Tax Policies: the good, the bad and the ugly…
Conservative tax policies pay no regard to the best interest of the country and Labour’s policies are horrendous with no awareness of the social consequences
Mr. Hunt has slammed Inheritance Tax as “profoundly anti-Conservative” but despite hopes for the Conservative manifesto to abolish the tax it did not transpire. The Conservatives have been the primary governing party since 2010, and if they wanted to demonstrate inheritance tax was profoundly anti-Conservative, they’ve had more than 20 budgets to do so! The problem with electioneering policies, is that they have little regard to what’s in the best interest of the country. I would welcome a reform of inheritance tax to find an equitable rate of tax, as I recognise the growth in much of our assets like property is not just down to us but also by the economic and infrastructure policies taken by the government to encourage that growth.
The Chancellor has firmly stated that the Conservatives will not raise Capital Gains Tax (CGT), emphasizing their goal to “encourage people to earn and to save. The irony is that the Conservatives have reduced the CGT annual exempt amount from £10,100 in 2010/11 to £3,000 today and have also frozen personal allowance. Private landlords who are already suffering from high interest rates, would be discouraged to sell and forced to push up rent to pay the costlier mortgage. Furthermore, by not being able to sell or transfer to their millennial/Gen Z children during their lifetime, it forces them to hold onto the property until death, at which point they’d suffer the higher 40% inheritance tax on the market value as opposed to the lower maximum 28% CGT rate on only the gain. It appears Mr. Hunt and his colleagues have done exactly the opposite of helping facilitate the transfer of wealth to millennials and Gen Z, who I would argue have a greater chance to benefit the economy by having a larger capital to leverage against as opposed to the limited economic potential of the boomers.
Recently, Mr. Hunt criticised Stamp Duty Land Tax, calling it a tax on “aspiration” and “very distorting.” When asked about the possibility of new taxes on expensive properties, he responded, “If you are talking about Stamp Duty, then I think if anything we should be going in the opposite direction.”
I can’t believe I appear to agree with Mr. Hunt, but Stamp Duty certainly needs a drastic overhaul. On this point I agree with Mr. Hunt, but Stamp Duty needs a drastic overhaul. I cannot see any equitable justification for charging tax on a property purchase. It’s a transaction among private individuals, and I struggle to see why the state should receive a cut especially when it could very well be receiving CGT. The seller has also been responsible for the council tax and any business rates if relevant, which the buyer would be taking on thus ensuring public service costs continue to be met. Stamp Duty should have ended when our war with France ended!
The Conservative manifesto says that first-time buyers purchasing homes up to £425,000 will be exempt from stamp duty. There is also a proposed two-year Capital Gains Tax (CGT) relief for buy-to-let landlords selling to existing tenants starting April 2025.
This is in line with the expectation for high rates of interest to continue for another couple of years and allows landlords easy relief if they sell to their existing tenants. Whether their existing tenants would have a sufficient deposit and the ability to obtain a mortgage is another matter. After all, if a tenant could afford a deposit and obtain a mortgage, they would probably already be a property owner. I don’t think this policy has been thought out.
It would be better if CGT was scrapped if the property was going to pass to a family member, thereby facilitating financial security for the next generation sooner, thus improving the prospects of entrepreneurial risk.
Meanwhile, every single tax policy by Labour is horrendous. I oft wonder what level of due diligence is done on these policies to scenario plan the likely social consequences.
Labour’s plans to levy VAT on private school fees are a disaster. The fact that we have a private school system reduces the burden on state schools which are already overcrowded. We need to make private schooling more affordable, not less affordable. We need an educational policy that works for our future economy. The ideal scenario would be to fund state schools sufficiently to pay for the best educational environment. Right now, the cheapest way to do this would be to maximise the potential of our bright minds, and we should look to help more parents fund private schooling or even private tuition. We would make up this investment in future tax revenue.
Equally heinous are Labour’s plans to abolish the non-dom tax status and close
various tax loopholes, including those related to carried interest. We need to be careful of abolishing non-dom tax status. It feels grossly unfair to tax worldwide wealth that the UK had no part in helping to generate. This could reduce foreign direct investment into the UK not just in terms of financial capital but human capital too – the good immigrants we need.
Similarly with CGT, CT, and IHT there’s nothing that I find encouraging to improve our lives.
