Exodus of the rich = less tax revenue

 Rachel is keeping quiet lately whilst the Starmer fiasco rumbles on.  I guess she's hoping no-one spots the unintended consequence of her tax policies.

The Sunday Times rich list has shown that 20 of the UK's 157 billionaires are no longer on the list because they have decided to leave the UK and no longer pay tax here.  1 in 6 of the rich are no longer on the list....they are on some other country's rich list instead.

Rachel decided to tax the non dom rich by making their world-wide assets subject to UK inheritance tax.  She could have said something like the annual fee is no longer £60k / year and is now £600k / year and IHT only applies to your UK assets and probably most of these 20 billionaires would have stayed. She naievely thought the rich were stupid and would therefore stay in the UK enjoying the tropical weather and other UK advantages and willingly pay potentially hundreds of millions more in tax.

It is likely that these billionaires were generating UK taxable income of around £50 million each per year and due to effective tax management, they were paying around 30% tax so £15 million each in tax.  So 20x £15m = £300 million less in tax revenue just for these 20 people. 

The UK's median salary is £39,000 and roughly 10 million people are around that level. So to make up the tax for losing these 20 people would require 10 million people to pay an extra £30 per year in tax.  That's the scale of the problem that is heading Rachel's way.  Taxation is going to have to ripple down the food chain to make up for the loss of tax income from just a few people who have upp'ed sticks and left.

Coupled with the middle class simply electing to work less hours or increase their pension contributions then the net tax take Rachel is getting, is falling.  If it wasnt for fiscal drag stealthily  taxing the "poor"  the situation would be more serious.

Capital Gains Tax receipts fell from £14.5 Billion to £13 Billion. Some of this is due to the wealthy accelerating disposals in the 24/25 tax year but the overall trend is the rich are delaying asset disposal or structuring to minimise tax by simply electing not to create taxable events.

Pension tax relief has increased from around £40 Billion before labour got to power to around £60 Billion as the more affluent middle class elect to boost their pensions rather than give Rachel the money. That £20 billion per year in pension contributions is avoiding £9billion in tax today for a lesser level of taxation in the future when the pension is drawn. 

Eventually socialism fails when it runs out of other people's money.  



Comments

Post a Comment

Popular posts from this blog

Rachel planning to charge National Insurance on rental income

 The rumour mill is that Rachel is considering introducing National Insurance on rental income. How ironic! For as long as I can remember, the government and HMRC stance is that rental income is not earned income and therefore it has consequences in how it is taxed and treated. For example you can't use rental income to make pension contributions (that can only be from earned income).   Also unearned income bubbles to the top of the tax stack (order of taxation) so is most likely to treated at the highest level of income tax.  By making rental income (hopefully profits rather than income) subject to national insurance it will almost certainly have unintended consequences.  Firstly if you are past State Pension age you dont pay National Insurance. it would therefore open up the government to litigation if they make rental income subject to National Insurance for OAPs.  I can just see the negative headlines ! It is estimated that there are 1 Million Buy to Le...
Read more

Energy Performance of Privately Rent Properties - expect crazy things as we approach 2028

 The wonderful Labour government has very generously given private Landlords until 2030 to improve the energy performance of rental properties to an EPC of C for incumbent tenants.  For new tenants they need to achieve this by 2028. I agree with the idea of energy efficiency in the home but it needs to be economically viable. Ignoring the fact that the EPC scoring system  is a work of fiction (for example installing triple glazed windows doesnt improve scores) I thought it would be interesting to work through the financial side of the EPC targets.  Social and council tenants currently do not have EPC targets of E (the current minimum for private landlords) although Labour seem to be suggesting that there won't be a 2 Tier system and that council and social landlords will also have to achieve C by 2030 (previously it was 2050 to achieve E). Although I suspect the council and social landlords wont have huge fines if they fail to achieve C.  Anyway it seems  c...
Read more

Rayner's attack on Landlords. TIme to rebalance the relationship in favour of Landlords.

 Exit anti-Landlord Conservative - only to be replaced by the very anti-Landlord Labour.  Government attacks on Landlords are set to continue. This feels like this Zombie attack cannot die. Angela Rayner makes unqualified statements about their forthcoming equivalent to the Renter Reform Bill such as “rebalance the relationship between tenant and landlord.".   Really? The law favours the Tenant way more than the Landlord. I thought it would be interesting to go through just how imbalanced things have got and how easy it is for a Landlord to get fined and get a CRIMINAL record. Let's start with the basics.  If a property has gas then the Landlord has to have a gas safety certificate.  Failing to get a gas safety certificate is a £6,000 fine and  a CRIMINAL record and potentially 6 months in prison.  This is not if the system is unsafe or kills someone.  Simply to not have the paperwork.  Most home owners do not have annual checks on ...
Read more