While we’re quite confident that none of our clients want to hear our political opinions, part of our job involves trying to prepare for upcoming changes to tax legislation and with Labour’s recent triumph at the UK general elections, it seems very likely that the newly formed government will bring in some new changes to the UK’s tax system.
With that in mind, what are the financial press marking as the most likely areas for change or reform?
No tax rises on “Working People”
The government have made a manifesto pledge using the above language. However, the press are accurately pointing out that they have been less than forthcoming about their exact definition of “working people”. It therefore seems quite like that there may be upcoming changes to higher earners or those who pay Capital Gains Tax. Within England there are also predictions that as they have ruled out most other areas this might mean an increase in council tax.
Capital Gains Tax
It seems likely that, as their manifesto is silent on the matter, Labour may increase the Capital Gains Tax rate from the current rates of 10% and 20% to align with income tax rates at 20%, 40% and 45%.
Non-Dom Reform
Labour committed to replacing non-dom status with “a modern scheme for people genuinely in the country for a short period”. This may mean an end to the ability of wealthy individuals to shelter assets from Inheritance Tax through the use of offshore trusts.
HMRC Investment
“We will increase registration and reporting requirements, strengthen HMRC’s powers, invest in new technology and build capacity within HMRC. This, combined with a renewed focus on tax avoidance by large businesses and the wealthy, will begin to close the tax gap and ensure everyone pays their fair share.”
Most clients are by now probably familiar with the near-total collapse of HMRC as an institution. Their inability to handle basic aspects of the tax system has been a crippling weight upon particularly small businesses in the UK.