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Yahoo
29-05-2025
- Business
- Yahoo
The unearthed Treasury document that casts more doubt on Rayner's maths
Treasury documents show one of Angela Rayner's proposed tax raids would bring in as little as a tenth of her predictions. The Deputy Prime Minister has once again been accused of getting her numbers wrong after she made eight tax demands in a leaked memo, first reported by The Telegraph. One suggestion made by Ms Rayner was to abolish the inheritance tax relief on non-listed shares. This would raise anywhere from £100m to £1bn, the memo said. On Wednesday, sources close to Angela Rayner refused to explain how the memo came to the £1bn figure. But, the Treasury's estimates, published after last year's October Budget, put the value of the tax relief at just £185m. The figure was based on modelling completed in the 2021-22 tax year. This could have fallen to as little as £55m as a result of a market downturn, analysis by tax firm RSM found. Tax experts have already warned against the estimates provided by the memo. Dan Neidle, of Tax Policy Associates, said: 'We'd be looking at around £100m rather than £1bn.' In total, she alleged her proposed tax measures would raise between £3bn-£4bn – although not all of the proposals were costed. The inheritance tax relief, which has been in place since 1996, allows those who hold 'unlisted' stocks – specifically including those listed on the FTSE alternative investment market (AIM) – to pay no death duties on those shares. This relief will reduce to a 50pc discount from April 2026, following Rachel Reeves's inheritance tax raids at the October 2024 Budget. HMRC estimations expect this to raise £110m per year. However, Ms Rayner wants to go further and scrap the relief entirely. But the FTSE AIM All-Share Index, which closed at 1,056.50 on April 5 2022, had fallen by close to 40pc by April 2025, when it closed at a value of 640.54. This market downturn could cut the size of any inheritance tax bills because the value of the underlying shares is smaller. The analysis from RSM said: 'If such a reduction were similarly applied to the cost of inheritance tax relief on AIM-listed shares, as the value included in estates may be similarly reduced, then the annual cost to the Exchequer from April 6 2026 might be much less, perhaps in the region of £55m to £80m.' Estimates for reinstating the pensions lifetime allowance – which introduced a ceiling for retirement savings – were also criticised by pension experts, including Sir Steve Webb, the former pensions minister. When Jeremy Hunt scrapped the threshold of £1.073m in 2023, the Treasury estimated it would cost around £800m a year. But while the memo assumes reinstating the ceiling would raise the same amount, Sir Steve said this was unlikely. He said: 'Bringing back the lifetime allowance would not be a quick revenue raiser. 'To avoid charges of 'retrospective' taxation, the Treasury would need to protect people over the new limit, and spend time designing that arrangement. They would also need to avoid the risk of NHS consultants retiring early because of pension tax limits. 'This either means a higher lifetime allowance, which reduces the tax take, or a messy carve-out for doctors, which many would see as unfair. It could take years to get serious money from bringing back the lifetime limit.' The Treasury and representatives of Angela Rayner were contacted for comment. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
29-05-2025
- Business
- Telegraph
The unearthed Treasury document that casts more doubt on Rayner's maths
Treasury documents show one of Angela Rayner's proposed tax raids would bring in as little as a tenth of her predictions. The Deputy Prime Minister has once again been accused of getting her numbers wrong after she made eight tax demands in a leaked memo, first reported by The Telegraph. One suggestion made by Ms Rayner was to abolish the inheritance tax relief on non-listed shares. This would raise anywhere from £100m to £1bn, the memo said. On Wednesday, sources close to Angela Rayner refused to explain how the memo came to the £1bn figure. But, the Treasury's estimates, published after last year's October Budget, put the value of the tax relief at just £185m. The figure was based on modelling completed in the 2021-22 tax year. This could have fallen to as little as £55m as a result of a market downturn, analysis by tax firm RSM found. Tax experts have already warned against the estimates provided by the memo. Dan Neidle, of Tax Policy Associates, said: 'We'd be looking at around £100m rather than £1bn.' In total, she alleged her proposed tax measures would raise between £3bn-£4bn – although not all of the proposals were costed. The inheritance tax relief, which has been in place since 1996, allows those who hold 'unlisted' stocks – specifically including those listed on the FTSE alternative investment market (AIM) – to pay no death duties on those shares. This relief will reduce to a 50pc discount from April 2026, following Rachel Reeves's inheritance tax raids at the October 2024 Budget. HMRC estimations expect this to raise £110m per year. However, Ms Rayner wants to go further and scrap the relief entirely. But the FTSE AIM All-Share Index, which closed at 1,056.50 on April 5 2022, had fallen by close to 40pc by April 2025, when it closed at a value of 640.54. This market downturn could cut the size of any inheritance tax bills because the value of the underlying shares is smaller. The analysis from RSM said: 'If such a reduction were similarly applied to the cost of inheritance tax relief on AIM-listed shares, as the value included in estates may be similarly reduced, then the annual cost to the Exchequer from April 6 2026 might be much less, perhaps in the region of £55m to £80m.' Estimates for reinstating the pensions lifetime allowance – which introduced a ceiling for retirement savings – were also criticised by pension experts, including Sir Steve Webb, the former pensions minister. When Jeremy Hunt scrapped the threshold of £1.073m in 2023, the Treasury estimated it would cost around £800m a year. But while the memo assumes reinstating the ceiling would raise the same amount, Sir Steve said this was unlikely. He said: 'Bringing back the lifetime allowance would not be a quick revenue raiser. 'To avoid charges of 'retrospective' taxation, the Treasury would need to protect people over the new limit, and spend time designing that arrangement. They would also need to avoid the risk of NHS consultants retiring early because of pension tax limits. 'This either means a higher lifetime allowance, which reduces the tax take, or a messy carve-out for doctors, which many would see as unfair. It could take years to get serious money from bringing back the lifetime limit.'
Yahoo
23-05-2025
- Business
- Yahoo
Labour-supporting tax expert slams Rayner's raid on taxpayers
A Labour-supporting tax campaigner has slammed Angela Rayner's proposals to reintroduce the lifetime allowance and freeze the top rate of tax threshold. The influential tax expert Dan Neidle said a number of the tax rises contained in Ms Rayner's leaked memo could deter investment in UK companies and undermine 'the progressivity of the tax system'. He also questioned whether some of the proposals could raise as much as the Deputy Prime Minister had suggested. The Telegraph revealed on Tuesday that Ms Rayner sent a secret memo urging Rachel Reeves to raise taxes instead of cutting spending. Mr Neidle is the founder of think tank Tax Policy Associates and also a member of Labour, however he has been critical of the party's policies in the past. The tax lawyer said that half of Ms Rayner's proposals 'make sense from a policy perspective', including closing the commercial property stamp duty loophole and removing inheritance tax relief on Aim shares. However he poked holes in some of the calculations on her memo. For example, he told The Telegraph that closing the stamp duty loophole for commercial property could raise anywhere between £700m or £2bn, as opposed to the estimate of £1bn cited in Ms Rayner's memo. In addition, scrapping inheritance tax relief on Aim shares would probably raise only a tenth of the £1bn figure mentioned by Ms Rayner, he wrote in an article for Tax Policy Associates. In the same article, Mr Neidle criticised Ms Rayner's proposal to reintroduce the lifetime allowance, a £1.07m cap on how much someone could save into their pension over their lifetime without incurring a tax charge. The cap was abolished by the Conservative government because it encouraged doctors to work fewer hours in order to avoid a huge tax bill. Mr Neidle said: 'These problems haven't gone away, and so it seems unlikely Labour is about to change its mind about changing its mind on the lifetime allowance.' Ms Rayner also proposed extending the freeze on the additional rate tax threshold beyond 2028, when it is currently set to rise in line with inflation. This would result in a larger number of workers paying 45pc tax as their wages crossed the £125,140 earnings threshold. Mr Neidle pointed out that the additional rate threshold was already much lower than it had been in recent years. For example, in 2009 the additional rate threshold stood at £150,000 – worth £240,00 in today's money. Mr Neidle wrote: 'Freezing tax thresholds is not good tax policy. It's a large tax increase, but a hidden one. It undermines the progressivity of the tax system to have the highest rates paid by more and more people. And it doesn't affect the seriously rich, just the moderately high-earning.' Mr Neidle also said the case for raising rates on dividend tax – another of Ms Rayner's proposals – was 'not persuasive'. Ms Rayner has pressed the Chancellor to align the higher and additional rates of dividend tax with those of income tax. As a result, a higher earner would pay 40pc tax on dividend income as opposed to the current rate of 33.75pc, while an additional rate taxpayer would see the charge jump from 39.35pc to 45pc. Mr Neidle said the UK's dividend tax rate was already 'one of the highest' in the Organisation for Economic Co-operation and Development (OECD) and warned that increasing it could deter investors. He wrote: 'We want to encourage people to invest in companies, and too high a rate of dividend tax won't do that.' The Deputy Prime Minister and the Cabinet Office were approached for comment. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Yahoo
23-05-2025
- Business
- Yahoo
Labour-supporting tax expert slams Rayner's raid on taxpayers
A Labour-supporting tax campaigner has slammed Angela Rayner's proposals to reintroduce the lifetime allowance and freeze the top rate of tax threshold. The influential tax expert Dan Neidle said a number of the tax rises contained in Ms Rayner's leaked memo could deter investment in UK companies and undermine 'the progressivity of the tax system'. He also questioned whether some of the proposals could raise as much as the Deputy Prime Minister had suggested. The Telegraph revealed on Tuesday that Ms Rayner sent a secret memo urging Rachel Reeves to raise taxes instead of cutting spending. Mr Neidle is the founder of think tank Tax Policy Associates and also a member of Labour, however he has been critical of the party's policies in the past. The tax lawyer said that half of Ms Rayner's proposals 'make sense from a policy perspective', including closing the commercial property stamp duty loophole and removing inheritance tax relief on Aim shares. However he poked holes in some of the calculations on her memo. For example, he told The Telegraph that closing the stamp duty loophole for commercial property could raise anywhere between £700m or £2bn, as opposed to the estimate of £1bn cited in Ms Rayner's memo. In addition, scrapping inheritance tax relief on Aim shares would probably raise only a tenth of the £1bn figure mentioned by Ms Rayner, he wrote in an article for Tax Policy Associates. In the same article, Mr Neidle criticised Ms Rayner's proposal to reintroduce the lifetime allowance, a £1.07m cap on how much someone could save into their pension over their lifetime without incurring a tax charge. The cap was abolished by the Conservative government because it encouraged doctors to work fewer hours in order to avoid a huge tax bill. Mr Neidle said: 'These problems haven't gone away, and so it seems unlikely Labour is about to change its mind about changing its mind on the lifetime allowance.' Ms Rayner also proposed extending the freeze on the additional rate tax threshold beyond 2028, when it is currently set to rise in line with inflation. This would result in a larger number of workers paying 45pc tax as their wages crossed the £125,140 earnings threshold. Mr Neidle pointed out that the additional rate threshold was already much lower than it had been in recent years. For example, in 2009 the additional rate threshold stood at £150,000 – worth £240,00 in today's money. Mr Neidle wrote: 'Freezing tax thresholds is not good tax policy. It's a large tax increase, but a hidden one. It undermines the progressivity of the tax system to have the highest rates paid by more and more people. And it doesn't affect the seriously rich, just the moderately high-earning.' Mr Neidle also said the case for raising rates on dividend tax – another of Ms Rayner's proposals – was 'not persuasive'. Ms Rayner has pressed the Chancellor to align the higher and additional rates of dividend tax with those of income tax. As a result, a higher earner would pay 40pc tax on dividend income as opposed to the current rate of 33.75pc, while an additional rate taxpayer would see the charge jump from 39.35pc to 45pc. Mr Neidle said the UK's dividend tax rate was already 'one of the highest' in the Organisation for Economic Co-operation and Development (OECD) and warned that increasing it could deter investors. He wrote: 'We want to encourage people to invest in companies, and too high a rate of dividend tax won't do that.' The Deputy Prime Minister and the Cabinet Office were approached for comment. Sign in to access your portfolio
Telegraph
13-05-2025
- Business
- Telegraph
Why the rich were better off under 1970s Labour
The 1970s are often associated with strikes, punk, bell-bottom flares and platform shoes. But the decade is also remembered for eye-watering tax rates under Harold Wilson's Labour government. Back then, the top rate of income tax was 83pc on earned income over £20,000 (the equivalent of £153,000 today) and 98pc for those with 'unearned' income thanks to the investment income surcharge. And yet, it appears the rich were technically better off under the tax system of the 1970s, thanks to a plethora of tricks and loopholes available at a time when the taxman was much more relaxed. Today, the top 1pc of earners pay almost a third – 28pc – of the nation's income tax bill. But in 1978 that share was just 11pc. It may seem counter-intuitive but there are reasons why the wealthy paid less tax in the 1970s than they do in 2025. One is simply that the rich earn more now. The share of household income going to the top 1pc doubled from 4pc to 8pc between 1970 and 2013, according to the Institute for Fiscal Studies. But that is not the only reason. Research by Tax Policy Associates, a think tank, has found that the high rates of the 1970s were easier to avoid. For example, high earners could choose to take their pay in the form of perks like cars or meals out because there was no income tax on benefits in kind. Interest on mortgages and business loans was fully tax-deductible until 1974. And before the 'temporary non-resident' rules were introduced in 1998, someone who had made a large capital gain could leave the UK and return the next year to avoid paying the bill. On top of this, high rates fuelled a boom in tax avoidance schemes at a time when there were fewer anti-avoidance rules. Dan Neidle, of Tax Policy Associates, said the tax policies of the 1970s 'failed to tax the rich effectively', while Chris Etherington, of RSM, called the UK tax system 'unrecognisable' from what it looked like in the 1970s. Today the tax code is over 23,000 pages long, but in 1976 it was just 1,626. Mr Etherington told Telegraph Money: 'The simplicity in the system provided more opportunity for individuals to minimise their tax liabilities and we now have an array of rules to counter tax avoidance that didn't exist at that time.' There has also been a major shift in attitudes towards tax over the past 50 years. He added: 'The majority of individuals simply want to ensure they are paying the right amount of tax at the right time and will steer well clear of aggressive tax schemes, which HMRC now has the tools to counter.' In recent decades a number of tax rises have specifically hit higher earners. One example is the tapering of the personal allowance under Gordon Brown. Introduced in 2009, this led to effective 60pc tax rates for those earning over £100,000, who would see their personal allowance reduced at a rate of £1 for every £2 earned over the threshold until it disappeared. Mr Brown also froze personal allowances in the 2000s rather than increasing them with inflation. This resulted in a phenomenon known as fiscal drag where workers pay more tax as wages rise and thresholds remain frozen. Mike Warburton, The Telegraph's tax columnist and formerly a director at accountants Grant Thornton, said: 'Gordon Brown was the master of raising tax by stealth through freezing personal allowances.' Nimesh Shah, of accountancy firm Blick Rothenberg, said since then the higher rate had also been adjusted more gradually compared to the personal allowance. 'As the personal allowance increased under the Coalition government, the higher threshold increased at a slower rate, meaning more people were pulled into 40pc income tax.' The personal allowance of £12,570 and the higher rate threshold of £50,270 have now been frozen since 2022. This has led to an increase in the share of workers paying the higher rate. The number caught in the 40pc band has soared from three million in 2010-11 to over six million today. More recently, the capital gains tax allowance was slashed from £12,300 to £3,000 and the dividend allowance from £2,000 to £500, hitting those earning an income from investments. In her maiden budget, Rachel Reeves also raised capital gains tax, closed inheritance tax loopholes and cracked down on non-doms. She is now facing pressure to raise taxes again following warnings that her National Insurance raid threatens to blow a £57bn hole in the public finances. This has led to growing speculation over whether she will target higher earners once again or break her pledge by raising income tax or National Insurance. Mr Warburton said: 'We all know that there is pressure on public services, especially the NHS, and that it has to be paid for. It is misleading to suggest that this can all come from the rich.'
