Rachel Reeves will tax us literally to death. It still won’t be enough | Personal Finance | Finance
Rachel Reeves has ruled out increasing income tax on November 26 but will instead hit us with a “buffet” of smaller taxes. Arguably, this could be more painful because of the price paid by tens of millions of people. If it extends the freeze on income tax thresholds until 2030, as expected, workers will be affected. Savers and pensioners will be affected by plans to reduce the Cash ISA allowance.
Pensions are under threat as Reeves considers cutting pension tax relief, cutting the annual allowance for pension contributions and scrapping salary sacrifice schemes. The Chancellor will also go after our homes by increasing council tax, or imposing a mansion tax on more expensive properties, or both. It could also tighten the rules around inheritance tax (IHT) donations and even hit families with double death tax.
Today, capital gains tax (CGT) liability on assets disappears when someone dies. Families only pay IHT. They may pay for both in the future.
And this is on top of the IHT payment on unspent pensions announced in last year’s Budget and due to come into effect in 2027.
Rachel Reeves literally charges us to death and beyond. Worse, this is just the beginning.
After increasing taxes by £40bn in last year’s budget, the biggest bust since 1993, Reeves vowed not to come back for more. It will now return for at least another £30bn. I can see three reasons why this won’t be the last major raid. The first will backfire just like the last.
Reeves imposed a £25bn jobs tax on British businesses in his first budget, putting further pressure on already struggling firms. Unemployment skyrocketed. Many businesses closed. This killed the growth and expanded its black hole.
This Budget will accelerate today’s economic exodus, with better-off Britons surviving. Nearly 257,000 people were cleared last year, with more to come. They will take the tax revenue with them, so fewer Britons will bear the burden.
HMRC eventually seizing their wealth will scare off more entrepreneurs who fail to see the point in setting up here and working hard, Reeves said. The second reason is even more worrying.
As the economy slows, unemployment will rise again, especially among young people, many of whom will stop looking for work and seek benefits.
This means over four million more Britons who have already been banned for life will claim benefits.
Public spending currently swallows up 45% of the UK’s annual income; When Margaret Thatcher resigned in 1990, the rate was 33%. As the country grows older and sicker, this rate will rise unless the government gets it under control, and Labor will not be able to achieve this.
A dwindling number of taxpayers will be called upon to make up the shortfall next year, the year after, and the year after that.
The third reason is the truly flimsy one. This tax attack is ideological. Everyone on the left, from the New Statesman and The Guardian to Polly Toynbee and wealth tax activists, is demanding it.
They want the government to collect more taxes. They want to wage class war against the rich. They even want to throw money at the state, despite its poor track record of effective spending.
Reeves will claim this was forced by events beyond his control, but that’s nonsense. This is ideological. That’s the plan and it works. Labor will not only tax us to death, it will also kill the UK economy.
