What the new Labour government means for your money

Now that the dust has settled on the election, and the red confetti swept away, we can take stock of what a Labour win will mean for your money, and how you can prepare. Unsurprisingly, for a campaign based on the idea of change, there are plenty of things in the pipeline.

Taxes will rise

The tax hike hiding in plain sight all along was that Labour doesn’t plan to do anything about the freeze on income tax thresholds — which is in place until April 2028. Already those frozen thresholds have meant 4.4 million more people paying income tax — including just under 2 million people over the state pension age.

This is going to take a toll over the next four years, and someone earning £30,000 and getting pay rises of 4% a year will pay £620 more in tax between this tax year and the end of the freeze in 2028.

There will be welfare reform, but not necessarily higher payments

During the campaign, Labour promised to reform welfare to tackle poverty.

However, despite being a major factor in child poverty, the party has not committed to ending the two-child policy, which limits benefits to the first two children in a family.

You may get better rights at work

A big part of Labour’s offering is to encourage more people into work, and make changes to the workplace to ensure fewer working people need state support.

Read more: Pound rises after Labour's landslide victory in UK general election

Rachel Reeves has said she will tackle the gender pay gap and strengthen women’s rights at work.

Labour has also said it will improve workers’ rights across the board including a ban on zero hours contracts; ending fire and rehire; and introducing rights to parental leave, sick pay, and protection from unfair dismissal from day one.

Ifyou’re on minimum wage you’ll get a pay rise

Labour says it will ensure the minimum wage takes account of the cost of living. It will also get rid of the age bands, so all adults are paid the same hourly minimum wage.

Renters’ rights will improve

Labour has promised to end no fault evictions for renters, allow tenants to challenge unreasonable rent increases, and raise standards.

However, it’s worth pointing out that by raising the standards, it will make life more expensive for some landlords, who could pass the costs on in the form of higher rents. Ironically, it could mean measures designed to improve life for renters actually end up making things harder.

Savings rates are likely to fall

The most competitive savings rates are still offering more than 5%, thanks to the fact that the election helped postpone a Bank of Englandinterest rate cut until August or September.

Read more: What a Labour government needs to do for pensions and work in the first 100 days

Now that the election is out of the way, a cut is on the way, and as a result, savings rates are likely to fall. This would have happened regardless of who won, and isn’t going to involve a major shift, because rates aren’t going anywhere in a hurry. However, savers may want to lock in better deals while they can.

Mortgage rates are likely to fall slowly

Changes in the mortgage market depend partly on interest rates — which are set to fall very gradually.

Mortgages also react to what happens to the bond markets. The fact that Labour has been emphasising the importance of fiscal responsibility and that its manifesto was fully-costed, means there’s unlikely to be anything to frighten the horses in the bond market. It means both variable and fixed-rate mortgages are likely to ease slowly in the coming months.

Stamp duty on property will rise in March

The infamous mini-budget in September 2022 brought in cuts to property stamp duty, which Jeremy Hunt hastily converted to a holiday until March 2025.

Labour has said it has no plans to extend it, so at this point the threshold will drop from £250,000 to £125,000 and first-time-buyers’ relief will drop from £425,000 to £300,000.

Property prices could fall in the long term — but not necessarily

Labour says it will help people get onto the property ladder by building more houses. What happens to prices depends partly on how these plans turn out.

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If it can bring supply and demand back into a better balance, it will help younger people get onto the property ladder without having to over-stretch themselves.

On the other hand, if supply is boosted faster than demand, it could mean prices fall. However, there’s not much to fear from this because the number of overall households continues to grow, suggesting there’s a lot of pent-up demand, and there’s a limit to how many properties can be built in a year.

There will be VAT on private school fees

If the cost is passed on, this will be yet another challenge for anyone who sends their child to private school — on top of runaway fee rises in recent years.

However, anyone tempted to consider one of the schemes that are claiming to get around VAT should think twice. Rules are highly likely to include measures designed to catch these schemes out.

You may pay more tax on savings and investments

Labour hasn’t said anything about capital gains tax, dividend tax or the personal savings allowance, so there has been plenty of speculation that it could be planning to hike any one of them.

However, even if the government doesn’t make any tweaks at all, you could still pay more of these taxes.

Read more: How to choose between saving and investing your money

Capital gains tax and dividend tax rates depend on your marginal tax rate, so if the frozen income tax thresholds have pushed you into a higher rate of tax, you’ll pay more on these things too.

The same is true for savings, but to make matters worse, the allowance shrinks as you cross the thresholds as well. It’s one reason why anyone who stands to make any interest on savings or gains or income from investments, should consider an ISA, to protect themselves from additional tax.

The state pension triple lock is safe

The triple lock is here to stay, giving retirees certainty on how their state pension will be uprated in the next parliament.

However, with costs continuing to rise, Labour will walk a tricky tightrope between keeping the triple lock and not overburdening the working population. It remains to be seen whether in an effort to ensure this is sustainable, the state pension age will need to rise more quickly than currently planned.

Pensions tax could be under pressure

This is ripe for tinkering whenever a government needs money. Rachel Reeves suggested years ago that pensions tax relief should be given at a flat rate — boosting the contributions of basic rate taxpayers, but cutting it for those who pay higher or additional rate tax.

Read more: How to make sure you don’t get underpaid when it comes to state pension

During the campaign, Labour made it clear that it didn’t have any immediate plans for this change, but it hasn’t been ruled out in the long run.

Energy bills should get marginally less frustrating

For people who have been feverishly cutting back on energy use in an effort to reduce their bills, hefty standing charges have been a real thorn in their side — because they remain the same no matter how much you cut back.

Labour said it would tackle this, as well as investing to upgrade the energy-efficiency of homes.

There could be support for drivers

In addition to fixing potholes, Labour has pledged to tackle runaway car insurance premiums, by working with the Competition and Markets Authority and the FCA to investigate whether the system currently penalises those on lower incomes.

Watch: 'Change begins now': says Starmer after UK election win

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