What the new government has meant for your finances so far

After 14 years under Conservative leadership, we are now one month into a Labour government that won over voters with a campaign promising change. So, what has changed so far, and what does the new government mean for your finances?

In truth, it’s still early days and we expect to learn much more about changes to the tax regime at the new government’s first major fiscal event - the Budget on October 30.

However, the new Chancellor, Rachel Reeves, has been anxious to emphasise the scale of the challenges she says lie ahead. We can also look to the Labour manifesto to understand the new government’s approach to tax, savings, investments and pensions.

Action on pensions and pay

What we already know is that the government will bring in a Pension Schemes Bill designed to boost the pots of those who save into workplace pension schemes.

The shake-up includes a 'value for money test' for pension providers, as well as a mechanism to consolidate multiple pension pots that people may have accumulated through their working lives, to help them save on fees. It’s a reasonably ambitious programme of change, which we welcome. After all, pensions is an area that has seen too much tinkering around the edges, where more decisive action was needed.

The government has also moved quickly to strike a pay deal with junior doctors, which is worth an average 22% over two years. The deal has yet to be ratified by a vote of BMA members, but an end to any further industrial action will certainly be welcomed by all.

At the same time, the 6% uplift recommended for GPs has been received less favourably, and it’s a row that could well escalate, with work-to-rule style action even on the cards. 

Alec Collie, Head of Medical at Wesleyan, said: "While we’re lacking explicit detail on how this funding will be delivered, it’s likely that this will be an uplift to global sum funding – although we hope this will be clarified.

"For many practices, this will hardly touch the sides when the rising cost of running a practice is taken into account, and that means there’s certainly no guarantee that GPs will see the 6% reflected in their pay packets.

"Doctors may have taken heart in the Chancellor’s words recognising the incredibly hard work that public servants like GPs do in delivering for patients, day in day out. But they’ll want to see concrete action that will lead to real improvements in working conditions, patient outcomes and support with cost pressures – and soon."

Dentists have also been offered a 6% pay increase, which has been broadly welcomed by the profession. Still, further reform to dentists’ contracts must still be on the agenda if we are to attract and retain more NHS dentists.

Trouble ahead for teachers

Wesleyan’s teacher members who work in the private sector will also be thinking about Labour’s pledge to apply VAT to independent school fees from 2025. We now know that will be imposed from 1 January, not the start of the school year in September, as was previously assumed.

Many fee-paying schools have pledged to absorb the uplift as much as they can, which will only add to any existing financial pressures they face. The knock-on effect of this may well be that ever more schools choose to opt out of the Teachers’ Pension Scheme (TPS).

Our research has found that more than a third of all independent schools in England and Wales have either withdrawn, or plan to withdraw, from the TPS since it was reformed in 2018, when employer contributions rose from 16.48% to 23.68%. The issue was exacerbated when contributions jumped again in April 2024, hitting 28.68%.

The TPS is an incredibly valuable benefit that’s inflation proofed, guaranteed by the government and provides a retirement income that’s directly tied to a teacher’s salary. Anyone facing a switch to a private pension scheme should seek professional financial advice on what this might mean for them and may need to rethink their retirement plans.

Tax and spend

The incoming government has pledged that it will not make any increases to Income Tax, National Insurance, Corporation Tax or VAT, however there is ongoing speculation that Inheritance Tax (IHT) may be ripe for reform in the Budget.

At the moment, the IHT threshold is fixed until 2028, so receipts will naturally rise in the years ahead as the value of assets like homes continue to increase. However, there is a complex abundance of widely used exemptions and reliefs to reduce liability that mean IHT is often referred to as an 'optional tax'.

In our view, IHT is now overstretching its original purpose - as a tax for the very wealthiest.

Jonathan Halberda, Specialist Financial Adviser at Wesleyan Financial Services, said: "Generally speaking, we’re seeing growing demand for IHT advice as more and more estates are pulled into its net.

"We’re seeing more younger people looking for help too as they try to plan early and we’re seeing more families try to craft ‘DIY’ plans. While this is perfectly possible, the complexity of IHT rules means that there’s always a risk that important details are overlooked.

"An adviser can help navigate the details and lay out all the possible options."

We hope any potential changes make IHT simpler, easier to engage with and don’t draw ever more people into its scope. However, the new government has said there will be tough decisions ahead. So, over the coming weeks and months, we’ll continue sharing timely updates and insights that are relevant to you.

Whatever comes next, you can trust in our proven resilience. We’ve been around since 1841, we know our customers and the challenges and opportunities they face, and we will continue to work diligently to help you achieve your financial goals.

We’re on your team for life, right through your career and into retirement.