Sterling Savvy

What will the election mean for your money?

What will the election mean for your money

The UK is in an election year – with feverish speculation that Britons will be heading to the polls in November.

Although inflation has been cooling down, the cost-of-living crisis remains front and centre in voters’ minds, making the economy a key battleground for the Conservatives and Labour.

Prime Minister Rishi Sunak, lagging behind in the polls, has repeatedly hinted that further tax cuts could be on the horizon.

Opposition leader Sir Keir Starmer has also been explaining what he plans to offer the electorate as his party eyes a return to Downing Street after 14 years out of power.

Here, we’ll take a look at what the election could mean for your finances.

‘A new direction of travel’

During last year’s autumn statement, the Tories announced plans to slash National Insurance from 12% to 10% – and that came into effect from January. That means a Briton on an average salary of £35,400 would save £450 a year.

But Conservative chairman Richard Holden has suggested further tax cuts will be enforced during the Budget in March, and again before the ballot takes place.

While Chancellor Jeremy Hunt has warned the public’s finances may make extensive reductions unaffordable, lower-than-forecast borrowing could give him £20bn of headroom to play with.

According to Capital Economics, a fuel duty freeze and a 1p cut in income tax could be top of the agenda – in an attempt to reduce the decades-high tax burden Britons are facing.

In the coming months, one of Mr Sunak’s top priorities will be continuing to tackle sticky levels of inflation. The Consumer Price Index stood at 4% – defying expectations of a fall – which is twice the Bank of England’s target of 2%.

Labour’s alternative

Sir Keir has been keeping his cards close to his chest when it comes to what Labour would do differently – and isn’t guaranteeing that he will unfreeze income tax thresholds, which are currently failing to rise in line with inflation.

He’s also warned his party may be unable to cut taxes for two years because of the country’s current, precarious economic position.

However, in an attempt to blunt Tory claims that he would target the richest in society if elected, Sir Keir has vowed that income tax won’t be increased. This is a reversal of his previous position – as back in 2020, he had indicated Labour would hike the top rate of 45% further.

There have been a couple of concrete pledges in recent weeks. As Mr Sunak comes under pressure to reduce inheritance tax from factions within his party, Sir Keir has warned any changes would be reversed.

Other priorities include eliminating the loopholes for non-doms and private schools. Clamping down on tax avoidance is set to be high on the agenda, as this could bring billions of pounds into the country’s coffers.

Expect plenty of big promises as electioneering gets in full swing – but remember, with plenty of uncertainty surrounding inflation and interest rates, the best-laid plans of both parties could be prone to change.

Connor Sephton is a journalist based in London. Over his 10-year career, he’s worked as a reporter, editor, and newsreader for Metro, Sky News, and the BBC.

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