UK Under Labor Government: Expected Renewed Focus on Large Business and Wealthy Individuals

Following their victory in the general election, the Labour Party, under the leadership of Prime Minister Sir Keir Starmer, is set to implement a series of tax and fiscal policies as outlined in their pre-election manifesto. This review examines Labour's proposed measures.

A COMMITMENT TO ECONOMIC STABILITY

A Labour government will uphold the integrity of the Office for Budget Responsibility (OBR). Labour declared that it will ensure that every significant fiscal change undergoes independent OBR forecasting. 

NO INCREASES IN INCOME TAX OR VAT RATES

Labour declared commitment to keeping taxes on working people as low as possible. 

There will be no increases in National Insurance, the basic, higher, or additional rates of Income Tax, or VAT. 

To address unfairness in the tax system, Labour will abolish non-dom status, replacing it with a modern scheme for short-term residents. Offshore trusts used to avoid inheritance tax will be eliminated to ensure everyone who makes their home in the UK pays their fair share.

MODERNIZATION OF HMRC, FOCUS ON LARGE BUSINESS AND WEALTHY INDIVIDUALS 

Labour will modernize HMRC, enhancing its powers, investing in new technology, and increasing its capacity to tackle tax avoidance. A renewed focus on large businesses and wealthy individuals will help close the tax gap and ensure fair contributions from all sectors of society.

Private equity's unique treatment of performance-related pay as capital gains will be rectified. 

ONE MAJOR FISCAL EVENT PER YEAR

Labour claimed to understand the significance of a stable business tax regime for investor confidence. Labour promises a strategic approach to tax policy, with one major fiscal event per year, providing predictability for businesses and families alike.

Corporation tax will be capped at 25 percent. Labour will also retain a permanent full expensing system for capital investment and maintain the annual investment allowance for small businesses. Clear guidelines on qualifying allowances will further improve business investment decisions.

REFORMING BUSINESS RATES

The current business rates system will be replaced in England. This new approach will level the playing field between high street and online businesses, incentivize investment, address empty properties, and support entrepreneurship.

REVENUE SOURCES AND ALLOCATIONS FOR PUBLIC SERVICES (2028-29)

Expected Revenue Sources and Allocations 

• Closing Non-Dom Tax Loopholes and Reducing Tax Avoidance: £5,230 million
• Applying VAT and Business Rates to Private Schools: £1,510 million
• Closing the Carried Interest Tax Loophole: £565 million
• Increasing Stamp Duty on Non-UK Residents by 1%: £40 million
• Barnett Consequentials: £650 million

GREEN PROSPERITY PLAN

Labour's Green Prosperity Plan aims to drive economic growth through catalytic investments funded by a time-limited windfall tax on oil and gas companies' record profits, supplemented by borrowing within Labor’s fiscal rules. This plan is designed to attract higher private investment and boost economic growth.

Funding and Allocations for the Green Prosperity Plan (Annual Average):

• Windfall Tax on Oil and Gas Giants: £1.2 billion
• Borrowing to Invest Within Fiscal Rules: £3.5 billion

Labour's manifesto sets forth a detailed fiscal plan focused on achieving economic stability and tax fairness. As these policies are expected to be rolled during their tenure, the effectiveness of Labour's approach to fiscal management and public investment will be put into test. 

SOURCES/ RECOMMENDED READ: 

• Change – The Labour Party