What will Starmer tax to fund his spending bonanza?

 It looks pretty much certain Labour will win the election on 4th July and Starmer will be our new prime minister.

Assuming Labour is not lying completely -  they have promised not to "increase taxes, national insurance, or VAT".  Their mantra is "Labour will not raise taxes on working people".

Reading "Labour will not raise taxes on working people" literally that means Labour will tax:

• Businesses because they are not people
• Any passive "non earned" income eg pensions, savings, dividends, rental income, capital gains

Labour have already said they will add VAT to private school education. That's one thing that Brexit has allowed.  It's illegal to charge VAT on education in Europe.  Maybe the next step is VAT on University education?

Logically Labour are therefore also likely to impose VAT on other legally exempt things.  Private Healthcare.  Since private Healthcare is actually a form of insurance it's likely that some kind of "Insurance Premium Tax" for private Healthcare will be introduced.

Although Labour have "promised" not to increase [personal] taxes or [personal] national insurance, they will not be increasing the tax thresholds.  This is called fiscal drag. More and more people are paying more tax as a result. 

The thresholds are   £12,570 tax free before you start paying tax then you start paying tax at 20%. Once you earn £50,270 you are then taxed at 40%.   These thresholds have slowly increased below inflation since 2019 and were then frozen in 2022 and will remain frozen until 2028.  As a result more people are paying tax.

To illustrate this, in 1992 3.5% of adults were paying higher rate tax (1.6 million people).  By 2022 this had risen to 11%  (6.1 million people) and is projected to rise to 14% (7.8 million people) by 2028.

Although the "con-servatives" have been flag waving about their national insurance cuts, it should be pointed out that there has been no cut in EMPLOYER national insurance.  Employers have to pay 13.8% "tax" for the privilege of employing someone. Employers start paying this once the employee is paid more than £9,100 per year.  

This threshold is highly unlikely to be increased.  Given businesses are not people it is possible Labour will lower this threshold which will mean business have to pay more tax for each employee.

Companies can't vote and taxing companies more doesnt affect your pay packet (it might in the longer term when companies go bust).

Another option which doesnt cost Labour anything is to increase the minimum wage. It costs businesses money.  

Currently the minimum wage increased to  £11.44 in April which was an inflation busting increase of 9.8%.  Expect Labour to continue these inflation busting increases.  Good for employees - bad for business. See blog on minimum wage.  Increasing minimum wages is inflationary but Starmer can blame the conservatives for the state of the economy.  I'm sure he will say Liz Truss crashed the economy when inflation ticks back up. (Liz Truss didn't crash the economy - her actions popped a bond market bubble  (LDIs)  which the Bank of England failed to spot or indeed any other of the vast army of Whitehall economists....but that's another story).

As businesses aren't people Labour may also increase the EMPLOYER national insurance - particularly for upper earning limits.

Pensioners are not "working people" so are in Labour's cross hairs.  With the state pension triple lock pensioners are on the cusp of being taxed.  [Post article note Sept 24 - Greedy pensioners are clearly in Labour's target hairs - cutting winter fuel payments for 10M pensioners]

So what else is Starmer likely to tax? Well businesses.   I would expect the VAT registration threshold to be reduced. The VAT threshold is any business with a turnover of £90,000.  I wouldnt be surprised if this was reduced to £50,000 so plumbers, hairdressers etc need to be be VAT registered.

If your business is currently VAT exempt then there's a good chance that will change.

If you are not a "WORKER" then expect to be taxed.

If you have any savings which are now starting to earn interest after decades of zero interest then expect Starmer to be knocking at your door asking for tax on your interest.  Currently if you earn £12570 (approximately the state pension) and earn £5000 per year interest on your savings then you dont pay tax on your savings.  This is likely to be scrapped.  You will pay tax on all interest.

Similarly if you have dividend income this is "Non Earned" income.  The con-servatives have been making dividend income less attractive during their tenure.  Currently you as an individual pay 8.75% tax  for basic rate tax payers and if you are a 40% tax payer you pay 33.75%. You may think that's not very high well that's not the real number.  Businesses pay dividends from taxed profits - ie the business has already paid tax on this before they give it to you.  Big businesses  pay tax at 25% rate so the effective tax rates are actually 33.75% and 58.75% tax.  Ironically the "pro business con-servatives" have actually taxed small business at higher rates - their marginal rate of tax is 26.5% so if your dividends come from one of these businesses the cumulative tax is 35.25% and 60.25%.  

Expect Labour to increase these dividend tax rates.

Similarly Landlords with income from property are not "WORKERS" so expect to be taxed on this income.  The con-servatives have already bashed landlords.  Expect Labour to introduce either direct taxation in Landlord income, national insurance on rental income or other stealth taxes such as mandatory Selective Licencing. [Note Labour will be opening themselves to legal action if they introduce National Insurance on rental income.  For years, successive governments have argued that being a landlord is not a business.  That means pension contributions from rental income are forbidden. Introducing national insurance would mean it is absolutely  a business and therefore expect retrospective tax claims in the courts as a class action]

Landlords thinking it's not worth it -  will sell up. Sadly that means you have to pay Capital Gains tax when you sell up. Expect capital gains thresholds to be reduced further than the con-servatives have already slashed. Expect the rate of taxation to be increased. Ex Chancellor Jeremy Hunt generously slashed the residential property capital gains tax to 24% from 28% (Note capital gains for all other asset classes is just 20%).  Expect Rachel Reeves to revert back to 28% as a minimum and maybe expect other asset classes to be increased to 28% or even 40%.

Pensions.  Well Labour do love raiding pensions.   The lovely Gordon Brown stole £60k from my pension in 1997 claiming I was a beneficiary of a "windfall tax".  The beauty of raiding private pensions is you are powerless to stop them stealing it and also, most people are unlikely to figure out how much they have stolen from you for decades.  I now manage my own pensions with a SIPP so I can react to Labour theft when it's announced.  Expect Labour to raid your private pension.  Since virtually every working person now has a private pension  there's a bigger opportunity for them to steal. Labour will almost certainly find a way to get their fingers in the till.

So what can you do to stop Labour taxing you more?  My plan is not to live in the UK anymore. 

The best plan is dont elect Labour.   Sadly I think it's almost certain they will be elected as a majority so what else can you do to stop Labour?

Well if you happen to live in Holborn and St Pancras, I urge you not to vote for Kier Starmer and instead to vote for Nick.  Similarly if you live in Leeds West don't vote for Rachel and instead vote for Darren

If neither Kier or Rachel are elected, it does create a funny situation for the Labour landslide and they might think twice about stealing your money!  Let the people speak!