It’s often a fascinating and encapsulating lead up to the UK General Election; colour, bluster, enthusiasm and, dare I say it, hope. It’s sitting pensively late into the evening, glued to the television screen, knee bouncing, waiting for the exit-polls, the effect on Professor Curtice’s “Swingometer”,and watching the shocks as political heavyweights are ousted (Portillo, Balls& co).

Well, not this year. The results were as predictable as a Formula1 weekend, or a no. 1 hit for the latest X-Factor[y] karaoke star. And swathes of the population voted against a party, policy, or candidate… as opposed to providing a ringing endorsement with their ‘X’ on the ballot paper. Sky’s Sam Coates labelled the result a “loveless landslide”.

The electorate are angry, and the sitting governments felt the wrath... Scotland rejected the SNP, Labour’s vote in Wales slipped (though their seats increased) and the Conservatives were hammered across the UK. It echoes the US 2020 presidential election: “anyone but Trump”.

Of course, we now wait to see how this chapter takes shape and how this political shift will affect us personally – opportunity, services, and personal wealth, will be at the forefront of many people’s concerns.

It’s the latter that I will concentrate upon here; this editorial is finance focused after all.

So, you and I knew The Labour Party led by Sir Kier Starmer would sweep to victory, and so did the financial markets – essentially, the switch in government was ‘priced in’ long before the result was announced on Friday 5^th July. As a result, investors have seen little movement in their equities to date (19th^th July) – FTSE 100 down c. 0.4% since the election. Sadly, no sign yet of the bull market of Boris’ early tenure.

What we’re less sure of is the approach the new administration will take to fund the promises and requirements of their manifesto – increased jobs and appointments in healthcare, education spending, 300,000new homes per annum, infrastructure improvements, a new Border and Security Command, and the ‘Green Prosperity Plan’.

The Institute of Fiscal Studies (IFS) states, “how they (Labour) will square the circle in government [finances], we do not know.” Going on to report that during the term, “we will get cuts, fiscal targets will be fudged, or taxes will rise”.

The most likely of these three elements is tax hikes, but with an eye on the pre-election promises to hold Income Tax, VAT and National Insurance… Capital Gains Tax (CGT) and the Inheritance Tax (IHT) regime are therefore under the spotlight.

Those with uncrystallised gains or business assets may be most concerned. The rumours circulate around bringing CGT in-line with IncomeTax and reviewing Business Asset Disposal Relief (BADR), formerly, Entrepreneurs Relief (the tax relief offered to business owners on the sale of their trading company).

It’s worth noting though that a comprehensive overhaul of the BADR structure is likely to damage SMEs, and we are consistently told that this sector makes-up the “backbone of our economy” (O. Dowden, 2018) – providing c. 16.5 million jobs [and associated taxes], as well as National Insurance, Corporation Tax, VAT and IPT for the government purse. This may temper enthusiasm in this area.

However, the Nil Rate Band legislation and pension system will also fall under review – notably, the ‘grossing up’ of pension contributions by higher rate tax-payers, and the 25% tax-free lump-cash entitlement on retirement.

Strategic thinking and financial planning alongside a financial adviser and/or accountant may be helpful to those with concerns in the above matters.

The pre-election rhetoric of both the largest parties outlined the importance of economic growth in funding Britain’s future; and the IFS review places further emphasis on this element. To promote innovation, risk must be rewarded… The ‘best’ must be incentivised. All eyes on Chancellor Rachel Reeves’ first budget.

Rob Cowsill

SW Financial Planning