Following the landslide victory, YourMoney.com has outlined five ways the change of Parliament will impact your finances.
In his victory speech to the UK, Keir Starmer promised to “relight the fire” of voters and reiterated his promise to bring economic stability to the UK.
The party released its manifesto with promises to keep the pension triple lock, improve social and affordable housing, freeze income tax, add VAT for private school fees and boost the minimum wage for workers aged between 18 and 20.
Under the new Government, pensioners will continue to have the triple lock scheme, which guarantees the state pension will rise by the largest amount of:
- Average earnings growth
- The rate of inflation
- Or by 2.5%
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It means your state pension could be worth £13,250, according to Laura Suter, director of personal finance at AJ Bell.
Suter said: “While pensioners will continue to get decent increases to their state pension, they may face more tax.
“That’s because Labour did not promise to shield the state pension from income tax in the same way as the Conservatives have with the so-called ‘triple-lock plus’ pledge. It means that more pensioners could face tax on their retirement income thanks to frozen tax bands.”
In terms of housing, the party has pledged to “prioritise the building of new social rented homes”.
The newly elected Government said it would do this by reviewing the increased right to buy discounts introduced in 2012 and increasing protections on newly built social housing, protections on newly built social housing.
For first-time buyers, there is the introduction of the permanent mortgage guarantee scheme, which aims to get more people on the property ladder.
‘Addressing housing market is essential’
Charlotte Nixon, mortgage expert at Quilter, said: “Addressing the limited housing stock is essential for creating a more accessible and affordable housing market.
“However, it is crucial to recognise that such ambitious targets have historically been challenging to meet. The success of this initiative will depend on unwavering commitment, significant resources, and effective execution.”
When it comes to your pay every month, the new Prime Minister said there will not be a rise in income tax.
That means the tax bracket freeze will continue, something that drew criticism of the former Prime Minister Rishi Sunak.
Suter said: “Had income tax bands not been frozen, the personal allowance would be just over £15,000 this year and the higher-rate threshold would sit at just over £60,000. As it is, people are paying more tax than they otherwise would have thanks to the freeze.
“Government data estimates that since thresholds were frozen in the 2021/22 tax year, 4.4 million more people will be dragged into paying income tax in the current tax year as their earnings have exceeded the frozen personal allowance of £12,570.”
Meanwhile, parents wanting to send their children to private school will see a VAT added on top of their bill.
But, this is unlikely to be added until September 2025.
The Chancellor Rachel Reeves said the tax would be announced in the party’s first budget but would be introduced later, so parents wouldn’t face a retrospective tax.
For younger workers, the new Government has pledged to extend the minimum wage if you’re aged between 18 and 20.
While the Conservatives extended the minimum wage from £9.50 in 2022 to £11.44 for 23-year-olds, Labour wants to extend that pay to 18-year-olds too.
Based on a 35-hour week, it would represent a £2.84 per hour increase to their salary – more than £5,000 per year.
