Reeves considers softening inheritance tax changes amid non-dom backlash
Rachel Reeves is considering caving in to City lobbying and softening changes to inheritance tax that affect wealthy individuals who would previously have been 'non-doms', reports suggest.
In her autumn budget, the chancellor confirmed that she would scrap the non-dom tax status, which allowed wealthy individuals with connections abroad to avoid paying full UK tax on their overseas earnings.
'Those that make the UK their home should pay their taxes here,' she said at the time.
Jeremy Hunt, her predecessor, had already sounded the death knell for non-dom status, but Reeves's changes were expected to raise an additional £12.7bn over five years.
She then announced minor adjustments to the transitional arrangements to the new regime at the Davos summit in January, after a backlash from some wealthy individuals.
However, Reeves is now reportedly considering modifying changes that came into force in April, which make the worldwide assets of all UK residents subject to inheritance tax (IHT) at 40% – even if these are placed in trusts, according a report in the Financial Times.
Responding to the report, a Treasury spokesperson said: 'As the chancellor set out at spring statement, the government will continue to work with stakeholders to ensure the new regime is internationally competitive and continues to focus on attracting the best talent and investment to the UK.'
There have been reports of an 'exodus' of wealthy individuals from the UK, though these have been questioned by some analysts – including in a recent study from the thinktank the Tax Justice Network.
When it projected the revenue from closing non-dom loopholes at Reeves's autumn budget, the independent Office for Budget Responsibility allowed for an additional 12%-25% of non-doms to leave the UK this year.
Sign up to Business Today
Get set for the working day – we'll point you to all the business news and analysis you need every morning
after newsletter promotion
But Reeves is keen to mollify wealthy global investors, as the Treasury is determined to attract foreign investment into the UK, as part of its mission to kickstart economic growth.
She already faces a challenging fiscal picture in the run-up to the autumn budget, as the OBR is expected to revisit its optimistic productivity forecasts, potentially downgrading growth projections as a result.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Telegraph
18 minutes ago
- Telegraph
Reeves' vindictive tax raid on the rich was doomed to fail
To no-one's surprise but the Treasury's, Rachel Reeves' attempts to heavily tax highly internationally mobile high-income or high-wealth individuals have backfired. After sparking an exodus sufficient to significantly undermine the revenues from the schemes – potentially even meaning these taxes cost money instead of raising it – she is reportedly considering a U-turn. The focus is now on finding an alternative to imposing a 40 per cent inheritance tax on world-wide assets – identified as the single biggest factor in driving rich people away from Britain. Whilst some specific measures may have bigger effects than others, changing one or two items is unlikely to be game-changing in stopping the UK's loss of high-income and high-wealth individuals – a drain that has persisted for some time now, going back to the 2008/09 Global Financial Crisis, but which has accelerated markedly in recent years. The UK was traditionally attractive to wealthy people, leading to our attracting a disproportionate share of the world's stock for a range of reasons. We had one of the top 'world cities' in London, with fantastic activities for rich people to engage in combined with much lower crime than cities in many other countries, low risk of revolution or civil disorder, a long tradition of opposing the arbitrary confiscation of wealth, little political support for extremely high taxes on high income, secure property rights, internationally famous schools for the children of the wealthy to attend, and a year-round gentle climate. Many of these factors are already gone and others are declining. London nightlife and other activities were already in decline but badly hit by Covid, never properly recovering. Casual crime has become endemic in many UK cities, along with unsightly rubbish in the streets. We came close to civil disorder in 2019 and fears of the same are now re-emerging. Talk of wealth taxes is popular. Property rights no longer seem secure. Retrospection is not unthinkable. Our private schools have seen sex scandals and taxes. Even the climate is less gentle. In such an unconducive environment, many rich people may not need much of a trigger to leave. And once they have adjusted emotionally to going, it will often be too late to get them back. Governments used to be very keen on the factors delivering 'competitiveness' – the attraction of high-income workers and of mobile capital. British government policy has, for a long time, apparently taken little to no interest in its impacts on competitiveness. Now we see the fruit.
The Independent
32 minutes ago
- The Independent
Starmer warned British jobs at risk without better trade deal from Trump
Keir Starmer has been warned that UK jobs are at risk without a better trade deal with Donald Trump that removes tariffs from the beleaguered steel industry. President Trump and the PM finally signed off a US-UK agreement to slash trade barriers on goods when they met at the G7 in Canada on Monday. But missing from the deal was the steel industry, which still faces levies of a whopping 25 per cent on goods entering the US. Industry experts and unions have now called for these to be scrapped as soon as possible, amid warnings they are a threat to jobs and livelihoods. But there are fears negotiations could drag on into the autumn after the transport secretary said work to get tariffs removed will continue in the coming 'days, weeks and months'. Alasdair McDiarmid, assistant general secretary of the Community union, said it was 'absolutely vital' to secure a deal on steel as quickly as possible. 'Our steel producers and their US customers need an end to the current state of uncertainty to allow normal business to resume,' he said. 'Crucially, we must see a full exemption for all UK steel exports to the US – without that guarantee some of our leading steel businesses could be left behind, with a threat to jobs and livelihoods.' Gareth Stace, Director-General, UK Steel said the sector should also benefit 'imminently... from a tariff rate cut similar to that which the automotive and aerospace industries will enjoy in seven days.' The government said the two leaders had pledged to 'make progress towards 0% tariffs on core steel products', but the Chinese ownership of British Steel could be a sticking point, as an executive order signed by Mr Trump suggests the US wants assurances that the metal originates in the UK. After signing it, the US President was asked whether steel tariffs would be eliminated, to which he replied: 'We're gonna let you have that information in a little while.' In April, parliament gave the government emergency powers to take control of British Steel and continue production after Chinese owners Jingye proposed shutting the Scunthorpe site's two blast furnaces and other key steelmaking operations. But its future is still uncertain. The uncertainty comes as a £500 million five-year deal has been struck between Network Rail and British Steel, which Ms Alexander said was a 'vote of confidence'. British Steel is to supply 337,000 tonnes of rail track, with a further 80-90,000 tonnes to be provided by other European manufacturers. The Network Rail contract will start on July 1 and is set to provide the company with 80 per cent of its rail needs. Jingye, which bought British Steel in 2020, launched a consultation in March which it said would affect between 2,000 and 2,700 jobs, despite months of negotiations and a £500 million co-investment offer from the Government. The Scunthorpe plant has been producing steel for Britain's railways since 1865. The Network Rail agreement is the first major public procurement since the Government's emergency legislation was passed. Network Rail's group director for railway business services Clive Berrington said: 'We are committed to buying British where it makes economic sense to do so and British Steel remain extremely competitive in the provision of rail and will remain our main supplier in the years ahead.' Charlotte Brumpton-Childs, national officer at the GMB union, said it was a 'crucial first step in securing the future of our steel industry' and urged ministers to make sure British Steel has a 'constant flow of orders' from other infrastructure projects. No 10 said it wanted to implement a further deal to remove tariffs on steel 'as soon as possible'.
BBC News
an hour ago
- BBC News
Police ombudsman Marie Anderson to stand aside
Northern Ireland Police Ombudsman Marie Anderson has said she is taking leave of absence with immediate effect due to what she has called commentary "detracting" from her parties had called on her to step aside after a file was sent to the Public Prosecution Service (PPS) following an investigation into an alleged domestic incident at her Anderson said she had made her decision because it had become "increasingly clear that current commentary is detracting from the focus of that work".
