IHT bill, but there may be other steps you can take as well. As part of an estate plan a financial planner would review your circumstances and goals to understand how you could pass on assets effectively, including steps that may reduce an IHT bill.

Please contact us to arrange a meeting to talk about your estate.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

The tapering of the Personal Allowance means some higher-rate taxpayers effectively pay an Income Tax rate of 60%, sometimes without realising. Fortunately, if you’re affected, there could be ways to reduce your tax bill.

A report in the Telegraph suggests 1.35 million workers were affected by the 60% tax trap in 2023/24. Collectively, they paid an extra £4.7 billion to the Treasury. Read on to find out if you could unwittingly be paying a higher rate of Income Tax than you expect.

The tax trap affects those earning more than £100,000

You might think the highest rate of Income Tax is 45%, and officially you’d be correct. Most people pay the standard rates of Income Tax. In 2024/25, Income Tax rates and bands are:

Please note, that different Income Tax bands and rates apply in Scotland.

However, the Personal Allowance is reduced by £1 for every £2 you earn over £100,000. If you earn more than £125,140, you don’t have a Personal Allowance and pay tax on all your income.

For example, if you earn £101,000, on the £1,000 above the threshold, you’d pay £400 of Income Tax at the higher rate. In addition, you’d lose £500 of your Personal Allowance, so this portion of your income would also be subject to Income Tax at 40%, adding up to £200.

So, out of the £1,000 you’ve earned above the tapered Personal Allowance threshold, you’d only take home £400 – a 60% effective tax rate. It’s led to the tapering being dubbed a “stealth tax” in the media.

Further compounding the issue is the fact that the Personal Allowance and Income Tax bands are frozen until 2028.

While the thresholds are frozen, many people are likely to receive wage increases. As a result, more people are expected to be caught in the 60% tax trap in the coming years.

Don’t forget your salary might not be your only income that’s considered when calculating your Income Tax bill. For example, you could be liable for interest earned on savings that aren’t held in a tax-efficient wrapper.

Contact us if you’re unsure which of your assets could be liable for Income Tax.

3 legal ways to avoid falling into the 60% tax trap

If you’re affected by the tapered Personal Allowance, thinking about how you structure your earnings may provide an opportunity to reduce how much you’re giving to the taxman. Here are three excellent options you might want to consider.

1. Boost your pension contributions

One of the simplest ways to avoid paying 60% tax if you could be affected is to increase your pension contributions.

Your taxable income is calculated after pension contributions have been deducted. As a result, boosting pension contributions could be used to reduce your adjusted net income so you retain the full Personal Allowance or reduce the proportion you lose.

Increasing pension contributions could help you secure a more comfortable retirement too. However, keep in mind that you cannot usually access your pension savings until you’re 55 (rising to 57 in 2028).

2. Use a salary sacrifice scheme

If your workplace has a salary sacrifice scheme, it could also provide a useful way to reduce your overall tax liability.

Salary sacrifice enables you to exchange a part of your salary for non-cash benefits from your employer. This could include higher pension contributions, childcare vouchers, or the ability to lease a car.

By essentially giving up part of your income, you might be able to bring your taxable income below the threshold for the tapered Personal Allowance.

You should note that salary sacrifice options vary between employers, so it may be worthwhile to check your employee handbook to see if any options could suit you.

3. Make charitable donations from your income

If you’d like to reduce your Income Tax bill and support good causes, you could make a charitable donation. Again, by deducting donations from your salary before tax is calculated, you could manage how much of the Personal Allowance you lose.

Contact us to talk about how to manage your tax bill effectively

There may be other steps you could take to reduce your overall tax bill. A tailored financial plan will consider your tax liabilities, including from other sources, such as your savings and investments, to highlight potential ways to cut the amount you pay to the taxman.

If you’d like to arrange a meeting, please get in touch.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The BBC reports that heart-related deaths are at a 14-year high. One of the biggest risk factors is high cholesterol, a condition that over half of UK adults live with every day.

While high cholesterol can increase your risk of heart disease and strokes, there are some simple lifestyle changes you can make now which will help you control your cholesterol levels.

Read on to learn more about how cholesterol affects your health and how you can reduce your risk of heart disease.

What is cholesterol?

Cholesterol is a type of blood fat which plays crucial roles in how your body works, especially in your brain, nerves, and skin.

Cholesterol has three main functions:

• Creating vitamin D and steroid hormones to keep your bones, teeth, and muscles healthy
• Making up the membrane of all your cells
• Turning into bile, which helps to digest the fats you eat.

There are two main types of cholesterol: low-density lipoprotein (LDL) and high-density lipoprotein (HDL).

LDL is often referred to as “bad” cholesterol because an excess of it can harden in your arteries, making it tougher for blood to flow through. On the other hand, HDL carries cholesterol away from your cells and artery walls to the liver, where it’s broken down and excreted.

When people discuss dangerously high cholesterol, they are usually referring to high non-HDL levels.

What can cause high cholesterol levels?

Anyone can develop high cholesterol levels through a variety of factors, some of which you can control.

For example, all the below can cause high cholesterol levels:

• Smoking
• Drinking alcohol
• Being overweight
• Being physically inactive
• Eating too much saturated fat.

However, your cholesterol levels can also be affected by things you can’t control. For example, age, gender, and ethnicity can all affect whether you are more at risk of developing high cholesterol.

Furthermore, high cholesterol levels can be caused by some health conditions such as kidney or liver disease, type 2 diabetes, or having an underactive thyroid.

What are the risks of high cholesterol?

When you have an excess of LDL cholesterol, it can build up on the walls of your arteries and harden into plaque, which reduces blood flow and can lead to health problems.

The most common complications of high cholesterol are coronary artery disease, heart attacks, and strokes, which can all increase your risk of a heart-related death.

However, there are often no symptoms of high cholesterol levels, which means many people don’t realise they have the condition until too late.

If you would like to check your cholesterol levels, please speak to your doctor, who can arrange a blood test.

How can I lower my cholesterol levels?

Luckily, there are steps you can take to lower your cholesterol levels and, so, your risk of a heart-related death.

1. Keep active

Exercising regularly can raise your levels of HDL and lower LDL cholesterol.

The NHS recommends 150 minutes of moderately intense or 75 minutes of vigorous activity a week. However, even working out once or twice a week can be incredibly beneficial to your health.

2. Eat less fatty food

Cutting down on fatty food – especially that which has saturated fats in – can help to reduce your cholesterol levels.

Instead, switch to healthier foods, such as:

• Oily fish, like mackerel and salmon
• Brown rice, wholegrain bread, and wholewheat pasta
• Nuts and seeds
• Fruits and vegetables.

If you aren’t sure whether something contains saturated or unsaturated fats, you can check the label.

3. Eat more fibre

Adding more fibre to your diet can reduce the absorption of cholesterol into your bloodstream.

Fibre can be found in foods such as oatmeal, kidney beans, and apples.

Additionally, adding more dairy products into your diet can lower your LDL cholesterol and overall cholesterol levels thanks to them containing whey protein.

4. Quit smoking and drinking

If you smoke, now might be the time to consider quitting. Smoking makes LDL cholesterol “stickier”, so it is more likely to cling to your artery walls, as well as lowering your HDL cholesterol levels.

Additionally, if you regularly drink more than 14 units of alcohol a week, it might be beneficial for you to cut down. Ensuring you have several drink-free days each week and avoiding binge drinking can also reduce your cholesterol levels.

If you are struggling to cut down on your alcohol or smoking habits, speak to your doctor as they can offer you help and support.