With the Labour Party winning a landslide victory at the 2024 General Election on 4 July, we set out their proposed plans for personal taxes and what this might mean for you.

Income tax and National Insurance rates/thresholds

In its manifesto, the Labour Party pledged to keep the rates of Income Tax and National Insurance for “working people”   unchanged.  The phrase “working people” has not explicitly been defined by Labour, potentially leaving them scope to be flexible with their policies and still claim they have honoured this commitment.

Additionally, Labour have previously commented that they will keep the current tax bands frozen as they are until 6 April 2028. 

Freezing the tax bands while maintaining current rates will likely lead to further 'fiscal drag,' where inflation pushes taxpayers into higher brackets without actual increases in real income. Similar policies have been seen in countries like Germany, where tax band freezing has been used to address fiscal challenges without immediate rate increases.

Capital gain tax (CGT) and private equity gains

The Labour Party’s Manifesto is silent on Capital Gain Tax (CGT), other than mentioning the treatment of private equity carried interest. This is currently taxed at 28%, but proposals are underway to tax this at the same rates as income tax (i.e. up to 45%).  

It appears likely that Labour will revisit CGT at some point in the near future, as the current top rate of 20% is much lower than the top rate for income tax (higher rates apply to carried interest and residential property).

In contrast, previous administrations have generally kept CGT rates lower to encourage investment. Labour’s approach signals a shift towards treating capital gains more like regular income.

An increase in CGT rates, along with a reduction in the annual tax-free gains exemption to £3,000 (down from £12,300), could trigger a significantly higher tax burden for those realizing gains on their investments.

You may wish to consider whether any capital gains can be realised now, with a view to trying to lock in the current CGT rates prior to any rise. This will obviously be easier for liquid assets such as listed shares/funds and more difficult for illiquid assets such as properties or shares in private/unlisted companies. Care should be taken as special rules can apply to certain assets e.g. the bed and breakfasting rules for shares which prevents rebasing unless  there is a 31-day period or longer between a sale and repurchase.