Labour Party leader Sir Keir Starmer continues to face increasing pressure to call for a rise in wealth taxes to balance out Prime Minister Boris Johnson’s National insurance hike. Leader of British trade unions, Frances O’Grady declared “Tax wealth to fund social care” at the Trade Union Congress conference held last week.
The statement came a day before MPs debated the legislation to enact the National Insurance hike which will help boost NHS funding and pay for social care reform in England. Meanwhile, an economist at the free-market Institute of Economic Affairs, Julian Jessop believes the levy should be abolished altogether. A report by express.co.uk quoted him as saying, “I’m not a fan of inheritance of tax because it isn’t obvious to me why someone should have to pay more tax because they have died. People should be free to build up assets and pay tax on the assets as they are going along, that’s fine. There might be a case for taxing the capital gains on your first home as well as your second home.”
He added, “The idea you should pay a tax bill because you have died, I don’t really see any justification for that. My personal view is that it should be abolished, I just don’t see what it is about dying that means you should pay tax. It doesn’t make an awful lot of sense to me.”
An Inheritance Tax is currently paid on anything above the £325,000 threshold, which was frozen until 2016 by Chancellor Rishi Sunak in his March budget. Capital gains tax is another wealth tax which could be changed. It is applied to the gain from the sale of something you own, and typically charged on things like shares, properties, businesses and other high value items. There is an annual capital gains tax allowance of £12,300, and the rate you pay depends on whether you are a basic rate or higher rate taxpayer.
If media reports are to be believed, the government could align capital gains tax with income tax, which could see the highest rate paid, currently 28 per cent on residential property, increase to 45 per cent. Jessop believes this could lead to an unfair “triple taxation”. He said, “The whole problem with inheritance tax and capital gains tax is a lot of them are running into the risk of being double or triple taxation. These are investments built on the back of income that people have already paid tax on, so I think you should tax income not capital otherwise you discourage people from saving and investing.”
He added, “It’s another good example of how there isn’t an easy win here, if you want to get more money out of the economy it really needs to be based on income rather than wealth or anything else.”
