For those with UK connections, investments, residence or even thinking of relocating to the UK, it is noteworthy that after 13 years under the Conservatives, the political winds seem to be shifting. It is looking increasingly likely that the UK will see a change in government following the next general election.
It comes off the back of a year of significant political turmoil in the UK, which has seen several major budgetary announcements, such as:
- The short-lived Truss government’s mini-Budget
- Jeremy Hunt’s autumn statement
- The recent spring Budget.
Understandably, you might have struggled to keep up with all the tax changes that they have introduced, U-turned on, and proposed for the future.
The situation could become even more complex if a Labour government comes into power and follows through on some of the further tax changes they’ve proposed.
Read on to learn what tax policy changes might be introduced by a Labour government, what it might mean for your liability, and what steps you should consider before opting to leave Hong Kong in the future.
UK voting intentions show a Labour government would take 44% of the vote if an election were held today
According to Politico, polling figures compiled on 17 April 2023 show that a potential Labour government would win an election held today with 44% of the vote compared to the Conservative’s 29%, as shown by the graph below:
Meanwhile, the Electoral Calculus gives Labour even better odds with a predicted 46.1% of the vote in their April 2023 report. This would translate to 457 seats in parliament compared to the Conservative’s predicted 113.
The economic situation and ongoing cost of living crisis in the UK are likely to form key parts of any future election campaign. As major household bills such as electricity, gas, water, and Council Tax continue to rise, many Brits are calling for further tax changes.
A YouGov poll in January 2023 found that almost 75% of Brits would be in favour of the creation of a wealth tax on millionaires. This particular policy was especially popular with potential Labour voters.
This shift in popular public opinion has prompted Labour leader, Keir Starmer, to outline a series of tax policy changes that Labour would implement should they gain power.
A Labour government would likely raise taxes, especially for high earners
The Labour party hasn’t announced its official election manifesto yet but there have been rumours, conjecture, and small-scale announcements that can give you some idea of what tax changes might be enforced in the future.
An equalisation of Capital Gains Tax (CGT) and Income Tax rates
Labour’s 2019 “Grey Book” proposed an equalisation of CGT and Income Tax rates. It is yet to be seen if Starmer’s Labour would follow through on this previous proposal, despite feeling pressure within his own party to adopt the policy.
Currently, CGT rates stand at:
- 18% on gains made on property sales for basic-rate taxpayers (gains that when added to your income remains within the basic rate of Income Tax threshold), or 28% for higher- or additional-rate taxpayers
- 10% on the sale of other assets for basic-rate taxpayers, or 20% for higher- or additional-rate taxpayers.
These rates take effect once you’ve exceeded your capital gains allowance, which for 2023/24 stands at £6,000.
An equalisation of the rates would see higher- and additional-rate taxpayers pay 40% and 45% in CGT respectively.
The reinstatement of the Lifetime Allowance (LTA)
In the Conservative government’s spring Budget, Jeremy Hunt announced a removal of the cap on the LTA, which had previously stood at £1,070,000, with plans to eventually abolish the policy altogether.
Sky reports that Labour are firmly against this decision and would seek to reverse the move if they came to power; Rachel Reeves, the shadow chancellor, called the move a “gilded giveaway”.
The reintroduction of a cap on pension savings could have significant implications for high net worth individuals and leave them potentially facing a significant tax bill in retirement.
An introduction of a Land Value Tax
According to the Chartered Institute of Taxation, Labour’s 2022 party conference hinted at the implementation of a Land Value Tax (LVT). This would involve land being assessed by a government body and a tax being charged on its value to landowners.
The creation of an LVT could potentially see thousands of landowners exposed to hefty new taxes on their properties.
The creation of a wealth tax on millionaires
The Guardian has suggested that a Labour government might be in favour of wealth taxes, such as those proposed in the poll by YouGov.
Individuals surveyed by the poll were largely in favour of a 2% wealth tax on wealth above £5 million and 1% above £10 million.
The implementation of any of these rumoured tax policies could complicate matters for expats or British National Overseas Passport holders considering a move back to the UK in the next few years. And, of course, Labour has not announced its election manifesto yet, so the content of this article could be subject to change.
The UK is already a high-tax region compared to Hong Kong, so it is important to plan ahead of any move
The key to avoiding falling foul of these potential tax rises is to be proactive and plan ahead. The UK is already recognised as a high-tax region, especially compared to Hong Kong. So, proper tax planning before you make a move should be treated as a priority.
Read more: 8 top tax tips for when you leave Hong Kong
If you have plans to move back to the UK (or any other high-tax region), it is vital that you work to get your tax strategies in place as early as possible.
Get in touch
If you’re considering a move to the UK, it is incredibly important that you take steps to minimise your potential tax liabilities before you leave, and not after you’ve arrived.
A great first step could be to seek out professional advice and discuss your potential options by emailing us at firstname.lastname@example.org or calling +852 3975 2878.