Do you need to start protecting your Finances now against a possible Corbyn regime?
This article is for information only and no recommendation is being made or should be construed from the contents of the article. Always seek independent financial advice prior to taking any action.
Up until the election last year, Corbyn was not considered a serious contender for prime minister. So much so that the implications of the proposed spending commitments in Labour’s election manifesto was never scrutinised seriously by most voters.
If it had been, it would have highlighted budget required to deliver their promises – which would have totalled around £100bn per year, according to a report by the Taxpayers’ Alliance. And this did not even include Labour’s plans for re-nationalisation, which could have an upfront cost of at least £176bn.
So, with the infighting of the Conservative party and Theresa May’s extremely fragile leadership, mostly brought on by the challenges of Brexit, should we now start looking ahead to see what impact a Corbyn regime would have on our finances, as it is becoming more likely with every week that passes in politics?
What could a Corbyn government mean?
As always, higher taxes are inevitable under Labour – and much of this increase may well be placed on the income tax of wealthier earners, focussing on the £80,000 – £200,000 tax bracket.
Corbyn has also proposed to reform council tax and business rates by replacing them with a land-value tax system, which also has a bigger impact on the wealthier homeowner, quadrupling the amount of tax paid by some.
Protecting against Tax increases
There is very little you can do to minimise the impact of income tax changes, unless you are a business owner and can take revenue out of your company through dividends and shares.
However, when it comes to personal wealth, Inheritance Tax hasn’t gone unscathed either. If Labour manages to gain power, they have promised to remove some of the ‘giveaways’ introduced by the current government.
To minimise the risk of falling fowl of these new proposals, it is worth looking into ‘gifting’ assets to your descendants to reduce your taxable wealth, as assets are not included in your estate for inheritance tax purposes if you live for seven years after making the gift.
Making the most of your Pension’s tax relief while you still can…
Even though your annual pension allowance has been cut in the past few years, Labour may feel there is still more that could be done. The higher and additional-rate taxpayers get tax relief of 40% and 45% respectively which Corbyn could reduce or abolish completely.
It may worth looking into using up your allowances now if you can afford to do so. As a basic-rate taxpayer, it will only cost you £80 to put £100 into your pension. If you are on the higher-rate, you only need to contribute £60, and those on the additional rate just £55.
The maximum annual contribution is £40,000 and it is well to remember that you can always carry forward unused allowances from the previous three tax years.
Are you paying for Private education?
Labour have also proposed to add VAT to private school fees, which is a hefty amount to add to what could already be a large bill. It may be worth investigating the possibility of paying your children’s school fee’s in advance – plus some schools may offer a discount for this too!
Hold off settling up any student debt!
One of Corbyn’s big promised is to abolish university tuition fees and cancel out any outstanding student debt, so if you were planning to pay off your offspring’s student loans it may be worth waiting to see what the future holds.
The re-introduction of Capital Controls
It may feel like we are going back to the 70’s where, as a holiday maker, you were only allowed to take £50 on holiday abroad, but the Shadow Chancellor has discussed re-introducing a similar system as a Labour victory could have a negative impact on Sterling – resulting in people rushing to take their money out of the UK economy and a run on the pound.
Booking summer holiday’s abroad and paying upfront for them now could mitigate against these circumstances, and if you do travel often, it may be worth looking into opening overseas accounts to give you more freedom for larger purchase if such restrictions were introduced.
How can we help?
As professional financial advisors, we aim to stay ahead and understand what any potential political movements could mean for your finances – and we are always happy to help advise on how you can plan and mitigate against any losses. The initial consultation is always free.
If you would like to talk to one of our expert Advisors, call now on 01892 300303, or for more information on how we can help you, visit our website www.prosperityifa.com.