The more the Chancellor taxes us, the greater the pressure to tax us again. She’s already clobbered us with £40billion in her last Budget, with another £30billion lined up this autumn. And still it won’t be enough.
Cutting spending is off the table. After the U-turns on winter fuel payments and disability benefits, Reeves daren’t touch it. Now Labour’s left, and assorted think tanks and tax activists, are urging her hit us even harder.
Not just to raise money. It’s about class war. Some of the proposals are extreme, and some she’s already done. They include slapping inheritance tax on pensions, taxing farmers and businesses, and hiking capital gains tax. Here are seven more of the blood-curdling ideas now doing the rounds.
1. 100% inheritance tax. This beauty comes from LBC’s Lewis Goodall, presenter of the centre-Left podcast The News Agents. It would mean every penny you’ve earned, including your home, would go straight to HMRC on death. His reasoning? “You don’t have a right to inherit money from Mummy and Daddy.” That’s not tax policy, it’s expropriation.
2. Lifetime cap on family gifts. At present, gifts made seven years before death fall outside inheritance tax. That safety valve may soon go. Campaigners want a cap on IHT-free giving, regardless of timing. Scott Gallacher of Rowley Turton calls it “daft” and warns it will turn generous grandparents into “overnight tax evaders”.
3. Cap ISAs at £100,000. Brits can save £20,000 a year into an ISA, but there’s no ceiling on how big the pot can grow. The left hate the idea of all that untaxed wealth. Labour pensions minister Torsten Bell has floated a £100,000 lifetime cap. That’s just one among 20 crazy ideas he’d love to contribute to the Budget. Others have talked of just £50,000. That would punish savers who’ve done everything right and amount to a retrospective raid. Years of careful planning undone in one swoop.
4. Hike tax on non-ISA savings. One tax hike leads smoothly to another. Once your savings are stripped of their ISA protection, the money will be fair game for income tax and capital gains tax. Bell wants to lift the top rate of CGT from 24% to 37%. Richard Murphy of Tax Research goes further. He wants CGT lifted to either 40% or 45%, in line with income tax.
5. Double tax assets on death. Currently, capital gains are wiped out when you die, with only inheritance tax to pay. The left want beneficiaries to pay both, including on property. That could mean a 40% IHT charge followed by a CGT hit of 24% to 45%. There won’t be much left after that. Which is the idea. Labour-backing Dan Neidle of Tax Policy Associates calls it “rational”. Others might call it daylight robbery.
6. Cap pension tax-free cash. At present, 25% of your pension pot can be taken tax-free up to £268,275. Bell wants to cap that at £100,000. Or even £40,000. That would hit anyone with a £160,000 pension. And you can bet that cap will never increase once set. The Institute for Fiscal Studies likes the idea too, showing how extreme proposals slide effortlessly into the mainstream.
7. Means-test the state pension. Loads on the left want to scrap the state pension triple lock. Others want to means test it, including the Intergenerational Foundation. That would strip wealthier pensioners of their entitlement. At a stroke, it would wipe out the incentive to save for retirement. Why bother if you’re punished for it later?
These proposals are all dressed up as attacks on the super-rich, but they’ll end up hammering the middle classes. Worse, they’ll sap growth and leave everybody poorer. Yet the weaker Reeves becomes, the more she’ll struggle to resist the hard left’s demands. And they’ve got plenty more ideas like these up their sleeve.