Andy Burnham has lots of taxes he’d like to hike so watch out (Image: Getty)
As yet, we don’t know who PM-in-waiting Andy Burnham is likely to appoint as Chancellor. It could even be Ed Miliband, in a terrifying worst-case scenario. Having trashed UK energy policy, Ed now fancies a crack at sinking the entire economy. Whoever Burnham appoints, we’re in trouble. Especially with former Transport Secretary Louise Haigh now a key Burnham adviser. This hard-left MP phones in tax hike ideas whenever she can locate her mobile. Financial experts warn that whoever takes over from Rachel Reeves at Number 11 is likely to face still more hikes. You didn’t think Labour would cut spending, did you?
Burnham’s pick as Chancellor will deliver their first Budget in the autumn, and it’s shaping up to be yet another nightmare, on top of the two disasters Reeves has already delivered. Alex Pugh, chartered financial planner at wealth manager Saltus, reckons the writing is on the wall: “A closer look at Burnham’s longstanding views on property taxation, wealth, inheritance and the role of the state will worry anyone with significant savings, properties or other assets.” The sun is blazing today but the autumn Budget is just three or four months away. It may be sheer hell. So which areas could Burnham target once in power?
Property taxes. One of the biggest areas to watch is property, Pugh said. Burnham has previously backed proposals to replace council tax and stamp duty with an annual levy based on a property’s value. Under the proposal, homeowners would pay 0.48% of a property’s market value each year, rising to 0.96% for second homes, empty properties and homes owned by non-UK residents. This could to leave homeowners in the greedy, evil south of England paying up to three times as much as those noble subjects in the glorious, virtuous north where Andy Burnham is king.
Pugh said millions hold a substantial proportion of their assets in residential property: “While removing stamp duty may benefit those buying and selling homes, a recurring levy based on property values could significantly increase annual costs for all homeowners.”
Income and investment. Last September, Burnham said there is “definitely a case” for restoring the 50p additional rate of income tax for top earners. This would come on top of the freeze on tax thresholds, which is slated to run until 2031. “The concern is not simply whether a 50p rate returns, but the wider direction of travel on tax,” Pugh said. Why should people work hard when HMRC takes more than half?
Capital gains. Burnham has not made any specific pledges on capital gains tax (CGT), but Haigh is pushing for Burnham to raise CGT bands in line with income tax. This would come on top of recent cuts to big cuts to the CGT annual exempt amount, which is now just £3,000.
Pugh said CGT could gradually become more strict over time, hitting second homes, buy-to-lets, non-ISA investment gains and business sales. “It could be detrimental to investment and growth, disincentivising both domestic entrepreneurship and making the UK a weaker option for global capital.”
Rules that end CGT liability at the point of death may also be overturned in what critics have dubbed a ‘death tax’. I’d term it a double death tax, since inheritance tax (IHT) will be applied too.
Inheritances. Burnham has also spoken previously about replacing IHT with a “social care levy” charged on inherited assets. Pugh said: “This may sound attractive politically, but for families it introduces another period of uncertainty.” This could make planning difficult as families won’t know if the goalposts are about to change.
Uncertainty around wealth taxation can affect long-term financial planning decisions, Pugh added. “The lack of clarity can often be as damaging as the tax increase itself.” Those who hoped replacing Reeves would be a step in the right direction are likely to be disappointed. “The tax environment is likely to become more challenging, rather than less.”
Pugh stressed that any changes remain speculative, but homeowners, investors and families planning to pass on assets should keep a close eye on what Burnham does next. We all should.