Tax - incoming Labour govt

[Adamski]

It's on the cards that Labour will get in at the next election, and been mentioned that they will align CGT with income tax

I'm guessing this would mean do away from with CGT allowance and tax at marginal rate. Income tax rates to rise at biggest level to go to 50%, then could be 60%. I'm guessing it is less likely they will remove isa's benefits retrospectively.

I'm basic rate payer but have some savings outside tax wrappers. But always been below CGT allowance. These two years before GE is a good opportunity to

a) use all available isa and sipp allowances,

b) crystallize gains outside tax wrappers, to use cgt allowances (by taking the profit now).

Otherwise you may be having tax bill 20, 40, 60% on gains in future.

Of courses, losses this year may have solved this issue for you, lol

Another possible change is wealth tax is possible, which unlikely effect myself. When they find cannot raise enough from windfall taxes on energy companies, then the well off will be next.

But for those effected i would guess a new wealth tax is less likely to effect houses and pensions. There's a window now to maximise pensions or invest in their main home. As we know the billionaires, super rich are ultra mobile and will just move abroad, therefore the burden will fall in the upper-middle.

[Alaric]

I'm guessing this would mean do away from with CGT allowance and tax at marginal rate.

Doing away with the CGT allowance has two problems. One is that it's a tax on inflation, which is government mandated. The other practical one is that it requires rather a lot of reporting and HMRC chasing what in many cases will be small amounts. Now that many people hold their shares through Broker nominees, statistics on just how many basic rate taxpayers have unsheltered shareholdings may be difficult to establish.

[Lootman]

Another possible change is wealth tax is possible, which unlikely effect myself. When they find cannot raise enough from windfall taxes on energy companies, then the well off will be next.

But for those effected i would guess a new wealth tax is less likely to effect houses and pensions.

I am not sure why property and pensions would be exempt from a wealth tax. I would expect it to apply to all wealth above a certain amount (5 million?).

But a wealth tax would have to be in Labour's manifesto so there would be time to prepare for it. Especially since it would be complicated to implement, given that individual net worth is not information that the government currently has or can easily collect. I suspect that a lot of wealth would "disappear" in the meantime.

[Alaric]

Especially since it would be complicated to implement, given that individual net worth is not information that the government currently has or can easily collect.

The easy information to collect is the wealth that's in tax shelters such as SIPPs and ISAs. Still they presumably wouldn't want headlines that a Labour government would wealth tax your pension and ISA assets.

[scotview]

I am not sure why property and pensions would be exempt from a wealth tax.

Would that include a wealth tax on pensions already in payment or does PAYE take care of that wee gremlin.

Thanks.

[Alaric]

Would that include a wealth tax on pensions already in payment or does PAYE take care of that wee gremlin.

There's perhaps an argument that since the NHS is financed in part at least out of general taxation and that those in receipt of pensions are mostly major users of the NHS and that they don't pay National Insurance, then some form of additional levy could be justified. It would no doubt be extremely difficult to win a General Election with that proposal.

[scrumpyjack]

Rather than include pensions in a wealth tax, a more rational approach would be to abolish the loopholes whereby people can benefit tax free from their pension asset, ie abolish the 25% tax free lump sum and the tax free inheritance of the pension if the owner dies before age 75. That way any benefit from pension would suffer income tax so does not justify being subject to a wealth tax.

Having said that I doubt if they would introduce a wealth tax as it is far too difficult to do so equitably and the only European country, I think, that has one is Spain and many regions in Spain deliberately set up loopholes so it doesn't apply.

It would certainly be hugely unfair to tax capital gains as income if the tax is based on nominal gains unadjusted for inflation or length of asset ownership. But that might not stop a Labour government. But the likely result of a high tax rate on gains would be lower tax revenue as people would stop realising gains.

Better to limit the amount of PRR on house sales - now that really could raise a lot!

[JohnB]

I love all these scare stories about hypothetical Labour tax raids while we suffer from actual Tory incompetence. Bungled Brexit and Trussonomics. We all remember how New Labour raided wealth, don't we?

[pje16]

Not looking good already (and this is from 2 years ago)
https://www.express.co.uk/news/politics ... iese-dodds

[DrFfybes]

Doing away with the CGT allowance has two problems. One is that it's a tax on inflation, which is government mandated. The other practical one is that it requires rather a lot of reporting and HMRC chasing what in many cases will be small amounts. Now that many people hold their shares through Broker nominees, statistics on just how many basic rate taxpayers have unsheltered shareholdings may be difficult to establish.

There are a few things to consider here..
Many people with unsheltered investments don't declare them, as they are under the limit. The ratchetting of the dividend allowance will affect many people who have small holdings, eg via company sharesave schemes, and have previously simply ignored the dividends. I worked for Astrazeneca in the 1990s, share price sub £10, and sharesave scheme meant a lot of employees bought them. I''d have to dig out my paperwork but I probably bought 100 shares a year for 3 years. Now they'd be worth £35k or so and pay £600+ in dividends. I doubt many of the holders from back then will bother registering for SA for this, or even notify HMRC. Shame I sold them when they'd doubled

About 12 million people submit SA each year at the moment, as you say it will be difficult to knw exactly how many should start to do so, but I hope they don't all phone HMRC to check at once.

As for what Labour will do, I'll wait for their manifesto, and then take it with a large pinch of salt.

Paul

[SalvorHardin]

I love all these scare stories about hypothetical Labour tax raids while we suffer from actual Tory incompetence. Bungled Brexit and Trussonomics. We all remember how New Labour raided wealth, don't we?

At the last election Labour's manifesto included the seizure of many privatised assets and 10% of the shares of every company with more than 250 employees.

Their shadow chancellor was a communist who was a big fan of Chairman Mao. He and his fellow commie scum haven't gone away, many are still semi-dormant within Labour.

Labour contains lots of socialists. They're almost as evil as communists to those of us with lots of assets. Socialists will (probably) let you keep your house, but just like the commie scum they really want to seize all private productive assets, including farms, and run them "collectively" (aka incompetently).

Lots of Labour MPs are arguing for a wealth tax and for them the 75% tax on North Sea Oil and Gas profits isn't enough.

It's perfectly rational for people on an investment forum to speculate about Labour's intentions and to plan to reduce their effect long in advance. Way too many people on TLF seem to have forgotten that TLF is an investment and personal finance forum, not a political forum.

For me, the strength of the opposition to Liz Truss' supply side reforms (NIMBYs and BANANAs won, high taxes, lots more regulation and low growth are our future), combined with the high probability of Labour winning the next General Election, has caused me to sell most of my UK focused shares and reinvest overseas.

[Lootman]

For me, the strength of the opposition to Liz Truss' supply side reforms (NIMBYs and BANANAs won, high taxes, lots more regulation and low growth are our future), combined with the high probability of Labour winning the next General Election, has caused me to sell most of my UK focused shares and reinvest overseas.

I would agree that UK Inc. looks doomed under any and every possible scenario. Sunak has basically adopted a bunch of Labour policies anyway, not least that he has started to punish investment profits.

As you know I am also UK-lite in my portfolio. But in a future confiscatory Labour government it is entirely possible that a "windfall" tax on investment profits, particularly from overseas, might be seen as a envy-fuelled vote winner amongst the great unwashed, much like Labour's war on non-doms.

And in that scenario it is not sufficient to hold foreign securities. You also have to export your residence. The only 100% effective way to avoid UK taxes is to avoid the UK.

[Eboli]

I'm not sure I agree with the main direction of travel. I do not think the Labour front bench is so wedded to appearance in taxes compared with raising money!

1. Alistair Darling was presented with lots of practical evidence in 2006/7 that the optimal revenue raising rate of CGT was around 17%. CGT yields are heavily behavioural - more so than nearly all other taxes. The shadow Treasury is fully aware of this. In any event recent inflation will substantially increase the yield anyway.

2. Similarly, it is far more difficult to capture a tax on wealth against the truly wealthy - almost all variants will hit the middle far harder. Fungible wealth disappears before the threat.

3. I can see both an overall limit to the amount protected by the ISA wrapper and a heavy reduction in the annual amount that can be contributed.

4. Similarly I can see a reduction in the pensions lifetime allowance and the amount of relief on contributions.

5. Non-doms will be hit - they are too wedded to the narrative. But I doubt that the abolition of non-don remittance basis will raise tuppence. It is the gallery opera star that's all.

6. Several Land Value Tax enthusiasts work behind the scenes for the shadow Treasury. This, of course, could raise substantial amounts of tax. This threat becomes more real the more they realise other headliners could raise very little if any revenue.

7. Though Labour would love to meet the narrative of cutting out (legitimate) tax avoidance that is portrayed as tax dodging, especially in the corporate field, I suspect they will once again find that any revenue raising measure will prove elusive.

All this suggests that it will be the middle, once again, that will be hit the hardest.

Eb

[Lootman]

Several Land Value Tax enthusiasts work behind the scenes for the shadow Treasury. This, of course, could raise substantial amounts of tax. This threat becomes more real the more they realise other headliners could raise very little if any revenue.

As TLF's leading tax theoretician, I knew you would not be able to resist another plug for LVT, every tax theoretician's leading fantasy. And I agree it is an elegant solution, at least for a new nation starting out.

It has often been said of Brazil that it is "the country of the future, and always will be". By the same token LVT might just be: "the tax of the future, and always will be". It's a great idea but the problem as always is implementation - how do you get from here to there without massive dislocation and injustice? After all, everyone who owns land bought it on the presumption that the rug would not be pulled from under their feet.

Now, if LVT only punishes farmers and the Crown then I can live with that. But who will LVT really punish after those powerful interest groups have diluted the effect upon themselves?

And the perennial question, as with a wealth tax: If it is such a great idea then why do so few nations have one?

[Adamski]

I am not sure why property and pensions would be exempt from a wealth tax. I would expect it to apply to all wealth above a certain amount (5 million?).

Hi there, Politically harder to tax people's main home (principal private residence) and pensions. Think in Spain pensions are exempt from their wealth tax.

My main point was on capital gains. As lemonfools could be stung in future. Might be better to use allowances now, and even take a tax hit this year/next year, and rebase purchase cost.

[Lootman]

I am not sure why property and pensions would be exempt from a wealth tax. I would expect it to apply to all wealth above a certain amount (5 million?).

Hi there, Politically harder to tax people's main home (principal private residence) and pensions. Think in Spain pensions are exempt from their wealth tax.

My main point was on capital gains. As lemonfools could be stung in future. Might be better to use allowances now, and even take a tax hit this year/next year, and rebase purchase cost.

Yes, regarding CGT I am giving serious thought to making substantial disposals later this tax year and next. It's not just the spectre of what Labour might do, but also Sunak's recent tax changes. I might rather pay the 20% CGT hit now and be done with it.

Labour could tax cap gains as ordinary income, abolish the annual CGT-free allowance and perhaps even get rid of the stepping up of the cost basis upon death.

Meddling with CGT won't be unpopular with the voters who will see it as "only affecting rich people". Ditto IHT and non-dom changes.

[scrumpyjack]

I too am seriously considering realising very substantial gains in taxable accounts. There are some losses too, but I would keep those for future use when the CGT rates go up. Really grates though

[Lootman]

I too am seriously considering realising very substantial gains in taxable accounts. There are some losses too, but I would keep those for future use when the CGT rates go up. Really grates though

Another idea I had is combining this with a charitable donation via Gift-Aid, as that will also reduce any future IHT exposure.

My understanding is that such a gift can be of a value up to four times the CGT due. But I need to learn more about Gift-Aid before deciding, as I have never done it before.

[88V8]

I too am seriously considering realising very substantial gains in taxable accounts. There are some losses too, but I would keep those for future use when the CGT rates go up. Really grates though

If you have old crystallised losses such as Interserve, I would use them up. The bring-forward could be abolished as well.
Whoever forms the next govt will be short of the readies and soaking 'the rich' seems to play well nowadays.

I sold nearly all my profits six weeks ago - some not sold because the 30 days would have missed a divi - to ensure I can use up my brought-forward losses this year.

Didn't do the cunning spouse thing, but after the 30 days purdah have luckily been able to buy back some of the shares that I wanted to hold... not yet BHP though... doh... after three years the dratted Chinese decide to 'open up' during the 30 days...

V8

[paulnumbers]

ie abolish the 25% tax free lump sum

Wouldn't that simply make pension uneconomical for basic rate tax payers. I'm not sure about you, but I wouldn't invest in a pension for zero benefit.