If Starmer was honest, he would have told us which taxes he was going to hike and which benefits he was going to withdraw during the election campaign. But he didn’t. And he still hasn’t done it today. Which leaves us playing guessing games.
Naturally, that’s the intention.
If “Stealth tax Starmer” had told voters what voting Labour would cost them, millions might have put their crosses elsewhere.
So Starmer did it by stealth.
He didn’t breathe a word about plans to ask the winter fuel payment for 10 million pensioners. Nor did chancellor Rachel Reeves.
And they said nothing about plans to scrap the £86,000 cap on social care costs, which Reeves axed seconds later. That hidden manoeuvre could cost many older people their homes.
“Stealth tax Starmer” kept both under wraps.
This means we’ve got absolutely no idea what Reeves is going to do when she stands up to deliver her autumn Budget on October 30.
But it’s clearly going to be nasty. Starmer laid the groundwork today, with his gloom-laden speech about the rotten state the Tories left us in.
The worst things are, the more he can tax us. But he ignored the fact that at least £9billion of his £22billion “black hole” is down to Labour granting the public sector every pay rise on their unions’ wish lists.
A hike in the capital gains tax (CGT) rate seems a shoo-in. This means instead of paying 24% CGT when selling a second home, higher earners will pay 40% or 45% instead.
That’ll cost them £11,000 each on average, and possible more.
They’ll also pay more when banking gains on businesses they set up, as well as non-Isa shares, antiques and any other asset that has increased in value.
Reeves is banking on her CGT hike raising £7billion year but I suspect it won’t, because many people will hang onto assets rather than sell them and write HMRC a fat cheque.
Hiking CGT will further backfire by giving entrepreneurs less financial incentive to set up the new businesses we urgently need to get the UK economy growing again.
Why bother, when the eventual gains will accrue to the Treasury?
Nicholas Nesbitt, partner at accountants Forvis Mazars, reckons Reeves will slap inheritance tax (IHT) on unused pensions. Personally, I think that’s a shoo-in.
He thinks she’ll go further warning: “The government may look to tighten rules on gifting money away for IHT purposes, perhaps by taxing gifts over a certain size, or introducing a lifetime limit of gifts.”
And I reckon there’s a chance Reees could scrap the £175,000 main residence allowance, which applies when passing on the family home to children or grandchildren.
It’s a Tory policy anyway.
For many people, their pension is the biggest source of wealth, after the family home. So she will inevitably go after that.
Today, higher earners get tax relief on pension contributions at 40% or 45%, as an encouragement to save.
Reeves is rumoured to be planning to cut that to a flat rate of 30% for all, in a weird move that would detach tax relief from tax paid.
Nesbitt is in two minds saying that “this has been discussed for years and is technically difficult to implement”.
We’ll find out in October.
Where will it end? Nesbitt makes one suggestion that will chill the blood of every homeowner.
Today, there is no CGT to pay when selling the main family home, even if you sell it for more than you originally paid. This is known as “principal residence relief”.
Scrapping this would net a fortune for the Treasury but Labour would never dare go all the way at once.
However, Nesbitt warned. “It could be replaced with a rollover mechanism or the introduction of a cap.”
In other words, gains on a property could be rolled over, and subject to inheritance tax when the owner finally dies.
Alternatively, they could be subject to a lifetime cap. Make too much from selling your main home, and HMRC will swoop.
Nesbitt said this would be “a significant change”. He isn’t wrong. It would also be thin end of a wedge.
Once introduced, the tax would become more punitive over time. You could easily say homeowners pay CGT after every transaction. Introducing tax to a lower rate then increasing it later is the oldest trick in the book.
And we know that where taxes are concerned, stealthy Starmer is as tricky as they come.
Today, we just don’t know what’s coming. It makes planning almost impossible, and should net the Treasury even more as people struggle to take your evasive action. And that’s exactly how Stealthy Tax Starmer likes it.
The UK is at a tax tipping point – you have just 10 weeks to protect your wealth. Here are some options.
