In our May client newsletter we playfully pointed out that the Olympics was fast approaching and that it would dominate the news when it finally kicks off this Friday in Paris. This lead to the concept of an ‘impending tidal wave of election noise’ as we also knew that an election would come at some point this year, and that when it did, it too would dominate the sound waves.
Little did we know just how timely our message was, as just a few days later Rishi called for a flash election. We now have a new Government and a period of uncertainty while we wait to see precisely what the Labour party do with their political majority.
How might your Financial Plan be impacted by a new government?
Headlines are currently awash with political guesswork. Some of those guesses will be correct, others will be wide off the mark. With so much possible change, it really is a golden era for journalists digging up speeches from years gone by and think-tank suggestions supported by Labour peers of yesteryear. But hearsay and rumours are not helpful – and they certainly can’t be allowed to impact your financial plan.
What might ‘change’ look like?
Governments can influence or change almost any aspect of the personal finance system. Generally, tax changes are to incentivise certain behaviours.
To highlight the hypothetical range of options available, let’s consider what a government motivated to resolve a housing crisis could introduce to motivate landlords to sell their rental properties:
- Introduce a temporary ‘holiday’ for Capital Gains Tax (CGT), to enable landlords to sell their properties before a deadline without any CGT due.
- Announce a rise in the rate of CGT that doesn’t come into effect for 18 months. This gives a deadline for selling, without handing out tax relief.
- Ban rent rises for a number of years, to reduce the impact of the cost of living crisis for tenants. This is unappealing to landlords, who may then sell instead.
- Double (or more) the council tax due on rental properties (as Wales have done for vacant properties), and make it payable by the landlord.
This example is only to highlight that even where a government has made an intended outcome clear, it is challenging to predict how they will go about achieving it.
There is lots of noise about how Labour’s manifesto and promises since the election will be funded. One way or another, we expect the tax liability of a typical boosst client to be on the rise.
When will we get some clarity?
- It’s likely we will see a further flurry of announcements before the summer recess and another batch after the house reconvenes in September. New governments have traditionally liked to bring in a handful of swift changes to make a mark.
- Some of those announcements will have an immediate impact while others will take longer, like the ‘review of pension legislation’.
- The Labour Annual Conference begins on Sunday 22nd September and we expect this will give us some clues about specific changes. These events are historically an opportunity to talk about areas where changes may come, to gauge public opinion.
- The Autumn Statement is the key platform for announcements that will make their way into The Finance Bill. This has fallen in mid/late November in recent years, and we will produce our usual commentary after the event.
What are boosst doing to help me navigate this period of change?
Seeing your financial plan impacted by politics is simply the norm, even when we have a longstanding party in power. Change is normal.
Our annual planning meetings provide the structured routine for us to revisit your financial plan and adapt it where appropriate to keep you on track for a life well lived.
Where there are rule changes, there are opportunities. Our team will be keeping a close eye on what happens over the coming months to help ensure you are best positioned for whatever change we see next.
A date for your diary: 23rd October
Now that we’re clear about our government, we’re going to give 3 months to become familiar with their policies and direction. We will host a webinar on 23rd October to provide our views on anything that has been announced, as well as the possible outcomes of a pension review. If we have had an early Autumn Statement, we will include a full summary of the announcements. To join our client webinar, please either email us or send a Secure Message.