Allies of Andy Burnham are reportedly considering a significant increase in inheritance tax as part of a broader package of wealth tax proposals aimed at the nation's wealthiest individuals. These discussions come as the incoming government faces substantial spending commitments, including welfare, defense, and potential nationalization of water companies.
While the Labour manifesto has ruled out increases to income tax, VAT, or National Insurance, Mr. Burnham has indicated there is room for "movement on tax." This has fueled speculation about potential new revenue streams. Some of the discussed tax options have roots in a 2024 report by the Labour-linked Institute for Public Policy Research, on which Mr. Burnham served. The report suggested raising inheritance tax from 40% to 50% on estates exceeding £325,000, which could generate an estimated £1.9 billion annually, partly to fund initiatives like subsidizing healthy foods.
Other proposals reportedly being examined include replacing income tax, capital gains tax, inheritance tax, and National Insurance contributions with a single "national contributions" levy applied to all income, regardless of its source. Additionally, higher taxes on goods such as tobacco, alcohol, processed foods, and gambling could potentially raise over £10 billion. There is also discussion about lowering the threshold for a mansion tax to properties valued at £1.5 million, potentially making an additional 150,000 families liable.
Financiers are reportedly preparing for the introduction of a "super-rich tax," which could impose a 2% annual levy on assets exceeding £10 million. This concept is similar to France's wealth tax, the Impôt de Solidarité sur la Fortune (ISF), which was in place until 2018. The French tax, ranging from 0.5% to 1.5%, was applied to net personal wealth above €1.3 million. French President Emmanuel Macron abolished the ISF, citing concerns that it had driven wealthy individuals out of the country and negatively impacted GDP growth.
Concerns about capital flight have led to discussions about an "exit tax" for individuals attempting to emigrate to avoid new tax regimes. This could involve charging 20% on business assets for those seeking to leave. Furthermore, Mr. Burnham has previously suggested that there is a case for reintroducing a 50p income tax rate.
Conservative Party Chairman Kevin Hollinrake criticized the potential tax increases, stating that they would "punish people who work hard, save responsibly and want to pass something on to the next generation." He suggested that instead of raising taxes, welfare reforms should be prioritized to free up funds for national defense.
However, a source close to Mr. Burnham stated that "We will not be doing anything on inheritance tax in the July package of measures," indicating that this specific proposal might not be part of the immediate plans.