Latest news with #wealth tax
Telegraph
2 days ago
- Business
- Telegraph
Reeves is about to be punished for doing the right thing
It is often pointed out that our main political parties are coalitions, made up of people with overlapping, rather than common, aims. This is certainly true of Labour, whose divisions over basic principle, as well as policy, have been painfully exposed in the last year. While a majority of its MPs seem willing to follow Starmer's lead on issues like welfare reform and the cutting of pensioners' winter heating allowances, a significant minority of them – supported by a worryingly large number of ordinary party members and trade unionists – would prefer to forge an altogether different set of policies and even a different type of government. On the crucial area of whether a 'soak the rich' tax policy needs to be adopted, Labour is split into two very different, opposing, camps. This issue is one that will define the government between now and the next general election. Whatever promises Labour made in its general election manifesto last year not to raise taxes for working people, now that it enjoys an overwhelming majority in the Commons, Left-wing back benchers are becoming impatient. Why can't the government just do what the party wants? And the party, as represented by former party leader, Lord Kinnock, as well as a swathe of back benchers and union leaders, wants a wealth tax. Regular claims by the Left that the rich 'don't pay their fair share' of tax are easily countered by the observation that the top one per cent of income tax payers already provide 30 per cent of all income tax revenue. A wealth tax – here envisioned as a two per cent levy on assets worth over £10 million – could hardly be seen as a tax on 'working people' because, according to Left-wing lore, wealthy people do not work but spend their days shooting grouse on their country estates and laughing at children who are forced to climb up chimneys. That a number of countries have already attempted such a tax and been forced to repeal it after it proved effective only in driving individuals out of the country is an inconvenient fact that can be ignored. And such arguments are indeed dismissed by people who give the impression that the purpose of such a tax increase would be less about raising money to spend on social programmes than about punishing rich people for the crime of being rich. That has always been a temptation of the Left and it took the election of Tony Blair as leader in 1994 to persuade them – or start to persuade them – that tax rises are not a good thing in themselves, and that they should only be used to fund a particular project rather than about signalling a particular principle or virtue. The Chancellor Rachel Reeves has learned that lesson and is robustly holding out against her comrades' urgings to take a more Left-wing approach to the 'problem' of the presence of wealthy people in our country. She recognises that as well as failing to raise the promised revenue, a wealth tax would be seen internationally as a sign that Britain has turned its back on wealth creation, a place where wealth creators – who tend to be wealthy themselves – are not welcome, which is precisely the opposite strategy that Reeves and the government wish to pursue. But back benchers have tasted blood. They got their own way by forcing a humiliating climb-down by Keir Starmer over welfare reform – the idea that the welfare budget should not be expanded while Labour is in office is anathema to the government back benches – and now they see an opportunity to get their way again by forcing an unwanted and unworkable policy on the Chancellor. No doubt this would be seen as a weapon that could be used against the threat of an emerging Jeremy Corbyn-led party that threatens to tempt Left-wing voters away from Labour. Reeves can see that this is all self-defeating nonsense. The one thing that could spell the demise of this administration would be if it proved an incompetent steward of the public purse and the economy. Attractive though populist quick fixes of the kind that can be summarised in a shouted slogan during student protest marches through central London might be (one of those slogans that is inevitably followed by the demand 'NOW!'), the Chancellor knows that real life demands real world solutions. Reeves must stand firm against the childish demands of back benchers who are too reluctant to accept that the roles of party activist and parliamentarian have very different, and often conflicting, responsibilities.
Telegraph
2 days ago
- Business
- Telegraph
Inheritance tax bills top £500k for one in 10 families
One in 10 families who paid inheritance tax faced a bill of more than £500,000, latest HM Revenue and Customs (HMRC) figures have revealed. Of the 27,850 estates who paid the death levy in 2021-22, the latest year for which data is available, 1,630 paid more than £500,000. A further 890 paid more than £1m in inheritance tax, according to figures obtained by wealth firm, Rathbones, under Freedom of Information rules. This represented a 29pc increase in the number of estates paying that much in three years. If the upwards trend continues, more than 3,500 estates could pay over £500,000 in inheritance tax this year, analysis found. Experts blamed the increase on rising house prices, but said that an upcoming raid on unspent pension pots would see more estates paying larger sums. It comes as talk of a wealth tax ramps up once again. Ahead of a looming Budget in which Rachel Reeves, the Chancellor, faces tough choices – including whether to charge a capital gains levy on death – more families are using exemptions, advisers told The Telegraph. Inheritance tax is paid at a rate of 40pc on anything over the nil-rate threshold of £325,000. Families can also benefit from other allowances, including a £175,000 exemption on a main property. Gifts made more than seven years before death are exempt, as are those which are made habitually out of excess income. In last year's October Budget, Ms Reeves announced that private pensions, previously exempt from the levy, would be considered part of a person's estate, and therefore liable for inheritance tax from 2027. This will increase the number of estates liable for death duties by almost a quarter, analysis found. In October, the Government admitted that it would pull more estates into paying inheritance tax, and that estates would pay more. Campaigners criticised the Chancellor for the 'cruel' blow to bereaved families that will 'wreak havoc on finances'. Lucy Woodward, of tax firm Saffery LLP, said: 'It is probably no surprise that inheritance tax is going up given the nil-rate band has been frozen since 2009.' The £325,000 nil-rate band, which was set in 2009, would be £519,695 today, if it had risen with inflation. Ms Woodward added: 'However, clients I talk to are still keen to use the seven-year rule and the more accessible exemptions, such as the annual £3,000 allowance and normal expenditure out of income. If anything, the challenging environment can make clients even more determined to mitigate this tax.' Last year, bereaved families paid a record £8bn in inheritance tax, a £750m increase on the year before, according to data published by HM Revenue & Customs (HMRC). Wealth advisers have said there has been a rise in parents making six-figure gifts to get their children on the property ladder to escape the tax grab. Rebecca Williams, head of financial planning at Rathbones, said: 'The Bank of Mum and Dad is under pressure. Clients are walking a line between supporting children today, having enough for later life care tomorrow and not wanting to give the Treasury too much of their hard-earned wealth on death.' An HM Treasury spokesman said: 'The number of taxpaying estates was published by the Office for Budget Responsibility in October. 'We continue to incentivise pension savings for their intended purpose – of funding retirement instead of them being openly used as a vehicle to transfer wealth – and more than 90pc of estates each year will continue to pay no inheritance tax after these and other changes.'
Yahoo
15-07-2025
- Business
- Yahoo
Mansion House glitz cannot hide the stark realities for the UK economy
Tonight, the Mansion House will almost certainly be in glittering floodlights, as the Lord Mayor hosts the good and the great to hear Chancellor Reeves extol the virtues of GB PLC. Those attending will be told that provided they are patient, the sun metaphorically is set to rise above the yardarm and deliver growth for working people. She will mutter about fiscal spending and probably repeat for the umpteenth time how awful the Tories have been for fourteen years. It is also possible that she will also dodge the obvious questions – How much will taxation be increased by in the Autumn Budget and which taxes – wealth tax, income tax, VAT? A wealth tax would be very anti-business, when the Government needs to encourage investment. Over 10,000 millionaires have left the UK and more will follow unless attitudes towards the creation of wealth and consequently jobs, changes. Labour governments have shown little appetite for cutting costs and especially welfare benefits or workers' rights and it's hard to see this one changing its spots. On the positive side, the Chancellor is likely to offer an easing of regulatory requirements for mortgages to stimulate the housing market. Friday's GDP number of -0.1% for May, following -0.3% in April made dispiriting reading. In fairness GDP was up 0.5% for the last quarter. Poor manufacturing data was one of the main reason growth was negative last month. No decent person on God's earth wants those with disabilities or genuine mental health to suffer. Like many others I was amazed that the Government had to do a 'U'-turn' on its recent welfare Bill. The sum involved, £5 billion, is but a mere bagatelle in the grand scheme of the total cost to the exchequer. The total cost of welfare in the UK for 2025/26 is estimated to be £303.3 billion, up from £228.7 billion in 2019 and from £247.4 billion in 2020/1. Of course Covid 19 played an active role in increasing costs, but we need a reality check before it's too late. Many respected economists with established track records, venture to suggest the figure will increase to £375 billion by 2029/30 – unsustainable in my humble opinion. The direction of travel the UK economy is headed in, offers scant encouragement. With the cost of welfare at eye-wateringly dizzy and unsustainable levels, growth at best will be anaemic for the next decade - 1% plus a bit at best. The prospects for the future look unappetising. There are no ministers with any business experience on the Government's front bench. Whilst the Government should be trying to unravel the colossal welfare burden in the years to come, it has failed to grasp the nettle – how to stimulate business and investment activity to create growth. Maybe the Chancellor's speech will offer a smidgen of hope! At present, risk appetite is all but at zero. Brexit should have encourage copious companies to come to London, by being offered aggressive tax incentives. Stamp duty on trading shares should have been abolished. Better tax concessions for start-up businesses should have been implemented. We shall be waiting with bated breath to hear what the Chancellor has to say tonight. Let's hope it is not a replica of another 'Pandora's Box.' Encouraging savers to put their pension funds in unquoted companies or any companies that have not been recommended is not the way forward. I am no economist, but there is one brutal fact staring everyone in the face on top of the cost of welfare, but closely associated with it. That is there are 9.2 million economically inactive people in this country – circa 21% of the working-age population. The cost of that is unsustainable. There are only two answers to the cost of this parlous state of affairs – increased taxation and or dramatically cut costs. This is not a right-wing rant. This is a reality check. The Labour is not the only government to blame for this crisis. The Tories, allowing for the fact that Covid 19 cost circa £400 billion, to keep the country in near enough full employment during those dark days of 2020-21, did little to deal with what is euphemistically referred to as a weeping carbuncle, better known as a bloated wasteful public sector. So many people, who rightly get huge benefits from free education for their children and free health from the NHS, still think the country owes them more. This is insanity. We are on the road to penury. Debt is now approaching £2.9 trillion, or around 100% of GDP, a level not seen since the early 1960s. Specifically, public sector net debt was equivalent to 96.4% of GDP at the end of May 2025. This level has fluctuated, reaching a high of 210.7% after the Second World War in 1948, and a low of 21.6% in 1990. The Federation of Small Business believe that 27% of their owners fear their operations will be closed, shrink or be sold, such is the lack of confidence in the future, which is at its lowest level since 2008. Only 25% believe their businesses will expand. The concern is such that many believe that 200,000 jobs could be lost. Though we hope the PM, the Chancellor and the Government will inspire us in the months to come, the larger than life crisis of the welfare, debt and those economically inactive is not going to go away. The problem needs to be addressed now. If not, it may not take too long before the gilt market takes its toll on the government again, which will just exacerbate this acute crisis. The Government must have the drains up to dramatically cut unnecessary waste and profligacy, focusing on those who do not deserve help. Sign in to access your portfolio
The Independent
14-07-2025
- Business
- The Independent
Why wouldn't a wealth tax work in Britain?
Not so long ago, when Labour was in opposition and still popular, there was no question of introducing a wealth tax. Yet today, influential figures such as former leader Neil Kinnock and ex-first minister of Wales Eluned Morgan, and some trade unions, are advocating just such a change. More tellingly, ministers simply refuse to rule out a wealth tax as they might have done before. The latest to do so is the transport secretary, Heidi Alexander, who was asked if the topic had come up at last Friday's cabinet away day and enigmatically replied: 'Not directly.' Teased at Prime Minister's Questions on the subject, even Keir Starmer couldn't bring himself to issue a flat denial. Some wonder if a wealth tax could actually happen... What did Labour promise? There's nothing in the manifesto to rule out a wealth tax, but in an interview in August 2023, Rachel Reeves was unequivocal: 'We have no plans for a wealth tax. We don't have any plans to increase taxes outside of what we've said. I don't see the way to prosperity as being through taxation. I want to grow the economy,' she said, adding: 'We won't be doing that. It's a denial.' And as recently as her spring statement in April, she declared: 'We're not interested in a wealth tax. Our priority is to grow the economy, and that's the way that you make working people better off and secure better public finances.' What does the left want? It's usually stated as a 2 per cent levy on assets – property, shares, art etc – owned by individuals in excess of £10m. For example, someone worth £12m would pay a levy of 2 per cent of £2m – a bill of £40,000. It could be paid immediately, or deferred to disposal (or death). Figures such as Richard Burgon, a left-wing MP who believes in it, says it would raise 'up to' £24bn. What does the chancellor say? As little as possible at the moment, suspiciously sticking to the 'working people' line (though some working people are worth £10m, and more). No denials, then. What are the arguments for a wealth tax? It's said that the country shouldn't balance the books on the backs of the most vulnerable, and that fairness demands that those with the broadest shoulders bear the greatest burden. Recent controversies about disability benefits and children with special needs have heightened the arguments. It's also true that wealth in the UK is undertaxed compared with income, and that we live in an unequal society, at least by some European standards. Economists warn about what might happen as wealth accumulates through inheritance over the very long run. As Thomas Piketty puts it: 'Inheritance will eventually matter a lot pretty much everywhere – as it did in ancient societies. Past wealth will tend to dominate new wealth, and successors will tend to dominate labour earners.' The present debate about 'intergenerational fairness' is one artefact of this phenomenon. And against a wealth tax? It has been tried, and failed. Comparable nations such as France, Germany, Switzerland and Norway have more or less abandoned wealth taxes, or found them to be unproductive. Almost half a century ago, a previous British Labour government issued a green paper on a proposed wealth tax, but then the chancellor, Denis Healey, concluded it would be impractical and too costly to administer. The wealthy have always found ways to avoid such taxes and protect their assets, while the super-rich simply skip the country altogether. Tax expert Dan Neidle judges: 'The idea that we can do something different is naive. It's arrogant to think that we in the UK can achieve a holy grail everyone else has been too stupid to find.' What wealth could be taxed? An uncomfortable truth is that the easiest wealth to tax would be the most politically difficult – and arguably, the least fair: homes and pension pots belonging to individuals worth far less than £10m, and who would fall into the category of 'working people' that Labour has pledged to look after. After all, you can't take the house in which you live and move it overseas. And many of the assets in question will have been taxed already. Any government that tried to tax a capital gain on a principal private residence would place itself in opposition for a generation. What are the practical problems with a wealth tax? Imagine obliging everyone to declare an accurate value for the property (and everything else) they own, along with how much they paid for it, or when it was inherited and its value at the time, and then employing HMRC officials to undertake checks and audits on such a mass of information. Should theoretical, unrealised gains be index-linked to allow for inflation? Any allowance for, say, renovating a derelict building? What counts and what doesn't? Wedding rings? A classic car? The family business? And how about offsetting capital losses on bad investments or failing companies? It would take years to process. What could Reeves have her eye on? It could be large, uncrystallised capital gains on assets such as rental properties, bonds, pension pots and shares at death, which mostly escape inheritance tax (IHT). It would basically be an extension of inheritance tax, itself a deeply unpopular levy (albeit few pay, and the thresholds are generous). Anything else? Capital gains on virtually anything except a main home are already taxed, as are pension pots in certain circumstances, and there isn't that much room left to hike these tax rates. Stamp duty on mansions has already been increased substantially, and of course 'non-dom' status was abolished by the previous government. The 'family farm tax' – the removal of the IHT exemption for agricultural property – is another recent, and unwelcome, change for many. They've even specifically taxed private jets. Beyond a certain level, heavy disincentives to save and invest start to kick in, which would be bad for the economy. For example, Neidle shows how this can depress investment: 'A 2 per cent wealth tax doesn't sound like much, but for someone earning an 8 per cent return on their assets, that plus existing dividend tax creates an effective rate of 60 per cent – and on a year when assets decline, an effective rate of over 100 per cent. That creates an incentive to avoid the tax out of all proportion.' Tax rates set too high on savings mean that people are unduly encouraged to consume rather than make provision for their old age or any periods of unemployment, with dire long-term effects on the Exchequer and on economic growth. It might therefore not raise much revenue for long. Politically, it makes a government look desperate, as if it's constantly looking for new things to tax rather than getting the economy to grow.
Yahoo
13-07-2025
- Business
- Yahoo
Chancellor guided by ‘fairness', senior minister says of calls for wealth tax
The Government will be guided by 'fairness' on tax, a senior Cabinet minister said when asked if tax rises are coming in the autumn budget. Transport Secretary Heidi Alexander would not rule out tax rises in the budget as she toured the broadcast studios on Sunday morning. She also told Sky News's Sunday Morning With Trevor Phillips programme that Cabinet ministers did not 'directly' talk about the idea of a wealth tax – as advanced by unions and former Labour leader Lord Neil Kinnock – during an away day at the Prime Minister's Chequers country estate this week. Chancellor Rachel Reeves has refused to rule out tax rises at the budget since Labour MPs forced ministers to make a U-turn on welfare reforms, which the Government had hoped would save up to £5 billion a year. Fiscal watchdog the Office for Budget Responsibility (OBR) this week warned that the UK's state finances are on an 'unsustainable' path due to a raft of public spending promises the Government 'cannot afford' in the longer term. Meanwhile, economists have warned Ms Reeves on several occasions that her fiscal headroom – the leeway within the Government's self-imposed spending rules – could be eroded by unexpected economic turns. Ministers are committed to not raising income tax, national insurance and VAT – the three main taxes which affect working people – to pay for their plans. Lord Kinnock last week suggested a wealth tax could 'commend' the Government to the general public and help it bolster the public funds while not breaking its existing pledges. Union leaders, including Sharon Graham of Unite, are also pressuring ministers to consider the move. Asked by Sky News if such a tax had been discussed at the Cabinet away day on Friday, Ms Alexander said: 'Not directly at the away day.' Pressed on what she meant by not directly, the senior minister replied: 'I think your viewers would be surprised if we didn't recognise that, at the budget, the Chancellor will need to look at the OBR forecast that is given to her, and will make decisions in line with the fiscal rules that she has set out. 'We made a commitment in our manifesto not to be putting up taxes on people on modest incomes, working people. We have stuck to that.' Asked again if this meant there will be tax rises in the budget, Ms Alexander replied: 'So, the Chancellor will set her budget. I'm not going to sit in a TV studio today and speculate on what the contents of that budget might be. 'When it comes to taxation, fairness is going to be our guiding principle.'
