Article last updated 22 July 2025.
The surprise summer election called by Prime Minister Rishi Sunak for 4 July will offer voters a much narrower choice than the last contest back in 2019. Under leader Keir Starmer, the party has abandoned his predecessor’s economic radicalism and declared a pro-business agenda. However, there are likely to be a range of policy changes if elected that could affect your clients’ personal finances.
Here are some of the potential new measures, how they might affect your clients, and how financial planning can help them manage the impact should they become a reality:
Change pensions tax relief to a standard flat 30%
For those clients who are higher or additional rate taxpayers, this would greatly reduce the benefit of surrendering income to a pension. It would also mean paying tax twice – once when it’s sent to a pension and then again when it is withdrawn as income. Financial advice can help determine whether it makes sense for your clients to add to a pension and then how to arrange their affairs to help maximise their income in retirement.
Align capital gains tax allowances
If a Labour government announced plans to align capital gains tax rates with income tax rates, then those that could lose out may want to crystallise gains before the change is implemented.
Make ISAs UK-only investment vehicles
It would be a radical move by the government that would reduce the diversification and potential returns for all UK taxpayers. If it were to be introduced, your clients would need to review their portfolios to determine whether the tax-sheltering benefits of the ISA are outweighed by the lack of diversification and reduced opportunities that the ISA would then offer.
Reduce additional rate income tax threshold from £125,140 to £100,000
Pension contributions for your clients with earnings above £100,000 would be extremely attractive. If the additional rate threshold is lowered to this point, it would mean the marginal rate would rise to 67.5% (72% in Scotland).
Remove business relief on certain assets/schemes or abolish altogether
Large portfolios could come back into your clients’ estates for inheritance tax (IHT) purposes and therefore potentially liable to 40% tax. These assets may also be subject to capital gains tax (CGT) if their value had increased since they had been purchased. Without the generous tax incentives, these riskier assets may no longer be suitable for some clients. These portfolios may need to be reinvested to minimise tax and improve their risk-reward profile. In some circumstances, there are also life assurance policies that can be taken out to help ensure the money is there to pay any IHT liabilities.
Make capital gains chargeable on death
Under the current tax system, when a person dies there is no CGT liability on an unrealised gain on an asset. Separately, the person who inherits the asset will also benefit as their new base cost is the value of the asset on the date of death.
The Office of Tax Simplification (OTS) produced a report for the government in 2020 and suggested a taxpayer should not be able to benefit from both the capital gains uplift and spousal inheritance tax exemption. Although these measures have not been implemented, a future government could decide to introduce new rules, which would result in CGT being charged on death.
Planning can help
While not bringing the same concerns that a more left-wing Jeremy Corbyn-led Labour government would have raised, a Starmer government would need to raise money to fulfil its plans. To do that, it may make changes to long-standing taxes, allowances and investment schemes and rules that could hit the unwary.
Regardless of any changes a new government could bring, sensible financial planning can help your clients maximise the opportunities available and potentially avoid some of the pitfalls the future may bring.
