Express Premium Banner Labour nightmare as taxpayers ‘strike’ in protest at Budget raid – tax take could FALL!_l
The Labour government’s plan to hike a string of taxes in its autumn Budget may backfire as taxpayers take their revenge.
Chancellor Rachel Reeves bid to hike taxes could end up collecting less (Image: Getty)
Chancellor Rachel Reeves claims to have identified a £22billion “black hole” in the nation’s accounts that she is desperate to fill by hiking taxes on October 30. But tax experts warn that instead of bringing in more funds, her Halloween tax grab could cost the Treasury money instead.
Instead of meekly complying and coughing up, taxpayers are preparing to take evasive action.
UK taxes are at a 70-year high, thanks to the Tories. Reeves may discover there is a limit on how much higher she can drive them, without triggering a huge backlash.
Many wealthy people and entrepreneurs are likely to up sticks and flee Britain for a country with a less punitive tax regime.
But you don’t have to leave the country to reduce your exposure to upcoming tax hikes. Take capital gains tax as an example.
Reeves is widely expected to increase CGT bands in line with income tax.
Today, higher earners pay CGT at 24% when selling a second home or buy-to-let property. Under Reeves’ plans, they will pay 40% or 45%.
This could cost them tens of thousands of pounds extra CGT.
The problem is – from Reeves’ point of view – is that owners don’t have to sell their properties. Labour can’t force them to (at least, not yet).
The decision is entirely up to them.
So instead of selling up and taking a big tax hit, they could simply hang onto their properties. That way, HMRC won’t earn a penny in CGT.
CGT bands change all the time, so many owners could decide to sit it out in the hope that the next government (or the one after that) takes a more lenient view.
They’d rather sit tight than take a big tax hit today. Effectively, they’re going on strike.
In the 2023/24 tax year, the Treasury took £15.4 billion in CGT receipts.
Reeves reckons her CGT hike will raise an extra £8billion on top of that.
Yet according to a report in The Daily Telegraph, new HMRC estimates that by 2027 her plan will actually cut receipts by £2billion. If true, her black hole will only widen.
Similarly, investors holding shares outside of the tax-free Isa may soon face a higher CGT charge on their gains.
Instead of paying 20% when selling shares, higher earners could pay 40% or 45%.
But only if they sell. Many will simply hang onto them.
They might even move abroad. There’s no CGT liability once you’ve lived overseas for five years.
Reeves’ fiscal grab could backfire on a host of fronts. Threats to charge more inheritance tax are driving families to put wealth into trusts, where it has greater protection.
Again, IHT receipts could fall.
Scrapping the Winter Fuel Payment for pensioners has alredy triggered a rush to claim means tested state pension top-up Pension Credit.
Successful claimants will still get their Winter Fuel Payment. Plus a potential £8,000 of other benefits on top.
That’s likely to wipe out the most of the money Reeves saves.
Today, the Financial Times reports that the UK’s biggest company, pharmaceutical giant AstraZeneca, is threatening to move its vaccine research centre to the US, after Reeves axed state aid for the project.
The UK will lose jobs and investment if it does. And HMRC will get less tax. Imagine that happening across a string of industries.
Ultimately, this is bad news for everybody. Labour’s punitive, politically driven tax raids could end up making all of us poorer, starting with the Treasury itself. It’s a huge gamble.
Thousands of pensioners may get Winter Fuel Payments ‘too late’ as Labour plan backfires
Critics have argued the ministry has ‘not thought this through’ as thousands of pensioners may be left without essential funds as the cold season starts.
Rachel Reeves (Image: Getty)
Thousands of pensioners could experience significant delays in receiving their winter fuel payments due to a surge in benefit applications, following Labour’s recent policy shift.
Charities are sounding the alarm, warning that these delays may leave pensioners without essential funds during the first cold spells of the season.
The delays stem from Labour’s decision, spearheaded by Rachel Reeves, to restrict winter fuel payments to only those pensioners who are already on means-tested benefits, affecting roughly 10 million retirees.
This change has triggered a spike in applications for pension credit, causing processing times to balloon from six to nine weeks, according to research by the End Fuel Poverty Coalition.
While the Government has assured pensioners that they can backdate claims until December, there is growing concern that the payments might not be processed in time to provide much-needed relief before winter sets in, The Telegraph has reported.
Simon Francis of the End Fuel Poverty Coalition said: “It’s clear ministers have not thought this through. When the Chancellor cruelly snatched away the winter fuel payment from millions of pensioners, she promised to help households who are eligible to claim the benefit.
“But as it takes so long to process new claims, even those applying now may be forced into a back-dating procedure, which will delay payments.”
Caroline Abrahams, charity director at Age UK, echoed these concerns, sharing an example of a pensioner who applied a month ago and has been told they may not see any money until mid-September.
She said: “We know that there are quite significant delays in the processing of claims, meaning that older people may not receive any money until after the cold weather has set in.”
“A woman I spoke to this week from London submitted a claim about a month ago and after following it up had been told she was unlikely to hear the outcome until mid September.
“These delays mean that pensioners who are very short of cash and who submit a claim now may well have to bridge quite a gap before their pension credit and winter fuel payment finally come through.”
The move to limit winter fuel payments is part of Labour’s effort to address a so-called £22 billion fiscal shortfall, a legacy they attribute to the previous Conservative government. Despite this, the decision has been met with backlash, with critics arguing that the cuts could leave vulnerable pensioners at risk.
Energy bills are projected to rise by nine percent in October, according to Cornwall Insight, and while this is lower than last year’s costs, the removal of winter fuel payments could mean that pensioners are the only group to see an increase in their bills.
As the government encourages more pensioners to apply for pension credit, Jonathan Bean of the Fuel Poverty Action group pointed out the confusion and fear this policy change has caused among older citizens.
He said: “Left caught up in the chaos are older people who will be left fearful of the winter ahead. Many will be unsure if they will get the winter fuel payment or not and delays to payments will only add to the misery.
“If ministers think that a communications campaign to encourage take-up of pension credit is any substitute for actual help with energy bills this winter, then they are very much mistaken.”
With nearly 900,000 eligible pensioners not currently claiming pension credit, there is concern that the surge in applications could lead to a larger-than-expected benefits bill, potentially wiping out any savings Labour hoped to achieve with the cuts. Former pensions minister Sir Steve Webb warned that the influx of claims could cost the Treasury up to £490 million.
The Department for Work and Pensions (DWP) has urged all eligible pensioners to apply for pension credit.
They said: “We urge anyone who thinks they may be entitled to pension credit to check. We said we would be honest with the public and, given the dire state of the public finances we have inherited, this government must take difficult decisions to fix the foundations of the economy.
“This includes reforming winter fuel payments so they are targeted at those most in need and leaving no stone unturned to encourage eligible pensioners to take up pension credit.”
Martin Lewis MSE warning as you could boost DWP state pension by over £50,000 – full guide
The Money Saving Expert team said the financial check could provide an “unbeatable” boost to your income.
People can boost their state pension by topping up their National Insurance contributions (Image: Getty)
State pensioners and those planning for their later years have been urged to do a check that could boost their retirement income by over £50,000.
Martin Lewis‘ Money Saving Expert site urged people to check if they could benefit from topping up their National Insurance (NI) contributions in the group’s latest newsletter.
People have been urged to check their NI record after a woman secured a potential £60,000 boost to her state pension payments if she lives for 20 years.
A guide from the Money Saving Expert team said the “potentially unbeatable” income boost is providing some people with increases of more than £50,000 to their income.
A person typically needs 35 years of NI contributions to get the full new state pension, which is currently £221.20 a week. You will need at least 10 years of contributions to get any state pension when you start to claim.
This means one year of contributions is worth one 35th of the full amount, or £6.32 a week. So even if you top up just one full year’s worth of NI contributions, this could increase your payments by £328.64 a year, or by £6,572.80 in total if you live for 20 years after claiming.
To first find out if you have any gaps in your NI record, you can use this tool on the Government website to check your record.
This will show you for each year since you turned 16 if you have a ‘full year’ of contributions or a ‘year is not full’ if you have a gap.
Martin Lewis (Image: Getty)
The next step is to use the state pension forecast calculator tool, as this will show how much state pension you are on track to receive given your current NI contributions.
This will also how much state pension you would get if you work up to your state pension age. The state pension age is currently 66 but this will be increasing to 67 and then to 68 over the coming years.
If you have missing NI year but are on track to get the full state pension, there is no need to top up. It may also be the case that by continuing to work until your state pension age, you will pay the contributions to get the full state pension.
People can boost their state pension by topping up their National Insurance contributions (Image: Getty)
Another consideration is the fact that usually you can only top up your contributions as far back as six years ago, but at present this is extended so people can top up as far back as the 2006/2007 tax year.
People can top up over this extended period until the end of this current tax year, which finishes in April 2025.
You may be able to effectively top up for free if you are entitled to NI credits, which cover your contributions in a range of scenarios, such as if you are on Universal Credit or other benefits.
More information about National Insurance credits is available on the Government website.
Topping up a full NI year usually costs £824, although this varies depending on the tax year and on your work situation.
