The Labour Party Manifesto for the election on 4 July 2024 has now been published. Our key tax takeaways from the manifesto for the asset management sector are as follows:

• Carried interest. Labour has pledged to “close the loophole” on carried interest, preventing performance-related remuneration received by investment managers from being taxed as capital gains. This has been costed to increase the tax take by £565 million in 2028/9. The basis of calculation is not clear, so it is not currently possible to tell whether they are proposing to impose tax at income tax rates (of up to 45%) on carried interest or at some intermediate rate between 28% (the current special capital gains tax rate for carried interest) and 45%. Labour previously indicated that they would consult on changes to the taxation of carried interest. It is clear that taxing carried interest as income in all cases would make the UK less attractive for investment managers particularly in the private equity, venture capital and private credit sectors, given that France, Germany, Italy and Spain each have clearly more advantageous carried interest regimes where amounts can be taxed at rates between 25% - 30% (if relevant conditions are met).

• Non-UK domiciled regime. The non-UK domiciliary regime, which the Conservatives promised to abolish at the Spring Budget 2024, will also be abolished by the Labour Party (including in relation to inheritance tax). It is not clear how Labour will modify the Conservatives’ proposals, although, as the manifesto indicates the changes will raise further tax, it is expected to be less generous in some respects, particularly concerning transitional arrangements, provisions relating to non-UK trusts and the temporary repatriation facility.

• Headline tax rates. Labour has pledged no increases to national insurance, income tax or VAT rates and corporation tax rates will be capped at the current 25%. This likely means that current income tax and national insurance rate bands will be frozen at current levels bringing more individuals into tax via stealth tax/fiscal drag.

• Increased HMRC scrutiny. Labour has pledged to boost the resources at HM Revenue and Customs (HMRC), strengthen HMRC’s powers and encourage a more active enforcement landscape seeking to “close the tax gap”. They have also indicated that HMRC will require increased “registration and reporting requirements” from businesses.

Read the full Labour Party manifesto here.