Politicians are in desperate need of more cash. Where will they find it? Simon Wilson reports
What’s happened?
If Labour wins the election next week, it plans to toughen the rules on non-doms further, and there’s widespread speculation about higher capital-gains tax. In March, chancellor Jeremy Hunt pinched one of Labour’s long-standing flagship policies by announcing the effective abolition of the UK’s “non-dom” regime. Under the rules, which date back to the 19th century, foreign citizens living in the UK, but whose permanent home (“domicile”) is overseas, can avoid paying UK tax on their foreign income and gains for up to 15 years provided they do not bring income or capital gains back into the country. Hunt’s March budget slashed the amount of time people can benefit from that status from 15 years to four, effective from April 2025.
What will Labour do?
If elected, Labour says it will be even tougher, reversing the Tories’ plan to let non-doms who will lose benefits from next April permanently to shield from inheritance tax any foreign assets held in an offshore trust. Given the UK’s unusually high inheritance-tax rate of 40%, this could be the clincher that sends the super-rich heading for friendlier climes, according to wealth managers. Labour has ruled out rises in the rates of income tax, national insurance and VAT (although sticking with the Tory policy of raising tens of billions by freezing thresholds). But in order to avoid massive spending cuts, or higher borrowing, it will need to put up taxes – and the very wealthy are likely to be in its sights.
Will there be a wealth tax?
The only party committed to a wealth tax (that is, a tax on rich people’s assets, rather than their income or spending) is the Greens. They propose a 1% annual levy on wealth above £10m, and 2% on assets above £1bn. Labour has ruled out a wealth tax (it didn’t even pledge one under Jeremy Corbyn), although not rises in capital gains or council taxes. The main argument in favour is that the rich have got much richer, says David Smith in The Sunday Times. In 2010, the combined wealth of the top 100 people in that paper’s Rich List was £172bn. This year it was £594bn.
What’s the argument against?
Wealth taxes are hard to implement, damage entrepreneurship and you don’t end up raising much money. In 1990, 12 of the 38 countries in the OECD group of wealthy nations had
