How Labour’s Victory Could Impact Your Business

Labour began its celebration of a significant victory on Friday morning, claiming a majority that fell short of its last landslide success in 1997. With this newfound power, Labour’s manifesto for change promises to shape the next five years of Parliament. While not revolutionary, these proposals are far-reaching, and it’s crucial to understand how they could impact you and your business.

Our expert team has been analysing Labour’s plans to help you navigate and plan effectively for the future. Here are the key areas we’ve identified:

The Economy: Navigating Economic Challenges
Labour inherits a struggling economy and aims to turn the tide with two primary fiscal rules: balancing the current budget and reducing debt as a share of the economy within five years. With a focus on investment over austerity, their economic strategy seeks to rebuild public finances while prioritising future growth. Understanding these fiscal rules and their potential challenges will be essential for businesses planning their financial strategies.

Tax Compliance: Enhancing HMRC’s Powers
Labour aims to invest in HMRC to modernise its operations and focus on tax avoidance by large businesses and the wealthy. This increased scrutiny and enhanced powers mean that businesses must prioritise robust tax compliance to avoid potential investigations and penalties.

Business Taxation: Providing Certainty
Labour plans to cap the top rate of Corporation Tax at 25% for the Parliament’s duration and retain investment incentives like the Full Expensing scheme. Replacing the current business rates system aims to level the playing field between high street businesses and online giants, fostering a more favourable environment for investment and growth.

Personal Finances: Tackling the Cost-of-Living Crisis
Labour aims to address the cost-of-living crisis through various measures, including:
Energy Costs: Launching the publicly owned Great British Energy, backed by an £8.3 billion investment.
Food Prices: Reducing barriers and costs for businesses to lower food prices.
Childcare: Expanding access to childcare with free breakfast clubs in primary schools.
Affordable Housing: Increasing the availability of affordable housing options.

These initiatives are designed to relieve financial pressure on individuals, potentially boosting consumer spending and economic growth.

Personal Tax Allowances: Keeping Taxes Low
Labour promises to keep taxes on working people as low as possible, with no increases in National Insurance, Income Tax, or VAT rates. However, the freeze on tax rates until 2028 means many will see higher taxes due to inflation. Effective tax planning will be crucial to maximise available allowances and reliefs.

Investment: Encouraging Private Investment
Labour’s £7.3 billion National Wealth Fund seeks to boost private investment through key projects like port upgrades, gigafactories, steel industry revitalisation, and green hydrogen manufacturing. A new 10-year infrastructure strategy and streamlined planning laws aim to facilitate these initiatives, potentially benefiting businesses through improved productivity and connectivity.

Small Business Support: Targeted Assistance
While specific plans for small businesses are limited, Labour’s policies on late payments, exporting, and reforming the British Business Bank aim to support SMEs. These measures could improve cash flow, open new markets, and provide easier access to growth capital.

Non-Domicile Status: Major Changes Ahead
Labour plans to overhaul the non-domicile status, focusing on ensuring everyone in the UK pays their fair share of taxes. This includes ending the use of offshore trusts to avoid Inheritance Tax. Non-doms should closely monitor these changes and seek professional advice to navigate the transitional period.

Fiscal Events: Stability and Predictability
Labour intends to hold only one fiscal event annually, providing stability and predictability in financial planning. Reforms to the Office for Budget Responsibility (OBR) will ensure all taxation and spending changes are independently forecasted, aiding in better planning and compliance.

Employment Law and Pay: Enhancing Worker Rights
Within the next 100 days, Labour plans to introduce a comprehensive employment reform package, including:
– A real living wage aligned with living costs
– Abolishing zero-hour contracts
– Promoting flexible working arrangements
– Ending fire and rehire practices

These changes aim to improve working conditions and wages, impacting businesses across various sectors.

Tax Increases: Funding Ambitious Plans
To fund its initiatives, Labour will increase taxes in specific areas, such as:
– Applying VAT and business rates to private school fees
– Closing the carried interest tax loophole
– Increasing Stamp Duty for non-UK residents
– Imposing further windfall taxes on oil and gas giants

What’s Next: Preparing for Future Changes
As Labour assembles its cabinet and prepares for the autumn Budget, many details of these proposals will become clearer. Stay tuned for updates as new policies and proposals are announced. In the meantime, if you have any questions or need advice on how these changes might affect your business, don’t hesitate to contact us. We’re here to help you navigate this new landscape and plan for a successful future.