The UK’s new Labour government: What to expect and how to prepare

Check out our election microsite for detailed post-election commentary

Vialto’s view: Our initial reaction

As a result of its victory at the General Election held on 4 July 2024, the Labour Party has formed the new UK government, with Sir Keir Starmer as Prime Minister. Our comprehensive guide is intended to help you understand what the result is likely to mean for global mobility: what’s coming, what you need to do, and what to communicate to your colleagues and your organisation’s leadership.

Whilst employment tax and immigration were key points of debate throughout the election campaign, it’s unlikely we’ll see any knee-jerk changes to the system on either front. Instead, we’re expecting Labour to focus on the long game.

For tax, that means focusing on closing perceived loopholes and generating growth, rather than immediate tax cuts or increases. However, with big spending plans and austerity off the table, it’s likely that additional tax revenues will need to come from somewhere. Labour has been clear that they do not want to raise taxes for workers—but something will likely have to give—and some commentators have speculated that there could be adjustments to Capital Gains Tax (“CGT”).

For immigration, that means focusing on improving the UK’s skills base, with better coordination between the Migration Advisory Committee (“MAC”), skills bodies and the Industrial Strategy Council (“ISC”), in order to achieve their overall objective of reducing net migration. The fundamental structure of the UK immigration system will remain the same, but we can expect an increased focus on compliance and good employment practices.

Highlights

The UK’s 2024 General Election has been won by the Labour Party.

As regards potential tax changes that may impact employers and employees, the Labour Party has promised that:

• There will be no increases to tax on workers’ pay, specifically no increases to the basic, higher or additional rates of income tax or National Insurance in the new Parliament
• Non-dom status will be abolished once and for all and will be replaced by a scheme for people in the UK for a short period of time
• It will introduce VAT on independent school fees
• The National Living/Minimum Wage (“NMW”) will be changed by removing age bands and changing the remit of the Low Pay Commission
• It will create a single enforcement body (Fair Work Agency) to ensure employment rights are upheld, e.g. to the NMW
• Disability and ethnicity pay gap reporting will be introduced
• The Apprenticeship Levy will be replaced with a more flexible scheme
• It will no longer be possible to avoid inheritance tax (“IHT”) through offshore trusts
• HMRC’s powers to tackle tax avoidance will be enhanced
• There will only be one fiscal event per year – essentially, one Budget

On immigration the Labour Party has promised that:

• Net migration will fall by connecting the points based system more closely to the skills system to reduce demand for migrant workers
• Employers who do not comply with immigration and employment laws will be barred from hiring workers from abroad
• The MAC will be strengthened and more closely connected to skills bodies, the ISC and the Department for Work and Pensions

Over the next month or two, global mobility professionals may wish to:

1. Identify which current and future workers could be impacted by the changes and what this may mean for your business’ current processes and costs. In most cases this will mean either workers paid at or around the rate of NMW or employees with non-dom status, but could also include cost considerations for any benefits the business settles on behalf of employees and/or higher paid mobile workers if a further rate of income tax above the additional rate were introduced.
2. Consider how to identify which workers engaged directly on a self-employed basis may be at risk of being a deemed employee if ‘worker’ status is amalgamated with ‘employment’ status, to put your organization in a good position to understand any employment tax impact/cost once further detail is announced.
3. Consider sending clear communications to impacted members of your executive population about relevant tax changes. Those are likely to be concerned with non-dom status but may also cover VAT on private school fees (if provided as a benefit), changes to the treatment of carried interest (if you are a relevant business) and/or reference likely changes to IHT.
4. Contact sector skills or trade bodies if you operate in a sector that the government may judge to be reliant on migrant labour, for instance care or hospitality. You will probably not need to take any action yet, but they will be important relationships when the government begins to look at immigration policy, most likely via the MAC.

For more detailed post-election commentary, check out our full guide, which is part of our election microsite— be sure to bookmark it, as it will continue to be updated with helpful resources as policies impacting global mobility are announced.

Contact us

For a deeper discussion on this topic, please reach out to your usual Vialto Partners point of contact, or the following team members: