Last month we wrote about the prospect of a Labour government and its potential plans for UK tax changes.

Since then, projections for the next UK general election have been shaped further following local elections across the country on 4 May 2023.

The results from the local elections were positive for the Labour Party and somewhat disastrous for the Conservatives, reinforcing the rising belief that control of the UK government will change hands in the near future.

Read on to learn about the UK local election results, what they could mean for a general election, and how you could be headed for higher taxes whatever the outcome.

The Conservatives lost nearly 1,000 seats in the 2023 local elections

According to the Guardian, some of the key takeaways arising from the final 2023 local election results include:

• The Conservative Party saw a net loss of 957 seats and 48 councils, leaving the party with control of 33 councils
• The Labour Party saw a net gain of 643 seats and 22 councils, leaving the party with control of 71 councils
• The Liberal Democrats saw a net gain of 415 seats and 12 councils, leaving the party with control of 29 councils — almost as many as the Conservatives
• The Green Party saw a net gain of 200 seats and won control of a council (Mid Suffolk) for the first time in their history.

At first glance, the results don’t paint a positive picture for the Conservative Party’s chances at the next general election. However, it should be noted that, for many councils, voter turnout was only between 20 to 30%.

Nevertheless, the BBC quotes the Labour Party as citing the election results as “a clear rejection” of the Conservative Party and prime minister Rishi Sunak by the UK electorate.

Labour’s projected national vote share is 35% compared to the Conservatives 26% and lends credence to the feeling that public opinion is firmly shifting towards a change in government at the next general election — whether it’s the Labour Party or a coalition of parties is yet to be seen.

Whichever party wins the general election, the UK is likely headed for a period of higher taxes

As covered last month, a Labour government would likely see UK taxes increase with rumoured policy changes including:

• An equalisation of Income Tax and Capital Gains Tax (CGT) rates
• The reinstatement of the Lifetime Allowance (LTA)
• An introduction of a Land Value Tax (LVT)
• The creation of a wealth tax on millionaires.

However, even if Rishi Sunak’s Conservative government were to change public opinion and win the next election, it is still likely that the UK is headed for a period of higher taxes.

Chancellor Jeremy Hunt has already outlined a series of tax policy announcements in his autumn statement and spring Budget that could potentially lead to increased tax liability for Brits and British businesses.

Some of the current policy announcements that might affect UK taxpayers include:

• The Income Tax threshold for additional-rate taxpayers being reduced from £150,000 to £125,140
• A freeze on thresholds for Income Tax, National Insurance, and Inheritance Tax (IHT) until 2028
• A freeze on limits for tax-efficient ISAs
• The CGT annual exempt amount being reduced to £6,000 for the 2023/24 tax year before being halved again to £3,000 for the 2024/25 tax year
• The Dividend Allowance being reduced to £1,000 for the 2023/24 tax year before being halved again to £500 for the 2024/25 tax year
• Corporation Tax being increased to 25% for businesses earning more than £250,000 for the 2023/24 tax year.

The situation is exacerbated further for certain individuals, such as those who might be affected by a quirk in the tax system. A scenario involving the tapering of the Personal Allowance and increased Income Tax creates an effective 60% “tax trap” for individuals earning between £100,000 and £125,140.

HMRC’s own figures show a pattern that points to a continued upwards trajectory for UK taxes. HMRC provisionally collected £786.6 billion in taxes in 2022/23 – an increase of 9.9% on the previous tax year.

UK tax receipts have generally increased year-on-year as shown by the graph below:

Source: HMRC

If you’re likely to be liable for taxes in the UK, it is important that you take steps to plan ahead.

Consider taking a proactive approach by creating a smartly structured tax plan

The UK is considered a high-tax region, especially when compared to Hong Kong. So, it is vital to plan ahead of any move abroad.

The value of proper tax planning shouldn’t be underestimated, and you should consider treating it as a priority before you consider relocating to the UK, or any high-tax region outside of Hong Kong.

Some of the steps you could take ahead of any move include:

• Crystallising existing capital gains before you move
• Taking the time to carefully review your tax-free pension wealth
• Sorting your bank accounts before you leave Hong Kong
• Planning any property purchases in advance, especially consider the ownership structure to minimise taxes.
• Consider establishing a tax shelter to hold your capital and to derive future tax deferred income, prior to relocating.
• Accounting for multi-jurisdictional estate planning.

Read more: 8 top tax tips for when you leave Hong Kong

Remember: If you have plans to move 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

The UK is potentially heading for political upheaval in the near future, yet whatever the outcome, it is likely that UK taxes will continue to rise. As the UK is already a high-tax region, it is important to take steps to proactively organise your tax plans.

A good first step could be to reach out for advice by emailing us at info@bmpwealth.com or calling +852 3975 2878.