The chancellor said tax increases on the wealthy would be “part” of next month’s Budget, with a renewed focus on levies such as capital gains tax and inheritance tax.
“Last year, when we announced things like non-nativelike [tax increase for] Rachel Reeves (pictured) told The Guardian that private equity, like VAT on private school fees, had too many complaints to raise the money – and people would leave
She made the remarks while attending the annual meeting of the International Monetary Fund in Washington.
Reeves added: “OBR [Office for Budget Responsibility] Up-to-date data on all of these matters will be released. This alarmism is not rewarded because this is a brilliant country and people want to live here.
“I think when people are alarmist again this year, we should take it with a grain of salt.”
She told the newspaper that tax increases on the wealthy “will be part of the budget on November 26”.
Last month, Reeves said the UK “does not need a separate wealth tax” as the government looks to raise £20bn to £30bn to restore operating space.
But her latest comments put new focus on a series of property taxes affecting high-income earners.
There has been speculation in the media that anyone selling a property for more than £1.5 million may need to pay capital gains tax on the amount that has increased in value since purchase.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “This is pure speculation at the moment and we don’t know what rates might be charged if it is introduced, but if a 24% rate is charged to higher rate taxpayers and if someone’s £1,500,000 property has increased by 15% since it was purchased, then they will pay 24% on £225,000.”
There has long been speculation about changes to estate tax rules.
The latest policy centers on the annual gifting allowance, which currently places no limit on the amount of gifts people can give, which may become exempt transfers.
Hargreaves Lansdown’s Coles said: “The government is said to be considering restrictions. The additional tax revenue will depend on how the restrictions work.”
“For example, if the cut is to £50,000, then a person with an estate worth £1.5 million, with a total nil rate band of £1 million, who might plan to donate £500,000 over their lifetime, would only be able to donate £50,000 and their estate would end up paying 40% tax on £450,000.”
Yesterday it was revealed that the chancellor had reworked plans to change the way the savings product works, which were thought to have been shelved in the summer.
The latest idea from the Treasury is to halve the tax-free limit on products from £20,000 to £10,000 a year.
Reeves is understood to be keen to move some of the cash into stocks and shares Isas to boost UK companies, but also because they can deliver higher customer returns in the long term. UK consumers hold around £300bn in cash Isas.
However, mutuals argue that many of their savers hold cash Isas in accounts which they use to pay home loans. Lower inflows into the product could push mortgage pricing higher.
Andrew Gall, head of savings at building societies, said: “We are very concerned that the Chancellor is still considering cutting Isa cash limits.
The agency added: “Cash Isas are not idle money. They meet real and practical needs, helping people build financial resilience, save for a home deposit or manage their finances in retirement.
“They also provide the basis for future investment and provide the necessary funding for mortgages and other loans.”
It is understood the Treasury is considering a tax on property sales above a certain amount to replace stamp duty.
Hargreaves Lansdown’s Coles said: “The cost depends on how the tax works, but if it replaced stamp duty entirely and was a percentage of the sale price, then someone downsizing a £1m property to £500,000 would move from their current situation (paying £15,000 on a smaller property) to paying a percentage of the sale price.”
“No potential tax rate was proposed but if the tax rate was 3% it would be £30,000.”
But David Morris, head of UK housing at Santander, welcomed the stamp duty reform, which he said had “suppressed supply and demand” in the property market.
Morris argued that the tax “distorts the housing market by discouraging activity by raising the underlying cost of buying a home.
“Changing this transaction tax will open up the market for more activity, while freeing up greater liquidity by encouraging ‘scale optimizers’ to relocate and freeing up the estimated 10 million currently empty bedrooms across the country.”
Rental Income National Insurance
Proposals to apply national insurance to rental income could hit landlords, with the Treasury hoping the move will raise £2 billion.
Paul Johnson, former director of the Institute for Fiscal Studies and now provost of Queen’s College, called the proposal “economically damaging.”
“You need to think very carefully about how you tax housing and how you tax rental housing, and the first myth that’s busted is the idea that… landlords are somehow undertaxed relative to owner-occupiers, which is complete nonsense,” Johnson told the National Residential Landlords Association’s podcast Listening to Landlords.
He added: “If you make it more expensive for landlords, then there will be fewer landlords and rents will go up.”
