A looming Andy Burnham premiership could usher in significant tax increases, particularly targeting wealth and capital gains, according to financial commentator Jeff Prestridge. Prestridge voiced strong apprehension regarding the prospect of Burnham in national leadership, suggesting his policies might align with a more socialist agenda.
Prestridge speculated on potential Chancellors of the Exchequer under a Burnham administration, noting that choices like Yvette Cooper, Shabana Mahmood, or Wes Streeting might continue the fiscal strategies of current figures, gradually eroding wealth. A more significant shift, Prestridge warned, could occur if figures like Ed Miliband or Torsten Bell were appointed, potentially leading to more aggressive tax hikes, especially for the middle class. Such appointments could also negatively impact bond markets, potentially increasing government borrowing costs.
Despite a Labour manifesto commitment against raising National Insurance, income tax, and VAT, Prestridge pointed to existing pressures like increased employer NI contributions and frozen tax allowances that are already pushing more individuals into higher tax brackets. He also noted persistent rumors of a potential reintroduction of a 50% income tax rate for top earners.
The primary focus, Prestridge contended, would be on wealth taxes, justified by the argument that wealth is taxed less than income. This is expected to lead to higher capital gains tax (CGT) rates on asset sales, with the exact timing and extent of the increase remaining a key question. Current CGT rates stand at 18% for basic rate taxpayers and 24% for higher rate taxpayers. Prestridge suggested that figures like Miliband and Bell might implement immediate increases, aligning with income tax rates, while others might opt for a more gradual approach by the end of a parliamentary term.
For investors and landlords, a significant increase in CGT could prompt asset disposals. Prestridge also raised concerns about the potential removal of the CGT 'uplift' on death, which currently allows beneficiaries to inherit assets at their market value without immediate CGT liability. Eliminating this could result in estates facing both CGT and inheritance tax.
Additional potential wealth taxes mentioned include an annual land tax for homeowners and a social care levy. Prestridge suggested these changes would likely aim to increase government revenue, potentially replacing existing taxes. He concluded that a Burnham administration would likely seek to address government funding gaps, possibly through increased contributions from the middle classes.