Ministers are expected to announce increases in inheritance tax and capital gains tax (CGT) in the budget next week…reports Asian Lite News
Keir Starmer has hinted at tax rises for those who earn their income from shares and property, saying that they did not fit his definition of “working people”.
Ministers are expected to announce increases in inheritance tax and capital gains tax (CGT) in the budget next week.
Ahead of the anticipated tax rises, the government has come under pressure to clarify its manifesto promise to “not increase taxes on working people”.
Asked whether someone who works but also earns income from assets, such as shares and property, was a working person, Starmer told Sky News: “Well, they wouldn’t come within my definition.”
The prime minister’s spokesperson later clarified that he was referring to people who “primarily get their income from assets” and was “not precluding people that have a small amount of savings” in stocks and shares.
Pressed on whether that meant taxes for these people could go up, Starmer told Sky News: “You can probably give me any number of examples … you’re asking me for a definition of who’s a working person, and then you’re making assumptions about what that tax might be in relation to.”
The debate over the definition of working people has intensified after ministers refused to rule out raising national insurance on employers in the budget. Starmer was asked to set out his definition of working people by reporters travelling with him for the Commonwealth summit in Samoa: “I have in mind people who go out earn their living, may have some savings, but don’t have the ability to sort of routinely write a big check if they get into difficulties.
“They’re the people uppermost in my mind when we’re making our decisions,” he added. Starmer and Rachel Reeves, the chancellor, have both warned that they will need to make “tough decisions” in the budget.
Starmer has indicated that CGT on the sale of shares and other assets, currently set at up to 20%, will increase. The tax is expected to rise by several percentage points.
However, ministers are expected to leave CGT on the sale of property untouched because of concerns that increasing it would cost money by slowing down sales. The Conservatives cut the top rate of CGT for property from 28% to 24% in the last budget.
Reeves is also looking at tightening the rules for inheritance and gift tax. Only about one in 20 UK estates now attract inheritance tax.
Meanwhile, the government’s borrowing costs have risen on global financial markets amid expectations that Rachel Reeves will change Britain’s debt rules to unlock up to £50bn of additional headroom for investment in infrastructure.
Ahead of next week’s budget, it was revealed on Wednesday that the chancellor was preparing to confirm at the International Monetary Fund’s annual meetings in Washington that she would change the way the debt rule is calculated.
The yield – in effect the interest rate – on UK government bonds rose by about six basis points to trade above 4.2% in early trading on Thursday morning before easing, contrasting with a fall in borrowing costs for other comparable countries, including the US. The spread between gilts and German debt rose to the highest in more than a year, according to Bloomberg.
“It seems to be related to Reeves last night suggesting that the fiscal rules would be rewritten to increase spending on infrastructure,” Lyn Graham-Taylor, a senior rates strategist at Rabobank said.
The measure – which is a broader definition of the government debt, including financial assets and liabilities – would have added £53bn to headroom within the fiscal rules if it had been applied at the last budget in March.
Reeves is expected to attend the IMF meetings on Thursday. Using the visit to Washington to announce the fiscal rule change will signal that Reeves is aligned with the traditionally conservative institution, which has gradually moved to support borrowing for investment in recent years.
Global bond yields have come under pressure in recent months amid expectations that cooling inflation will lead the world’s most powerful central banks to cut interest rates to avoid an economic hard landing.
Andrew Bailey, the Bank of England governor, suggested UK inflation was falling by more than expected, despite cautioning that there were still “outstanding questions” about whether price pressures would remain stubborn.
In comments appearing to hint that the Bank could further reduce borrowing costs at its next policy meeting in November, Bailey told a meeting at the IMF that there had been “good news” on inflation across advanced economies.
“Disinflation – and the UK is part of this – has actually taken place faster than we expected it to,” he said.
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