A new Labour government – what will it mean?

Image source – https://commonslibrary.parliament.uk/research-briefings/cbp-10009/

There is a lot of speculation around the new Labour government and the effect this will have on investments, pensions and tax. We think the key is not to panic and make knee jerk changes for several reasons:

RB clients will have most of their investments in portfolios that are diversified across different countries, industrial sectors and asset types. We in the UK like to think of ourselves as the centre of the world, but what happens here is only one factor in many that affect market performance and the world economy in the short and long term.

In the short term, markets do not like surprises – with opinion polls largely unchanged for months, this election victory was hardly a shock. Labour have been at pains to highlight their fiscal and financial caution and markets seem happy to give them time to prove this. 

Maybe we should say thank you to Liz Truss – yes, you won’t hear that phrase very often!  However, her short-lived government provided a very recent example of the need for caution rather than radical economic policies. Sensible, and even boring, is no bad thing after the tumultuous last few years.

So what about tax? Labour have committed to not raising Income Tax, VAT and National Insurance. That still leaves possible changes to Capital Gains Tax and Inheritance Tax. Our advice is the same as when speculation mounts around every budget – to make decisions based on facts, not guesses, and what is right for you, your family and your financial plan.

There is a lot of talk about changing pension rules and allowances and the end of preferential inheritance tax treatment. If these do come to fruition, recent history tells us that previous changes under both Conservative and Labour governments have always had an element of transitional allowance, to allow for planning before changes come into force. 

Finally, things might get better! Inflation has fallen, interest rates look set to start to come down this year and the economic outlook looks relatively optimistic. After all, a few weeks ago, there are not many that would have predicted England would make it to the Euros semi-final after a clinical and competent penalty shoot-out on Saturday!

Let’s watch this space. And as always, if you have any concerns about your financial plan, please get in touch. We’re here to help.

With best wishes,

Antony, Gillian, Dan and John

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