Rachel Reeves ‘plots tax raid on solicitors and GPs in crackdown on UK’s wealthy’
Lawyers, GPs and accountants will reportedly face higher taxes as Rachel Reeves tries to fill the Treasury’s coffers by targeting the rich.
In next month’s budget, Ms Reeves is expected to raise £2bn as she seeks to plug a gap in the public finances estimated to be between £30bn and £50bn by announcing a charge for workers using limited liability partnerships.
According to Money.co.uk, there are 355,760 partnerships in the UK, of which 86,030 are employees. These are especially common in the legal world. Partnerships do not pay 15 per cent of the employer’s national insurance rate as partners are considered self-employed. Partners also pay a lower employee NI rate.
But Ms Reeves reportedly is preparing to announce changes to the system in her budget. The Times.
It will impose a new tax on partnerships in a bid to “equalize tax treatment.” However, this is expected to be charged at a slightly lower rate than employers’ national insurance rate.
The Center for Tax Analysis (CenTax) found that solicitors received a fifth of all partnership income, earning an average of £316,000 a year each from company profits. The average for GPs is £118,000 and for accountants it is £246,000.
More than 13,000 partners are thought to earn an average of £1.25 million a year.
Ms. Reeves is also expected to announce a “mansion tax” that would impose a capital gains tax on the sale of the most expensive homes.
Brexit and austerity are having a bigger impact on public finances than expected, he said on Tuesday as he sought to pave the way for tax rises.
The Office for Budget Responsibility (OBR) is expected to cut Britain’s growth forecasts next month and economists believe the chancellor will break his manifesto promise not to increase income tax, VAT or national insurance to stabilize the fiscal situation.
Ms Reeves said: “We know the OBR – I think we will be quite frank about that – [will say] Things like austerity, capital spending cuts and Brexit have had a greater impact on our economy than was anticipated at the time.
“That is why, in my view, we have been shamelessly rebuilding our relationship with the EU to reduce some of the costs that have been unnecessarily added to businesses since 2016 and since we formally left a few years ago.”
CenTax director Arun Advani said: Times There was no reason why partners should pay less tax than similarly highly paid employees and business owners.
“As partnership income is highly concentrated, with almost half going to the top 0.1 per cent, exempting partners from any tax equivalent to employer NICs is a very regressive approach and simply means higher tax for everyone else,” he said.
The employer said the lack of national insurance was due to a series of minor accidents.
Stuart Adam, senior economist at the Institute for Fiscal Studies, said: “People in LLPs are generally very well off and in many cases they are simply providing their labor like ordinary employees, so it is not clear why they should receive preferential treatment.
“But as with any tax increase, this could be a disincentive to work. There may be other ways people might react, including, in the most extreme cases, leaving the UK or not coming in the first place.”
The Treasury was contacted to get an opinion on the issue.
