Taxes to Increase After Next Election, Whoever Wins

As the UK approaches the party political conference season and next year’s general election, voters are wondering what will happen to their personal taxes. Both the Labour Party and the Conservative Party have different approaches to taxation, with Labour pledging no wealth tax or higher levies on capital gains and property income, while the Conservatives may announce tax cuts, including the possible abolition of inheritance tax.

However, the current economic conditions, including sluggish growth, high inflation, and the impact of the pandemic, have worsened the country’s public finances. This leaves little room for any government to maneuver, with experts warning of a looming debt burden. In this article, we will explore the outlook for tax and provide advice on how individuals can protect their personal finances from an inevitable increase in taxes.

The Concerns of UK Voters

A survey of FT readers reveals widespread concern about taxes and the tax system in the UK. Many readers believe that reducing government commitments and increasing taxes is necessary to balance the books. Advisers also report that their clients are worried about the general tax outlook and the specific plans of both the Conservative and Labour parties. Many individuals remain skeptical of political promises and fear that taxes will inevitably increase, regardless of party affiliation.

Labour Party’s Pledges

While the manifestos for the upcoming election are still being written, the Labour Party has already made some specific tax pledges. These include the promise to abolish the non-domicile regime and use the tax raised for increasing recruitment and training of NHS staff and boosting spending on school breakfast clubs. Labour also plans to impose VAT on private school fees and end the tax break used by private equity executives known as carried interest. However, many remain uncertain about the actual tax policies that Labour will implement, as their recent commitment not to raise taxes on wealth, capital, or property income has left some skeptical.

Conservative Party’s Approach

On the other hand, Prime Minister Rishi Sunak is under pressure within his party to make tax a key dividing line with Labour. Some Conservative MPs have called for tax cuts, including the abolition of inheritance tax, to attract voters. However, Sunak has ruled out any significant pre-election tax cuts, emphasizing the need to focus on tackling inflation and maintaining economic stability. Furthermore, the Conservative government has already raised the tax burden to the highest since the 1940s, with tax revenue forecasted to rise even further under current government plans by 2027-28.

The Impact of “Fiscal Drag” and Frozen Allowances

To increase tax revenue, the government has relied on “stealth” taxes, such as freezing allowances and thresholds at which tax is paid. This approach, known as “fiscal drag,” has a significant impact as inflation rises, pushing more individuals into higher tax brackets even if their real incomes remain flat or falling. Furthermore, the government’s decision to freeze the inheritance tax exemption and cut the capital gains tax allowance has already led to increased tax receipts in these areas. These reductions in allowances, along with impending changes to dividends and capital gains tax allowances, will further squeeze individuals’ finances in the coming years.

Tax Planning and Advice

Given the uncertainty surrounding the post-election tax outlook, experts caution against making hasty financial decisions based on speculation. Instead, individuals should focus on maximizing existing allowances, making use of Individual Savings Accounts (ISAs) and pensions, and considering strategies like gift aid. Spouses can also optimize their financial assets between them to maximize allowances, including bank interest. It is anticipated that more people may need to file tax returns to account for earned bank interest, so it is crucial to register for self-assessment tax returns if necessary.


Regardless of the election outcome, it is highly likely that taxes will increase in the future due to the economic challenges the country faces. Both major parties have different tax proposals, but the complexity and uncertainty surrounding these plans make it difficult to predict the exact impact on individuals’ finances. Taking advantage of existing allowances, maximizing tax-efficient savings accounts, and seeking professional advice are some of the ways individuals can protect their personal finances in the face of the expected tax burden. Ultimately, UK voters have a difficult choice to make between higher taxes or a potential deterioration in public services and benefits provision.