Martin Lewis discusses impact Labour's win will have on your personal finances

Martin Lewis has shared his thoughts on the implications of Labour's General Election victory for personal finances. The founder of MoneySavingExpert.com appeared on ITV's Good Morning Britain today, where he discussed the potential financial landscape following Labour's decisive win over the Conservatives, bringing an end to 14 years of Tory governance.

Sir Keir Starmer is set to take up residence at Downing Street later today (July 5) as the new Prime Minister. However, his triumph comes amid a cost of living crisis, with families across the country grappling with rising prices in shops and escalating mortgage rates over recent years.

Martin began by suggesting that Labour will likely soon announce that the state of UK finances is more dire than anticipated, reports the Mirror. He then forecasted that any forthcoming changes will need to be financially feasible for the Government.

Martin stated: "What I expect is going to happen in the next couple of weeks, is Labour will get fully into Government and do some form of revelation, saying: ‘Wow, the finances are so much worse than we expected, there’s a big economic black hole, things are going to be very tough,’ and then do some expectation management.

“Of course, we all know that already… I've been pushing candidates from all parties of what they’re going to do to fill the huge black hole in the nation's finances. I think what that means for the cost of living, is the Government will be looking at things that do not cost the exchequer a lot of money to do.

“They’re going to need in the first 100 days to make a difference to the country, they’re going to want to show people that things have changed, that they mean action, they’re going to start to deliver. But they're going to have to do it in a way that, where unless it was preannounced in the manifesto, it doesn't cost.”

Martin confirmed that Labour has promised not to raise taxes, but it is important to remember that the threshold for when you start paying tax will remain frozen until 2028. This means more people will be dragged into paying tax when they start to earn more money, through pay rises or getting a better paid job.

The MSE founder said Labour could instead look at raising Capital Gains Tax to help plug the black hole, although this has not been explicitly mentioned in the manifesto, so we don't know if this will happen yet. Capital Gains Tax is the tax levied on the profit made on the sale of an asset that has risen in value.

Martin stated: "They’ve said they won't raise taxes, they’ve also said they won't substantially cut spending, they’ve also said they won't increase government borrowing and they're not planning on printing money, so that is, all four of your hands tied behind your back. It means the only thing you’ve got filling that black hole is growth and it will be very tough to have growth at the level that is needed to fill it.

"I think Capital Gains Tax is, to some extent, probably right for a few percentage point raised there. It is a lot cheaper to make profit than it is to make income. You're taxed a lot less on profit you make, on selling assets, than you are on earning money."

One key promise in the manifesto is the pledge to construct 1.5 million homes over the next five years by reforming planning rules and developing poor-quality areas in the green belt. On this, Martin commented: "Let’s see if they can deliver that one.

"They’re also talking about finally banning Section 21 ‘no fault’ evictions. There is a huge power imbalance between landlords and renters and that needs to change - and I think it will change. The building homes situation certainly should be helpful for mortgage holders."

He went on to say: "There's been talk for a long time at looking at pensions. They've said they wont change the lifetime allowance back… so its the annual allowance they could change, its a much more radical thing.

"They could limit pension tax relief, so that everybody gets the same, the same tax relief as basic rate taxpayers. At the moment, higher rate taxpayers get more from the state toward their pension because they pay more tax. I think we wont hear much of that until September and we don't really know."