What the General Election might mean for Investors

On December 12 the country will vote in its third General election since 2015. Although we are waiting for the various contenders to publish their manifestos the Times newspaper produced an article over the weekend in which they have put together past announcements and proclamations as a guide to what might be reasonably expected. The following are some examples which may be of interest for investors.



If the Tories win the election, the future of interest rates will depend on the type of Brexit we end up with. A no-deal Brexit will result in rate cuts by the Bank of England to stimulate a shocked economy. This would be bad news for savers, but good news for mortgage holders. However, if we depart with a deal, that may encourage the Bank of England to raise rates. The base rate has been 0.75 per cent since August last year and has not been above 1 per cent since February 2009.


The likelihood of a rate rise increases significantly if Jeremy Corbyn gets into power. “A Labour government is expected to borrow heavily because of its public spending commitments. This could lead to a sharp increase in interest rates,” says Anna Bowes of Savings Champion, a personal finance website.

Liberal Democrats

In the unlikely event that the Lib Dems win an overall majority to govern on their own, the first thing Jo Swinson said she would do as Prime Minister is revoke Article 50 and cancel Brexit. This scenario, according to the Institute for Fiscal Studies (IFS), a research group, would be “the best economic outcome” and interest rates would rise quickly. This would also be the case in a Labour-led coalition.



The Prime Minister Boris Johnson has previously talked about raising the threshold at which you start paying higher-rate income tax in England from £50,000 to £80,000. At present, 40 per cent tax is levied on income of between £50,000 and £150,000. Scotland and Wales set their own tax bands.

According to AJ Bell, an investment platform, this would affect about four million people, with the highest earners gaining an extra £2,500 a year.

Raising the threshold would not be all good news for higher-rate taxpayers, however, because they could lose tax reliefs on their pension savings.

Income tax isn’t the only tax earmarked for reform. The Chancellor, Sajid Javid, suggested at the Conservative party conference that he was considering scrapping inheritance tax.

The Tories have also promised to look at the pension tax rules for higher earners, including the lifetime allowance (£1.055 million) and annual allowance (£40,000), after it emerged that NHS workers were cutting their hours to avoid tax. Another unpopular rule they could look at is the taper applied to the annual pension allowance, which reduces the tax-free amount that can be saved into a pension for those earning more than £150,000.


The Shadow Chancellor John McDonnell has proposed lowering the threshold at which the 45 per cent additional income tax rate kicks in from £150,000 to £80,000 and would apply a 50 per cent rate to income of more than £123,000. Labour’s 2017 manifesto included an “excessive pay levy” under which companies would have to pay 2.5 per cent tax on any salary they paid over £330,000 and 5 per cent on any wages above £500,000. Labour has previously indicated that it may reduce pension tax relief.

The party has pledged to scrap the existing complicated inheritance tax system and simply impose a lifetime cap of £125,000 on the amount you can inherit tax-free. Any gifts received above this would be taxed as income. The party has also said it would end the marriage allowance that reduces a couple’s tax liability by £250 a year. McDonnell has also said he would reverse the Conservative cuts to capital gains tax (CGT) from 28 per cent to 20 per cent for higher-rate taxpayers and 18 per cent to 10 per cent for those on the basic rate of income tax.

Liberal Democrats

Plans set out by the party last year include taxing capital gains as income and abolishing the £2,000 tax-free allowance available on dividend income. The Lib Dems also plan to introduce a flat 25 per cent rate of tax relief on pension contributions and abolish employee national insurance payments on those contributions. Last year the party called for the tax-free lump sum that can be withdrawn from pensions to be limited to £40,000 “restricting the amount of relief those with the largest pension pots can receive without paying any tax, while leaving 75 per cent of pension drawdowns unaffected”.

Everyone would have a lifetime tax-free inheritance allowance of £250,000 and beyond this wealth transfers, including gifts, would be taxed as income. Small annual gifts, spending on a child’s education and transfers to spouses and charities wouldn’t count towards the allowance, it stated in its report Giving Everyone a Stake.


The Scottish National Party has previously said it is opposed to lowering income tax thresholds for higher earners.



Tom Selby, a senior analyst at AJ Bell says: “Perhaps the most politically toxic area of pension policy centres around plans to increase the state pension age. Under accelerated plans announced by the Conservatives in 2017, the state pension age will rise to 67 by 2028 and 68 by 2039, a full seven years earlier than had been proposed.” The amount paid in the state pension rises each year in line with whichever of three factors are higher: average earnings, inflation or 2.5 per cent. This “triple lock” was introduced by the coalition government, but the Tory party has suggested moving to a “double lock” of average earnings or inflation from 2022.


According to its 2017 manifesto Labour would halt proposed increases to the state pension age beyond 66 and commission a review. In the last manifesto it committed to keeping the triple lock for the next parliament.


The Liberal Democrats and SNP have previously committed to the triple lock and the SNP has said it is opposed to an increase in the state pension age beyond 66.


This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned about the content hereof and any such action or inaction. Professional advice is necessary for every case.

Julian Kaye Dip PFS

Financial Adviser.