Wealth tax and the rich

[Adamski]

Listening to a couple of recent podcasts I tend to think that a blanket wealth tax is unlikely as too complex to introduce. Instead we will see an increase and extension in the existing "Wealth Taxes' of IHT, CGT and Stamp duty on houses, increased council taxes on second homes and perhaps CGT extended to profit on the sale of houses (main residence) above a certain figure. We already have additional car road tax on cars retailing at £40k and above. All of this type of thing (plus some new ones) would be far simpler to introduce.

100%. I've been having the same thoughts. Under Labour IHT bound to go up. Closing the "loopholes"/ exemptions.
CGT go up as well. And second home owners will be hit hard. When they find they've not got enough that way, will go after upper middle class via council tax and car tax.

Reading the Guardian comments, the left generally want wealth taxes. But Rachel Reeves will know this is impractical and be counter productive. So will extend existing taxes by increasing the tax take. By keeping the headline income tax the same can say taxes haven't gone up.

[Adamski]

[... Instead lower the rate of IHT and have an instalment payments system (There already is such a system for property)[/quote]

Little chance of that, IHT will be a cash cow under Labour.

[SalvorHardin]

Taxing some forms of wealth is difficult because of the problems in valuing assets, particularly private businesses and chattels (lots of wealth can be hidden from the taxman in the form of antiques, jewellery and gold).

OTOH taxing some other forms of wealth is much easier, particularly real estate, inheritances and realised capital gains.

I reckon that the most likely wealth taxes that Labour will increase are: council tax, capital gains rates and inheritance tax rates. Also reduce the exemptions for business relief for inheritance and increase stamp duty for the more expensive homes.

I wouldn't be surprised if Labour goes after agricultural property relief. The establishment has already decided that Britain produces too much food (look at what they do, not what they say), so reducing the ability of families to pass on farms would be consistent with this. Absolutely crazy, but the drive to net zero is behind a lot of the attacks on agriculture and it isn't going away.

I'm largely unaffected by these changes. A couple of thousand quid on council tax is tolerable (easily absorbed by surplus income and if rates rose by that level across the board there'd be civil unrest) whilst CGT can largely be avoided by not selling shares outside ISAs.

I've already taken action by restructuring my portfolio in 2023-24, turning over almost 50% by value. My higher yielding shares are now in ISAs whilst most of my holdings outside ISAs are those that I'd be happy to hold for a long time.

2023-24 is the first tax year that I won't be paying CGT since 2008-09. Unless I have to make sales due to takeovers I won't be paying anything like the same CGT under a Labour government as I have been paying since 2000. Incentives matter.

[Lootman]

I reckon that the most likely wealth taxes that Labour will increase are: council tax, capital gains rates and inheritance tax rates. Also reduce the exemptions for business relief for inheritance and increase stamp duty for the more expensive homes.

Stamp duty can already be as high as 17% (foreign buyer of a high-value second home). That is 1/6th of the value of the property!

I'm largely unaffected by these changes. A couple of thousand quid on council tax is tolerable (easily absorbed by surplus income and if rates rose by that level across the board there'd be civil unrest) whilst CGT can largely be avoided by not selling shares outside ISAs.

I've already taken action by restructuring my portfolio in 2023-24, turning over almost 50% by value. My higher yielding shares are now in ISAs whilst most of my holdings outside ISAs are those that I'd be happy to hold for a long time.

2023-24 is the first tax year that I won't be paying CGT since 2008-09. Unless I have to make sales due to takeovers I won't be paying anything like the same CGT under a Labour government as I have been paying since 2000. Incentives matter.

Finding a way to tax ISAs could be on the cards. Too many of us now have 7-figure ISAs that Guardian readers might get into a envy-fuelled frenzy about.

As for CGT I am thinking of selling off all my unrealised taxable positions in the next few months. And paying the 20% CGT, which might be seen as a bargain once Labour starts backsliding on its "sensible" language on taxes.

As for IHT, I already regard that as punitive so making it even more confiscatory won't change my plans to avoid it.

[MuddyBoots]

I reckon that the most likely wealth taxes that Labour will increase are: council tax, capital gains rates and inheritance tax rates. Also reduce the exemptions for business relief for inheritance and increase stamp duty for the more expensive homes.

Stamp duty can already be as high as 17% (foreign buyer of a high-value second home). That is 1/6th of the value of the property!

I'm largely unaffected by these changes. A couple of thousand quid on council tax is tolerable (easily absorbed by surplus income and if rates rose by that level across the board there'd be civil unrest) whilst CGT can largely be avoided by not selling shares outside ISAs.

And the Tories have already been increasing these taxes via fiscal drag and reducing the CGT allowance, so they've long since busted their reputation as a low-tax party. There's nowhere else for low-tax & small government supporters to go except further to the right with Reform etc.

[SalvorHardin]

Finding a way to tax ISAs could be on the cards. Too many of us now have 7-figure ISAs that Guardian readers might get into a envy-fuelled frenzy about.

As for CGT I am thinking of selling off all my unrealised taxable positions in the next few months. And paying the 20% CGT, which might be seen as a bargain once Labour starts backsliding on its "sensible" language on taxes.

Whilst big ISAs get the Guardianistas foaming at the mouth, it's going to be very unpopular to change the rule given that a lot of people have ISAs. I can see Labour stopping new ISAs, or restricting the amount per year to say £5,000.

Changes to ISAs won't affect me too much. My ISAs are barely 20% of the portfolio.

There's a lot to be said for selling in 2024-25 and paying CGT at 20%, rather than waiting for Labour to increase the CGT rate. I did this in 2022-23 and 2023-24 with a few holdings, moving into high yielders that wouldn't be out of place in a textbook HYP.

The vast majority of my shareholdings with large capital gains are ones that I'm happy to hold for many years / forever (North American Railroads, Berkshire Hathaway, Diageo, defence companies, some investment trusts).

[Steveam]

One thing that I think would be reasonable is to abolish Business Property Relief. It is the main mechanism that allows large inherited wealth to pass from one generation to the next without being depleted by the taxman. Instead lower the rate of IHT and have an instalment payments system (There already is such a system for property)

And the 7 year rule …

Best wishes,

Steve

[Lootman]

Finding a way to tax ISAs could be on the cards. Too many of us now have 7-figure ISAs that Guardian readers might get into a envy-fuelled frenzy about.

As for CGT I am thinking of selling off all my unrealised taxable positions in the next few months. And paying the 20% CGT, which might be seen as a bargain once Labour starts backsliding on its "sensible" language on taxes.

Whilst big ISAs get the Guardianistas foaming at the mouth, it's going to be very unpopular to change the rule given that a lot of people have ISAs. I can see Labour stopping new ISAs, or restricting the amount per year to say £5,000.

My guess is something simple to implement that puts the onus on ISA providers. For example a 1% "fee" on the value of any ISA worth more than (say) £250,000. Collected from accounts and remitted by the ISA providers.

There is a precedent. Although the tax breaks of being a non-dom are often discussed, in fact you have to pay a fee to claim that exemption. Last I looked it was £30,000 a year!

[Steveam]

Lootman used this phrase: “Too many of us now have 7-figure ISAs that Guardian readers might get into a envy-fuelled frenzy about.” I quite like it as a rhetorical play but it’s entirely unhelpful if the aim is to have a debate. It is a nonsensical attribution of motive when many other motives might obtain. (I no longer read or contribute to the highly political boards and hope we can avoid straying).

I have concerns about the exclusion of assets of all sorts from the tax base. In general I believe it is a matter of fairness that we all contribute to the society in which we live and my bias is towards the broadest shoulders baring the largest burdens. If I were able to influence Labour tax policies towards limiting ISAs in some way I’d do so but this is not because of some envy-fuelled frenzy but rather because I think it might help create a better society.

Best wishes,

Steve

[scrumpyjack]

Whilst big ISAs get the Guardianistas foaming at the mouth, it's going to be very unpopular to change the rule given that a lot of people have ISAs. I can see Labour stopping new ISAs, or restricting the amount per year to say £5,000.

My guess is something simple to implement that puts the onus on ISA providers. For example a 1% "fee" on the value of any ISA worth more than (say) £250,000. Collected from accounts and remitted by the ISA providers.

There is a precedent. Although the tax breaks of being a non-dom are often discussed, in fact you have to pay a fee to claim that exemption. Last I looked it was £30,000 a year!

The problem with that is that you might have ISAs with 10 different platforms! It really would not raise much tax and sends the wrong message to investors.

[Sorcery]

Lootman used this phrase: “Too many of us now have 7-figure ISAs that Guardian readers might get into a envy-fuelled frenzy about.” I quite like it as a rhetorical play but it’s entirely unhelpful if the aim is to have a debate. It is a nonsensical attribution of motive when many other motives might obtain. (I no longer read or contribute to the highly political boards and hope we can avoid straying).

I have concerns about the exclusion of assets of all sorts from the tax base. In general I believe it is a matter of fairness that we all contribute to the society in which we live and my bias is towards the broadest shoulders baring the largest burdens. If I were able to influence Labour tax policies towards limiting ISAs in some way I’d do so but this is not because of some envy-fuelled frenzy but rather because I think it might help create a better society.

Best wishes,

Steve

That makes you a socialist in the Darling sense since he first used the phrase "my bias is towards the broadest shoulders baring the largest burdens". The trouble is bearing the largest burdens make the broadest shoulders quite anxious to leave. You may think it's fair but obviously you must have narrow shoulders. The coining of the phrase and the 45%, then 50% and the possibility of 55% (income tax rate) made me instantly fear for Labour's sanity and actually leave the UK. I had already bought a house outside the UK and not in the EU. I hope you see the day when you have the broadest shoulders remaining after the previously broadest shoulders have left. It will not be a good outcome for the UK to have it's richest leave but necessary to stop Labour being so stupid in future. Since the Conservatives are almost as bad, goodbye the UK.
Leaving the UK wasn't an easy option, however since I am the broad shouldered type, I don't expect any tea and sympathy from an individual like yourself. Good luck with your ambitions for the broad shouldered

[Steveam]

Lootman used this phrase: “Too many of us now have 7-figure ISAs that Guardian readers might get into a envy-fuelled frenzy about.” I quite like it as a rhetorical play but it’s entirely unhelpful if the aim is to have a debate. It is a nonsensical attribution of motive when many other motives might obtain. (I no longer read or contribute to the highly political boards and hope we can avoid straying).

I have concerns about the exclusion of assets of all sorts from the tax base. In general I believe it is a matter of fairness that we all contribute to the society in which we live and my bias is towards the broadest shoulders baring the largest burdens. If I were able to influence Labour tax policies towards limiting ISAs in some way I’d do so but this is not because of some envy-fuelled frenzy but rather because I think it might help create a better society.

Best wishes,

Steve

That makes you a socialist in the Darling sense since he first used the phrase "my bias is towards the broadest shoulders baring the largest burdens". The trouble is bearing the largest burdens make the broadest shoulders quite anxious to leave. You may think it's fair but obviously you must have narrow shoulders. The coining of the phrase and the 45%, then 50% and the possibility of 55% (income tax rate) made me instantly fear for Labour's sanity and actually leave the UK. I had already bought a house outside the UK and not in the EU. I hope you see the day when you have the broadest shoulders remaining after the previously broadest shoulders have left. It will not be a good outcome for the UK to have it's richest leave but necessary to stop Labour being so stupid in future. Since the Conservatives are almost as bad, goodbye the UK.
Leaving the UK wasn't an easy option, however since I am the broad shouldered type, I don't expect any tea and sympathy from an individual like yourself. Good luck with your ambitions for the broad shouldered

You are quite wrong. For the last 20 years I have paid CGT almost every year, I’m an additional rate tax payer, I pay significant amounts of dividend tax; all this despite having maxed out ISA allowances and pension allowances. I think the avaricious accumulation of wealth is a pathology and once one has a comfortable amount further pursuit of wealth is absurd. Most of my wealth will go to charities when I die.

Best wishes, Steve

[Lootman]

For the last 20 years I have paid CGT almost every year, I’m an additional rate tax payer, I pay significant amounts of dividend tax; all this despite having maxed out ISA allowances and pension allowances. I think the avaricious accumulation of wealth is a pathology and once one has a comfortable amount further pursuit of wealth is absurd. Most of my wealth will go to charities when I die.

Of course leaving large amounts to charity is itself a tax avoidance strategy. You are avoiding IHT. And/or to the extent you are also donating appreciated assets and/or using Gift-Aid, again that lowers the tax take.

That is no problem for me and personally I would much prefer to choose the causes that I fund rather than have politicians decide that for me. But there is a touch of contradiction there.

Personally I do not think it is "avaricious" or "absurd" to pursue more wealth. I think it is fun and an interesting intellectual challenge. Frankly I think I use wealth more wisely than others might. But such differences just go to show that the topic of wealth is an emotional issue, hence my reference to "envy" earlier, and yours to "avarice".

[Nimrod103]

Most of my wealth will go to charities when I die.

Everybody's situation is different, and of equal validity. Personally I don't think it right that your preferred charities should benefit at the expense of the common good (i.e. paying IHT should come first, before any charitable gifts). But it is your choice to bequeath to charity instead of looking after any of your family.

My situation is different. I have children and grandchildren who, because of very unfortunate circumstances, are financially dependent on me. I would like what assets are left when I die to go to them, rather than the Chancellor taking a big slice.

[Mike4]

That makes you a socialist in the Darling sense since he first used the phrase "my bias is towards the broadest shoulders baring the largest burdens".

Another problem with this sentiment so beloved of swivel-eyed lefties is it is so open-ended.

No matter how much tax a government loads onto "Those with the broadest shoulders", no leftie is EVER going to say "That's enough now" . More will always be called for as there will always be someone with "the broadest shoulders" and therefore deserves to be taxed more heavily.

[Kantwebefriends]

As someone who never did pay higher rate income tax I take it that you'll all find it reasonable of me to define "the rich" as anyone who does pay it?

[Bubblesofearth]

You are quite wrong. For the last 20 years I have paid CGT almost every year, I’m an additional rate tax payer, I pay significant amounts of dividend tax; all this despite having maxed out ISA allowances and pension allowances. I think the avaricious accumulation of wealth is a pathology and once one has a comfortable amount further pursuit of wealth is absurd. Most of my wealth will go to charities when I die.

Best wishes, Steve

You should move to Scotland. Here we benefit from a 42% higher income tax band starting at £43,663. In the rest of the UK it's 40% starting at £50,270.

BoE

[the0ni0nking]

Taxing some forms of wealth is difficult because of the problems in valuing assets, particularly private businesses and chattels (lots of wealth can be hidden from the taxman in the form of antiques, jewellery and gold).

OTOH taxing some other forms of wealth is much easier, particularly real estate, inheritances and realised capital gains.

Quite. It's incredibly simple to introduce a wealth tax. You force people to submit a form to HMRC that lists their assets and tax a % of it.

If pensions or ISAs are excluded or included is a matter of fact. They've had this in Spain for years since it was introduced as a money raising scheme after the GFC - the fact that you still have to complete this form even where the wealth tax rate is 0% (such as in Andalusia or Madrid IIRC) means the state still gets the information.

But you're right on private company valuations - I know of a number of companies who've introduced EMIs and HMRC have basically nodded through the valuation even when the owner has a different view (normally one which is more realistic and also higher because the EMI is designed to retain and incentivise staff in a tax beneficial way).

I guess you could just apply a PBT multiple but that's crude given the vastly differing private companies. I should probably do some more digging to see how Spain approaches this (not because they'll do it well but just because they've had it for quite a while).

[scrumpyjack]

That makes you a socialist in the Darling sense since he first used the phrase "my bias is towards the broadest shoulders baring the largest burdens".

Another problem with this sentiment so beloved of swivel-eyed lefties is it is so open-ended.

No matter how much tax a government loads onto "Those with the broadest shoulders", no leftie is EVER going to say "That's enough now" . More will always be called for as there will always be someone with "the broadest shoulders" and therefore deserves to be taxed more heavily.

Yes and it ends up being counter-productive. People sit on gains to avoid triggering a tax bill, they work less because it isn't worth it and so on. It only takes a few very wealthy people leaving the country to more than cancel out tax rises. The French had to cancel their high tax charges when lots of the rich simply moved over the border to Belgium, or like Depardieu moved to Russia! When Lawson slashed the top rate of tax to 40%, the tax take INCREASED hugely! Global mobility is much easier now than it was and if Reeves really means she wants the UK to be the best place to do business, I can't understand why she has recruited that idiot Sir Edward Troup as her adviser.

[DrFfybes]

Most of my wealth will go to charities when I die.

Everybody's situation is different, and of equal validity. Personally I don't think it right that your preferred charities should benefit at the expense of the common good (i.e. paying IHT should come first, before any charitable gifts). But it is your choice to bequeath to charity instead of looking after any of your family.

I suspect the 2 aren't mutually exclusive. In fact the family may benefit more from not recieving or expecting a large inheritance.

Paul