WHAT LABOUR WINNING THE GENERAL ELECTION MEANS FOR YOUR MONEY - FROM TAX TO PENSIONS

Labour has won the race to Number 10 - but now all eyes will be firmly fixed on whether they will follow through with the promises in their manifesto and what new measures could be announced.

The cost of living crisis means hard-working families have all been feeling the financial squeeze, with households desperate for relief from price rises and higher mortgages. Getting on the housing ladder is also a pressing issue for many Brits, who believe this has become an unaffordable dream for many.

There is plenty to pick apart in the Labour manifesto in terms of taxes and housing, and we also explain what it means for your pension as well as employment.

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Tax

Labour has pledged not to increase Income Tax or National Insurance, but the threshold for when you start paying tax will remain frozen until 2028. This means more people will be dragged into paying tax when they start to earn more money, through pay rises or getting a better paid job.

The basic rate of Income Tax is 20% and is paid on annual earnings between £12,571 and £50,270, then you pay 40% on earnings between £50,271 and £125,140. You also pay National Insurance if you're an employee and you earn above £12,570. You currently pay 8% on earnings between £12,570 and £50,270 in Class 1 National Insurance contributions, and for earnings above this amount, you pay 2%.

Labour has said it will also raise an extra £5billion a year by closing the loopholes in Rishi Sunak’s "non-dom" plan and cracking down on tax dodgers. "Non-dom" describes a UK resident whose permanent home for tax purposes is outside the UK. If you have this status, you only have to pay tax on earnings made in the UK - meaning you don't have to pay any tax to the UK on money made elsewhere in the world.

Sarah Cole, head of personal finance, Hargreaves Lansdown, said: "There was a pledge to increase taxes for specific groups – including non-doms and parents paying school fees if the cost of VAT is passed on. There was also silence on frozen income tax thresholds, hiking taxes for millions. Since the thresholds were frozen, 4.4 million more people have been forced to pay tax including 2.1 million dragged into paying basic rate tax and 1.88 million into higher rate tax."

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Pensions

Labour has promised to keep the triple lock in place, which means the state pension will continue to rise each year. The triple lock guarantees the state pension rises each April by the highest out of inflation (using the previous September inflation figure), wages (average growth between May and July) or 2.5% - whichever is highest.

However, many pensioners still face paying more tax as the full new state pension is set to hit almost £12,000 next year, which is not far off the current £12,570 tax-free personal allowance. Labour has dropped a plan to reintroduce a cap on how much people are allowed to save into their pensions before paying tax.

The pensions lifetime allowance was scrapped in April and saw pension pots worth over £1.07million face an annual tax of £40,000 on average. Labour has also promised to "review the current state of the pensions and retirement savings landscape" but we don't know yet exactly what this will include.

Helen Morrissey, head of retirement analysis, Hargreaves Lansdown, said: “Labour’s promised pension review needs to transform workplace pensions to better serve savers, from consolidation to thinking about small pots and how people can build a lifetime pension, rather than switch provider with every new job. This has the potential to help people engage with their pension, address the issue of lost pension pots and drive competition in the industry.“

Minimum wage and employment

Labour has pledged to extend the minimum wage to younger people. The Tories have already extended the full minimum wage to 21-year-olds, where previously the cut-off was 23 - but Labour wants to lower this again to those aged 18.

Under current rates, the minimum wage for workers aged 21 and over is £11.44 an hour, while those aged 18 to 20 are paid a minimum of £8.60 an hour. The minimum wage for people under the age of 18 and apprentices is £6.40 an hour. Labour has also pledged to end zero hours contracts, end "fire and rehire" and introduce rights to parental leave, sick pay, and protection from unfair dismissal from day one.

Kate Palmer, Employment Services Director at Peninsula, said: “While most employers will be glad to get back to business as usual now we know which party will form the new government, Labour campaigned on a ‘Plan to make work pay’ so employers should be prepared for significant changes to employment law as they look to strengthen employee rights. With more than 60 proposed changes in their manifesto and a pledge to bring in the majority of these changes within 100 days of taking office, now is not the time to relax.“

Household bills

Millions of households have seen their energy bills rocket off the back of Covid and the Russian invasion of Ukraine. Labour wants to establish Great British Energy, a publicly owned company which it claims will help drive down bills. The firm will be headquartered in Scotland and funded by making energy firms in the North Sea pay a windfall tax.

The party has also said it will aim to cut energy bills and reduce fuel poverty by requiring all landlords to meet energy efficiency standards by 2030. Daniel Särefjord, Aira UK CEO, said: “Labour’s manifesto has a noticeable focus on clean energy and energy security. The creation of GB Energy will help to introduce significantly more renewable energy into the country’s grid, bring down carbon emissions and create 650,000 jobs. Households struggling with their energy bills will be interested to learn more about their plans to invest in home insulation upgrades.“

Labour could also impose higher fines for water companies who illegally discharge sewage, and bosses could lose their bonuses and face criminal charges. The average water bill in England and Wales is currently £448 a year, according to Water UK.

Housing and renting

Labour has pledged to build 1.5 million new homes over the next five years by reforming planning rules and developing poor-quality areas in the green belt. Labour has also pledged a permanent Freedom to Buy scheme to replace the existing mortgage guarantee scheme, which is due to end in June 2025.

The mortgage guarantee scheme sees first-time buyers take out a mortgage with a 5% deposit - the Government then promises to cover some costs if your lender loses money. The major selling point is that people with small deposits may be able to use this to get on the property ladder, but analysts have previously criticised the existing scheme for having more expensive rates compared to higher deposit home loans.

John Fraser-Tucker, Head of Mortgages at Mojo Mortgages, said: “For some, this might be their only path onto the property ladder. However, it's not without risks. With a substantially smaller deposit, buyers may face higher mortgage rates, leading to larger monthly payments and potentially thousands more in interest over time. While this scheme offers a valuable opportunity, it's important to weigh the long-term costs against the immediate benefit of homeownership.”

Labour has also promised to give "first dibs" for local people on new developments, end the leasehold system and tackle unaffordable ground rents. For renters, the party has pledged to finally ban no-fault evictions and make it harder for landlords to remove tenants without a good reason.

Childcare

Labour has pledged to create 100,000 additional childcare places and more than 3,000 new nurseries. The party has also said it will provide free breakfast clubs in every primary school in England, and spare school classrooms will be converted into spaces for nurseries.

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: "There were clearer pledges for parents – including breakfast clubs in primary schools, the right to parental leave from day one of starting work, and protections against discrimination against pregnant women. When added to the roll out of free childcare to all children over nine months, this could make a significant difference to families."

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