UK General Election 2024: Comparing the Manifestos

While political party manifestos are not binding on the party which forms a government, they are the “promises” made by the parties which seek to entice floating voters to their cause. We can see from history that many manifesto “promises” have never made it to the statute books, although this is for a variety of reasons, including global economics, domestic difficulty and political reality. However, they do give us some insight into the intentions of each party and therefore allow us to consider how the economy may react and the possible impact on financial planning and investment management.

Whichever party wins the general election on 4 July to form the next government, they will have to build a robust, sustainable plan that ensures it meets its fiscal targets. It can only do so by cutting spending and/or raising taxes. We have set out below some of the key topics discussed, which could impact on financial planning depending upon the winner of the general election.

This summary covers the main proposals on personal tax, business tax and related matters of the three traditional main national parties. However, given that the total page count of the three manifestos was 333 pages, it does not claim to be exhaustive – there are some smaller, detailed plans which could not be included in a summary. As ever, what is not mentioned in a manifesto can be as important as the manifesto’s content.

Pensions: the Conservatives said they would not introduce new taxes on pensions or increase existing ones in the course of the next Parliament. This means retention of the 25% tax-free lump sum and tax relief on pension contributions to stay at the marginal rate of income tax. The Labour Party promised a review of the pensions landscape to ensure improved pension outcomes and greater investment in the UK markets. Liberal Democrats have said that they will review the rules concerning pensions for gig economy workers, so they do not lose out. All three parties have pledged to retain the Triple Lock, which is the promise to increase the State Pension by the highest of either inflation, wage rises or 2.5%.
Capital Gains Tax (CGT): this tax-free allowance was reduced by half to £3,000 in the tax year 2024/25, so realistically a new government might not find much room for manoeuvre in this area. Labour has said it would not change this allowance, but there may be an opportunity to amend some of the allowances and rules relating to it or the rate itself. Conservatives have made a commitment not to increase CGT, whilst the Liberal Democrats have said they will reform CGT to raise £5bn a year for the NHS with three tiers of CGT rates.
Lifetime Allowance (LTA): the Conservative government recently abolished the LTA (previously capped at £1,073,100). When the LTA abolition was introduced, the Labour Party said it would bring back the cap. Labour reversed its decision due to the uncertainty it would cause savers ahead of the election – but refused to rule out if they would introduce any changes during a Labour-led government mandate.
Inheritance Tax (IHT): Labour has previously said that it believes that some IHT exemptions and allowances are too generous but has not commented on it in their manifesto. Potentially there could be some changes to this tax in the wake of a Labour-led government. Both the Conservative and Liberal Democrat parties have not commented on IHT.
National Insurance Contributions (NIC): Labour pledged not to raise NIC “to ensure taxes on working people are kept as low as possible”. The Conservative party has pledged to abolish contributions for the self-employed, along with a further 2% point cut in employee NIC by 2027, before removing contributions when affordable to do so. The Liberal Democrats will review the system overall.
Non-domicile Tax Regime: the Conservatives set out their plans on changing the non-doms rules earlier this year and are expected to follow through with those. Labour has said the Conservative proposal does not go far enough and has pledged to abolish this tax status, replace it with a shorter-term scheme for people staying in the country and remove the “loopholes” that the Conservative proposal left.
Individual Savings Accounts (ISAs): UK residents are entitled to save £20,000 in an ISA (for the financial year 2024/25), free of income tax and CGT every tax year. None of the three parties commented on a change in the ISA landscape.
The British ISA: In the Spring Budget, the Conservative government announced the launch of a British ISA, which would create an additional £5,000 allowance on top of the current £20,000 ISA limit to encourage increased investment in UK companies. There are no plans in the Labour or Liberal Democrat manifestos in respect of the British ISA which could result in its demise.
Private School Fees: the Labour Party pledged ahead of publishing its manifesto, and its launch confirmed, its intention to charge VAT on private school fees. It is estimated to raise £1.5bn per year by applying VAT and business rates to private schools. There are no plans by the Conservatives or Liberal Democrats to do the same.

For a more detailed comparison of the positions of the traditional three main parties, please click on the link below.

UK General Election 2024: Manifestos Round Up

What does this mean for the UK economy and investments?

Very few events in UK politics, including general elections, have meaningfully moved markets longer term. From an investment markets standpoint, those with globally diversified portfolios may find that it matters little who wins.

The number of elections across the world has reached a record high in 2024, with 49% of the world population going to the polls. Although in some countries it is challenging to predict results, in the UK the possible results are seen as safe and predictable which investors like. In fact, the political turmoil in Europe of recent weeks contrasts with the stability on offer in this year’s UK election.

We believe, whichever party forms a government it is unlikely that they will do something radical, as they cannot risk upsetting their supporters. Analysts that we have spoken with do not believe that the 2024 general election will affect the financial markets significantly and it is interesting how little effect UK elections have had on portfolio performance historically.

How can I prepare for potential changes?

The Conservative Party is significantly behind Labour in the polls. With a change in government highly likely, you may wish to consider the following steps to prepare your finances:

Use your personal allowances: make sure that you have used all the allowances available to you, such as the annual £20,000 ISA allowance, £3,000 CGT allowance and annual pension allowance. All allowances have been quoted for the financial year 2024/25.
Consider other allowances which may apply: The Junior ISA allowance is £9,000 (for 2024/25) and has the same shelters to UK tax as standard ISAs and could be used to build a nest egg for children.
Plan to adjust to different circumstances: A possible new government could alleviate or burden different parts of your plans. It is important to revisit your financial plan to ensure it is still delivering the intended value and delivering the best chances of success.
Consider the unexpected: the Labour Party has pledged not to increase National Insurance, Income tax, or VAT. But it has refused to confirm it will not make changes to CGT, which could affect those with non-tax wrapped portfolios or Buy-To-Let properties. Those in this position should consider the serious impact this could have on the net gains from their portfolios and seek to optimise their capital gains positions.

What does this mean for the UK economy and investments?

How can I prepare for potential changes?

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