Updated 03 September 2020
To general amazement, the UK elected a Conservative majority to form a new government. What could this mean for your money? Here’s a run-down of what’s happening now, what’s likely to happen, and what might.
A pensioner in Glasgow staked £30,000 on the Conservatives winning a majority in the General Election, and duly raked in £240,000. That’s one person who has benefited financially from the Tory victory – but what about the rest of us? Here’s an overview of what we may be seeing in the weeks and months to come, and how it could affect our pockets.
The financial markets were in a jubilant mood, with the FTSE rising 2.3 per cent in the wake of the election result. Five more years of lighter government controls should mean more profits for shareholders and investors in stocks, which should also benefit pension savers by delivering stronger growth.
Curbing the tax man
Tories and tax cuts go hand in hand, and we already know from their manifesto to expect a raised personal allowance (to £12,500) and a more generous 40 per cent threshold (which is currently £42,386 but after the change won’t kick in until £50,000). David Cameron has also promised no rises in VAT or National Insurance.
Inheritance tax (IHT) was another big area of Tory pledges. The proposal is for family homes worth up to £1 million to be effectively exempt from IHT. Parents will receive a new £175,000 allowance to bequeath property to children free of tax, and this is transferrable to the surviving parent and is on top of the existing £325,000 threshold – so the grand total is £1 million. However, for properties worth upwards of £2 million the allowance will be tapered off, until there is no additional benefit for owners of homes worth £2.35 million and over.
Yet more pension reform!
It is expected that top-rate tax relief for pension savers (currently at 45 per cent) will soon be reduced, though this has yet to be confirmed. It is also possible that George Osborne may introduce a flat rate of pension relief (perhaps 30 per cent for all savers) as was proposed in the last Parliament by the Liberal Democrats. All of this is currently speculation, but top-rate taxpayers should certainly think about making use of their current rate of tax relief while it lasts. Meanwhile, basic-rate savers may have something better to look forward to.
House prices / housing crisis?
Owners of more expensive properties can breathe a sigh of relief – there won’t be any mansion tax after all. But already this euphoria is expected to drive up prices at the top end of the property ladder. Cheaper properties may also surge in price as a result of other Conservative policies, such as extending the mortgage guarantee scheme until 2017 and the Help To Buy equity loan scheme until 2020. Another proposed initiative is to roll out the Right To Buy scheme so that housing association tenants can buy their homes at a substantial discount. Although this will be good for the individuals involved, the resultant squeeze on social housing could well have a knock-on effect higher up the ladder. Landlords could benefit, however, as more people may have to resort to rented accommodation.
The biggest cliché of the election – but what will ‘hard-working families’ actually get? Well, parents who work will receive double the amount of free childcare – 30 hours per week, up from 15. However, parents of older children may have to support them for far longer, as younger benefits claimers will be hit hard: those between 18 and 21 will lose Job Seeker’s Allowance, in place of a Youth Allowance paid for a maximum of six months, after which the young person will have to find unpaid work (or study) in order to receive the allowance. Young people will also lose their automatic entitlement to housing benefit.
Were you a winner or a loser? Either way, you can find out how to make the most of the new policies by speaking to a financial adviser. Search for yours now.