A top British tax expert has warned Rachel Reeves that reported plans to hike Capital Gains Tax up to 39% could be a “disaster”.
Reports emerged yesterday [FR] that the Chancellor is considering increasing Capital Gains Tax by nearly double as she scrambles to find extra cash ahead of the budget to fund Labour’s manifesto commitments.
Leaked Treasury modelling appeared to show officials considering increasing wealth taxes to between 33% and 39%, with growing panic in the department that Labour’s pledge not to increase VAT, income tax or national insurance on working people has boxed them in ahead of Ms Reeves’ first fiscal statement.
Amid claims from officials that Ms Reeves’ plans are in “complete disarray”, the reported plans to hike Capital Gains tax has been met with a reaction ranging from consternation to horror.
Tax expert Dan Neidle issued a warning that unless the policy is implemented with correct mitigations it could be “a disaster and potentially lose large amounts of tax”.
Ms Reeves is being warned off making the move (Image: PA)
Mr Neidle, a member of the Labour Party, argued that significantly raising CGT could raise additional sums, but warned it must be accompanied by a “generous allowance for investment, and reforms to the base to stop avoidance.”
He also warned “It also needs to happen overnight”, repeating previous warnings that the most important thing when raising CGT is “don’t tell anyone about it until the moment it happens”.
Other voices were even more opposed to the planned tax raid, with Tory frontbencher Andrew Griffith warning it will lead to Britain losing out on a “generation of entrepreneurs”.
He told this paper: “If true it would be 39 reasons not to start a business, invest for the future or take a risk – all things economic growth depend upon.”
“Britain would miss out on a generation of entrepreneurs and it’s yet another bit of prejudice where Rachel Reeves sums won’t add up.”
Meanwhile the free market think tank the Institute for Economic Affairs pointed out that a CGT rate of 39% would mean Britain has “the second highest top rate on capital gains (on shares) in Europe.”
Former Treasury minister Andrew Griffith opposes the policy (Image: Getty)
Executive Director Tom Clougherty said: “It is simply too high – it would hurt our competitiveness and growth prospects, and likely raise less revenue than the Treasury expects.”
“There’s a case for policing the boundary between income and capital gains more carefully, but genuine investment returns need to be taxed differently – otherwise you end up destroying the incentive to save.”
The reports about Capital Gains came shortly before it else emerged that a rumoured raid on pensioner tax relief could cost high-earners £1,800 a year.
Ms Reeves is tipped to cut tax relief on employe pension contributions in her October 30 Budget, something Keir Starmer repeatedly refused to rule out at this week’s Prime Minister’s Questions.
Employers currently pay National Insurance of up to 13.8% on employee earnings, but salary paid into a pension is tax free.
Plans to apply this tax rate to employer pension contributions would raise billions for Ms Reeves, however it would also likely result in businesses passing on the costs to employees.
It was suggested yesterday that the typical high-earner would lose out on £1,818 a year in pension contributions if employers did choose to pass on the cost.
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Bam! Angela Rayner’s big mouth has cost the UK £1bn, just like that
Angela Rayna should have been more circumspect when discussing P&O’s employment practices (Image: Getty)
Too many in the Labour party are keen on striking poses that will please the trade unions and party faithful, and they don’t seem to care about the consequences. Angela Rayner is right at the top of that list. She takes pride in being “mouthy”.
That’s how she got into politics in the first place. While a care worker she was made union rep because in her own words: “I was mouthy and would take no messing from management.”
Frankly, if I was in the same union as Angela Rayner, I’d vote for her to be my union rep, too. Stick it to the management and all that.
She’d be brilliant at it.
Unfortunately, sticking it to the management isn’t such a good pose to strike, when you are the bloomin’ management. In case nobody told her, she’s helping her boss Keir Starmer run the country.
Rabble rousing statements designed to work the party faithful into a froth of anti-capitalist anger can have brutal consequences when other people catch wind of them.
Mouthy Rayner has just lost the UK a cool £1billion in much-needed overseas investment into the UK economy.
There’s a cost to allowing her to stomp around saying what she wants, and other people are paying for it in their jobs.
I bet Rayner and transport secretary Louise Haigh felt like they were sticking it to the man when they described ferries company P&O as “unscrupulous” and “exploitative” this week.
They singled out the company while vowing to close a “legal loophole” that P&O allegedly sued to sack almost 800 workers in 2022.
I bet the unions loved it.
And you know what, I’m sure they had a point. A whole heap of big businesses don’t treat their workers like they should.
There’s nothing wrong in protesting about that.
But when you’re in government, you have to handle things a bit more delicately. For example, by introducing laws in Parliament, not hurling targeted abuse at alleged offenders, which is what Rayner and Haigh have just done.
I’m sure they feel proud of sticking to their left-wing principles. But the result is that Labour has just inflicted even more needless economic damage on the country.
P&O owner DP World has just put a planned £1billion expansion of one of Britain’s biggest container hubs on hold after Rayner’s attack.
It’s even more embarrassing than that.
By happy coincidence, PM Keir Starmer is making a big push to boost overseas investment to the UK, convening a summit next week.
DP World had been planning to announce its investment in London Gateway port at this very summit.
Now there will be no announcement. The planned investment is “under review”, according to Bloomberg news. DP World chief Sultan Ahmed bin Sulayem won’t even be attending Starmer’s summit.
Good work, Angela. I bet your boss is thrilled.
The UK desperately needs to encourage investment and growth. Its Budget attack on higher earners has already scared enough people away from the UK.
Is Labour now planning to insult the businesses who are still investing here, one by one?
Sir Keir is desperate to reposition the UK as a country that is open for business to boost overseas investment. That task would be easier if he could ask Angela Rayner to think before she opens her mouth.
