Andy Burnham could be eyeing up some tax increases that would hit pensioners in the pocket, an expert is warning. An investment expert spoke about whether there could be changes to capital gains tax, inheritance tax or other levies under his new premiership.
Michele Tieghi, financial expert at investing guidance platform psyfi money, said the new PM may be looking at cutting allowances as well as increasing tax rates to raise Government revenues. He said: "It's definitely plausible that tax rises could be announced in the 2026 Autumn Budget in October, with some having a higher probability than others."
Tax pledge likely to stay
Labour previously nailed its colours to the mast saying it would not raise income tax, National Insurance or VAT, and Mr Tieghi said the new administration will likely stick by this pledge. But he said the Government will "find ways of getting around this" as many people will still pay more through these taxes.
He said: "Freezing thresholds, personal allowances, and reducing allowances for higher earners will allow fiscal drag to become a major source of extra revenue."
Savings tax changes
One area where there are definitely tax hikes on the way is regarding savings. From April 2027, the tax rate you pay on your taxable interest earnings will go up by two percentage points, across all tax bands. So if you are a basic rate taxpayer, the rate you pay will go up from the current 20 per cent, up to 20 per cent.
Mr Tieghi said new Chancellor John Healey may well look at more increases here. He said: "There's also been talk around taxing savings. However, this will be unpopular with many, so it wouldn't be the top choice for the Labour Government."
Hitting pensioners hardest
The expert also pointed to some potential tax increases that would impact pensioners. He said: "In theory, they could reduce the personal savings allowance, lower starting rates for savings, and increase taxation on investment income, which would hit pensioners, middle-income families, and cautious savers the hardest."
There are several taxes you can pay on income from investments, such as dividend tax or capital gains tax. Mr Tieghi said capital gains tax is a more likely target for HMRC to tighten the squeeze on taxpayers.
He said: "Changes to capital gains and inheritance tax remain much more of a possibility, with this having been frequently discussed by experts in the past as an easy way to raise revenue. For capital gains tax, they could reduce exemptions, increase rates, restrict Business Asset Disposal Relief, and alter reliefs for entrepreneurs."
One way to build your savings through investments tax-free is through stocks and shares ISAs. Any investment growth within an ISA wrapper is tax-free. You can currently deposit up to £20,000 each tax year into ISAs, and split this allowance however you want between cash ISA accounts or stocks and shares ISAs.
But from April 2027, the rules are changing so you can only use up to £12,000 of this allowance as you see fit. The remaining £8,000 you will only be able to use for stocks and shares accounts. However, many pensioners will be spared from the new allowance restriction. People aged 65 and over will be exempt from the new rules and will keep the current £20,000 allowance.
Inheritance tax changes
A major change to inheritance tax is set to come in from April 2027, when unused pensions will become liable for the 40 per cent tax. Mr Tieghi said Labour could bring in more changes here.
He warned: "Andy Burnham's Government could tighten trust rules, alter gifting exemptions, reduce reliefs, and increase compliance."
The majority of estates do not have to pay inheritance tax. You can pass on up to £325,000 in total assets tax-free, with an additional £175,000 allowance if you are passing on your main residence to a direct descendant. An individual can pass on any of these unused allowances to their spouse or civil partner when they die. So when the second partner dies, they could potentially pass on up to £1million in assets with no tax to pay.
A Treasury spokesperson said: "The Chancellor is fully focused on his priorities, to boost business, help with the cost of living and support people in every postcode. As has always been the case, the Chancellor will set out decisions at fiscal events, rather than routinely commenting on rumour, speculation or proposals."
