How the general election could affect UK billpayers - from taxes to wages

Policies on finance are important amid a cost of living crisis
-Credit: (Image: Shared Content Unit)

Britons will head to the polling booth come July 4, as the UK holds its first general election since 2019 - and the results could have a massive impact on your money. The cost of living crisis has battered Britons for two years now, and policies on finance could sway voters come July.

But what have the Tories and Labour unveiled about money thus far, and how can new policies impact the people of the Unite Kingdom. While both manifestos are yet to be compiled, leaders in Rishi Sunak and Keir Starmer have highlighted key changes that would be made if they are elected this year.

Here, Chronicle Live breaks down some of the major talking points ahead of the election - from pensions and savings to tax, and how other policies could affect your bank balance.

Taxes -

The Mirror reports that Laura Suter, personal finance director at AJ Bell, said the Tories want to 'tout' two cuts to National Insurance in 2024 to strengthen their commitment to cut taxes. Labour will argue that the Conservatives have increased taxes by 'stealth' through tax bracket freezing.

Laura explained: "In truth, there is very little wiggle room in either direction. Taxpayers will struggle to stomach further tax increases, while tax cuts will eat into the future Chancellor’s budgets, which is crucial to any spending commitments either party plan on."

Labour's Rachel Reeves has noted that the party will not look to undo the 2p cut to National Insurance, and would look at other avenues of raising funds - including scrapping non-dom status, clamping down on tax avoidance, and introducing VAT and business rates for private schools.

Current Chancellor Jeremy Hunt recently nodded to cutting National Insurance even more if it can be afforded.

Pensions -

The triple lock:

The Tories' state pension triple lock - which was first implemented in 2011 - has seen pension spending increase tenfold. Research from the IFS says that continuing this policy would cost between an extra £5billion and £45billion each year by 2050.

However, both the Tories and Labour have pledged to keep the policy in place if they are elected.

State pension age:

Tom Selby, director of public policy at AJ Bell, said that retirement age will be another issue to explore, and while 'neither party is likely to talk about it in their manifesto', the expert says that age increases may come into focus for the next administration. He explained: "The current state pension age is 66, with plans in place to raise this to 67 by 2028 and 68 by 2046.

"However, there have been calls from various quarters to accelerate that timetable in order to save the Treasury money."

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown added: "Pensions are something we all need to be in for the long haul and yet they’ve been subject to the whims of the electoral cycle. Such an approach risks undermining people’s confidence in their retirement planning when they need stability and predictability in areas such as pensions taxation.

"This will give them the confidence that the money they save today, will fund their retirement rather than disappear into the hands of the taxman."

Pension lifetime allowance:

The Tories scrapped the lifetime allowance in April - a system which allows people to build up a certain amount in pensions savings without incurring a tax charge. However, Tom says that Labour have hinted about bringing it back in a 'retrograde step' which would add 'unwelcome complexity to an already complex system'.

He added: "It would also run directly counter to wider efforts to boost investing, as any lifetime allowance tax charge would punish those who enjoy strong investment growth."

Pensions must be kept as 'simple as possible' Tom believes, and parties should refrain from turning pension tax into a 'political football'. He added: "By their very nature pensions are a tool for long-term planning and the public need to be confident that governments won’t move the goalposts every five minutes."

ISAs -

Simplifying ISAs:

Jeremy Hunt announced that a British ISA would be created in the latest budget, allowing savers to invest £5,000 a year tax-free in the UK stock market. However, this has been delayed pending a consultation. The Tories also announced that multiple ISA subscriptions of the same type will also be brought in, as well as partial rather than full transfers between providers.

Labour has said it will simplify ISAs - a move which Tom would welcome. He explained: "No sensible person designing a savings system from scratch would propose the plethora of different ISAs we have on offer today."

On Labour's plans, Tom added: "A full review of ISAs should be seen as an opportunity to prevent them being suffocated by incremental complexity, which could eventually see ISAs turned into a political football in the same way as pensions taxation."

Lifetime ISAs:

Laura highlighted that housing costs could bring a major divide between the old and the young in the election - noting how first time buyers want to see an extension to a support scheme which helps them get their foot on the property ladder, while homeowners want 'policies that moderate inflation and increase the likelihood of interest rate cuts'.

She said: "Many aspiring homebuyers will have signed up to the accounts years ago, not realising that it would take so long to get on the property ladder and that they might fall foul of the property limit in the future. What makes the situation more galling for first-time buyers who have been priced out of using the Lifetime ISA is that they now face losing some of their own money when they withdraw their cash from the accounts, thanks to the onerous withdrawal penalty.

"Anyone who exceeds the £450,000 limit, even by just £1, will be hit with the 25% exit charge on the Lifetime ISA, as their purchase will no longer be within the rules."

Childcare -

Mr Hunt also announced in the 2023 Spring Budget that free childcare would be extended to two year olds from April 2024, with younger age groups covered in the 18 months following. Laura says that this is a 'helpful boost' to parental finances, saving almost £3,500 a year on nursery fees.

However, she also said that this doesn't tackle the shortage of childcare in many areas of the UK - preventing parents from returning to work. She said: "It also doesn’t help the many parents who have to pay nursery top-ups to the free hours, have more than one pre-school child or who earn too much to get the support."

Bridget Phillipson has refused to commit to the £4billion expanded scheme, but Labour have since said that they would keep it in place. Future reforms could be possible after a major reform to the whole system. Laura continued: "It’s possible a future government could go back to the drawing board with a complete re-think on the way parents are supported with childcare and the cost of starting a family."

Automatic refunds for train delays -

Labour say that they will renationalise almost every passenger rail service within five years. A new public body would inherit existing contracts upon expiration, while automatic refunds for delays to services and better on-train internet connections are also planned.

Energy bills -

Labour plans to set up a Great British Energy Company - which would 'cut bills for good and boost energy security'. The party say that this will be paid for by windfall tax on oil and gas companies.

A temporary windfall tax in the form of the Energy Profits Levy is already in place under the Tory regime, but Labour previously indicated that it could increase the levy from 35 per cent to 38 per cent.

Minimum wage changes -

Labour, in March, said that it would 'strengthen' the minimum wage which employers must pay to 'ensure it reflects the cost of living', but it is yet to be confirmed what the rate would be and what new laws could be brought in. The Conservatives raised the UK's National Living Wage and Minimum Wage in April 2024.

From April 1, the National Living Wage increased to £11.44 an hour, with the age bracket expanding to anyone over the age of 21. Minimum Wage, meanwhile, increased to £8.60 for 18-20 year-olds while under-18s and apprentices seen their wages rise to £6.40 per hour.

These rates are far lower than the real living wage though - which is based on the cost of living and how much families need to live. It is paid to people over the age of 18 and is set at £12 an hour to those outside of London, while capital workers see £13.15 per hour. Over 460,000 people working for 14,000 employers are paid the Real Living Wage.