Prime Minister Andy Burnham has historically supported a range of tax reforms that could significantly impact personal finances. During his campaign, he made spending commitments that would necessitate funding through fiscal changes, leading to scrutiny of his past proposals on pensions, mortgages, inheritance, and property taxes.
Property Tax Proposals
Burnham has long advocated for changes to the UK's property tax system. One proposal, dating back to his 2010 leadership campaign, was a 'land value tax' intended to replace stamp duty. This tax would be an annual levy based on the value of the land a property occupies, rather than the property itself. Proponents argue this encourages optimal land use, but critics point to the difficulty in separating land and property values and the potential for disputes.
A related concept, supported by the group Fairer Share and endorsed by Burnham, is a 'proportional property tax.' This would replace both stamp duty and council tax with an annual tax set at 0.48% of a property's value. Under this model, homeowners with lower-value properties could see savings, while owners of more expensive homes might face higher annual bills. This shift could revitalize the housing market by removing stamp duty barriers, but re-valuing all homes in Britain would present a significant implementation challenge.
Additionally, reports suggest Burnham might consider expanding the scope of the 'mansion tax,' officially the High Value Council Tax Surcharge. This could potentially lower the threshold for properties subject to the levy from £2 million to £1.5 million, drawing more middle-class families into the tax.
Income Tax Considerations
While Burnham has pledged to uphold Labour's manifesto commitment not to raise income tax, National Insurance, or VAT, allies have suggested these promises might be revisited to fund spending plans. Burnham has previously expressed a desire to raise the income tax personal allowance threshold, which would benefit millions of workers and pensioners by increasing their tax-free income. However, he has also indicated a willingness to consider reintroducing a 50% top rate of income tax for high earners, a move potentially paired with a lower 10% starting rate for low earners.
Inheritance Tax Overhaul
Burnham has suggested a complete overhaul of inheritance tax, potentially replacing it with a new care levy to fund social care. Another mooted option is a flat 10% rate on all estates, which would remove the current tax-free allowance but be significantly lower than the existing 40% rate for larger estates. He has also expressed a willingness to reconsider inheritance tax rules for farmers, particularly concerning agricultural and business property relief.
Pensions are also set to be subject to inheritance tax from April next year under current plans, which could lead to double taxation when combined with income tax for beneficiaries. Individuals can currently utilize allowances, such as the £3,000 annual gift allowance and gifts made out of surplus income, to mitigate potential inheritance tax liabilities.
Mortgage Rates and State Pensions
Changes in prime minister can influence mortgage rates through their impact on gilt yields. If bond markets perceive increased government borrowing, gilt yields could rise, leading to higher mortgage costs. Recent rate increases have been attributed to Middle East conflict and inflation fears, but future fiscal policies will be closely watched.
Burnham has vowed to maintain the state pension triple lock, though there are internal discussions about its long-term sustainability. The issue of compensation for 'Waspi' women, who were affected by changes to the state pension age, remains a point of discussion, with Burnham having previously ruled out full financial compensation but remaining open to other benefits.
Capital Gains Tax and Small Businesses
A potential increase in Capital Gains Tax (CGT) rates, aligning them with income tax, is also on the agenda. Campaigners argue this would create a more equitable tax system for investment and property profits. However, critics suggest this overlooks investment risks. For small businesses, Burnham has indicated support for reducing National Insurance Contributions for employers and has proposed cuts to business rates for specific sectors like pubs and music venues, as well as potential full relief for single-site shops, restaurants, and cafes.
What Individuals Can Do
Individuals concerned about potential tax changes are advised to understand their current financial position, including property valuations and pension savings. For property owners, assessing home values and understanding potential future tax liabilities is advisable. Those nearing retirement should ensure they are maximizing their state and private pension contributions. Investors might consider crystallizing gains or utilizing tax-efficient wrappers like ISAs. Small business owners should stay informed about potential changes to business rates and employment taxes.