Politics
Chancellor Reeves Hints at Possible Tax Hikes: Inheritance and Capital Gains Under Scrutiny Ahead of ‘Painful’ Autumn Budget
Chancellor Rachel Reeves has not dismissed the possibility of increasing inheritance and capital gains taxes. While Labour has committed to keeping income tax, national insurance, and VAT steady, they have consistently avoided confirming if they would hike other taxes.
Political journalist @alixculbertson
Wednesday, August 28, 2024, 5:
The chancellor has not dismissed the possibility of increases in inheritance and capital gains taxes, following Sir Keir Starmer's caution that the upcoming autumn budget could be difficult.
When questioned on Wednesday, Rachel Reeves declined three times to give a definitive "yes" or "no" answer regarding whether she would commit to not increasing two specific taxes in the upcoming October budget.
Yesterday, Sir Keir Starmer hinted strongly that the upcoming October budget will likely include tax increases, describing it as "going to be painful."
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Throughout the election campaign and afterward, Labour consistently stated that there would be no hikes in income tax, national insurance, or VAT. However, they did not commit to whether other taxes would be increased.
Estate tax, levied on the assets of a deceased person, and capital gains tax, applied to the earnings from selling capital assets, are considered the prime candidates for an increase.
When questioned on Wednesday about the possibility of raising taxes, Ms. Reeves responded, "I am not going to set the budget two months before presenting it."
"We'll need to tackle tough choices across various sectors."
When questioned once more about the possibility of raising them, she replied, "In terms of spending, welfare, and taxes, we are faced with a number of tough choices. However, I will provide the specifics in a correct and appropriate manner on October 30 during the budget announcement."
When asked a third time to dismiss the possibility of those increases, she responded, "I will present the budget on October 30."
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Further reading: What tax increases might the Labour Party consider?
Numerous individuals in the financial district are alarmed by the government's decision to increase the maximum capital gains tax rate from 28% to match the 45% top rate of income tax.
A study by the Institute for Fiscal Studies (IFS) suggests that aligning the two could generate £16.7 billion in revenue.
According to analyses from HMRC and several economists, a rise in capital gains tax might lead to lower revenue collection as individuals could postpone the sale of their assets.
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Inheritance tax is levied at a rate of 40% on estates valued above £325,000, yet due to various exemptions, only about 5% of estates are subject to this tax, frequently at a reduced rate.
The Institute for Fiscal Studies has indicated that sealing gaps in the inheritance tax system could potentially generate an additional £4 billion for the government.
Shadow Chancellor Jeremy Hunt criticized his successor for trying to justify her decision to increase taxes by blaming the economic situation she inherited, suggesting that these tax hikes were always part of her plan and asserting that the public would see through this excuse.
The ex-leader of the Treasury has accused Ms. Reeves and the prime minister of consistently undermining the economy through their rhetoric, while also providing unions with substantial pay increases that surpass inflation rates. He commented, "It's completely illogical." He also highlighted Labour's repeated assurances during the election campaign, where they vowed more than 50 times not to increase taxes, yet now appear to be setting the stage to do exactly that. "We will make sure they keep their word," he stated.
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