Now Labour Are In Government What Tax Rises Are Coming?
The Chancellor doesn't have much wiggle room ...
Posted by Helen Beaumont on 10/07/2024 @ 8:00AM
It has been widely reported that the new Labour chancellor, Rachel Reeves, will be looking at taxation and many individuals are now wondering what taxes she will raise to manage public debt ...
What tax rises are on the cards now Labour are in Government?
With the Institute for Fiscal Studies (IFS) predicting that the incoming government will have to either cut spending or raise taxes, it's clear that Labour's spending plans will likely result in tax increases.
"But what specific taxes could Labour target and how might they impact UK residents?"
One area that could see significant changes is Capital Gains Tax (CGT). Currently, the headline rates for CGT are 20% (24% for residential property), but Labour may consider increasing these rates to align with income tax rates, which are currently 20%, 40%, and 45%.
This could have a significant impact on individuals who earn income from selling assets, such as stocks or property. If you have been considering selling any assets in the near future, it may be wise to do so sooner rather than later to avoid potential tax increases.
Pensions could also be in Labour's sights, as we have seen in the past with former chancellor Gordon Brown's £5bn annual tax raid on company pension schemes. While Labour recently backtracked on their plans to reintroduce the Lifetime Allowance for pensions, it's possible that they could introduce other measures to increase tax revenue from pensions.
This could include imposing inheritance tax (IHT) on uncrystallised pension funds or taxing uncrystallised funds on investment income and gains. If you have a large pension fund, it may be worth speaking to a financial adviser to explore potential strategies to mitigate any potential tax changes that may be coming.
"Another area that has been a hot topic for Labour is the taxation of non-doms!"
While they have promised to continue with the Foreign Income & Gains (FIG) regime, they may remove the transitional measure of the 50% reduction in tax on foreign income in 2025-26. This could have a significant impact on non-doms, who may see a substantial increase in their tax bills.
Additionally, Labour may also consider removing the reduced 12% rate on bringing previously unremitted offshore income and gains to the UK in 2025-26 and 2026-27. This could result in a costly exodus of non-doms from the UK, as 30% are already considering leaving due to potential tax changes.
One way Labour could mitigate the non-dom exodus is by reforming Inheritance Tax. By widening the base through the restriction of reliefs, but reducing the rate, Labour could potentially generate more tax revenue while also making the UK a more attractive place for non-doms to reside. This could include imposing IHT on UK resident non-doms, which could discourage others from coming to the UK.
It's also worth noting that Labour's manifesto was relatively silent on tax reform, with the only mention being a promise to maintain stability in the rate of Corporation Tax. However, many argue that what is needed is a reduction in Corporation Tax to boost confidence and investment in the UK.
If Labour does not address this issue, it could have a detrimental effect on the economy and potentially lead to job losses!
While the specifics of Labour's tax plans are still unclear, it's evident that they will have to raise taxes to manage public debt. Potential reforms could include increases in Capital Gains Tax rates, changes to pension taxation, and measures to target non-doms.
It's essential for UK residents to stay informed and plan accordingly to mitigate any potential tax changes. Only time will tell what taxes Labour will raise.
It's clear that they will have a significant impact on us all.
Until next time ...
HELEN BEAUMONT
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about tax rises, do give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
No unauthorised use, duplication, distribution or modification to any original content contained within this blog is permitted without prior written permission of the author. All other trademarks and registered names are acknowledged.
