In her post U-turn panic Reeves has briefed out much of the Winter Budget. Income tax thresholds will be frozen, they won’t be lowered, and there won’t be a hike to the headline rates. That leaves the ‘smorgasbord’ option of scattergun tax rises that will have much worse distortionary effects on the economy…
If we take the Treasury’s word that the OBR told Reeves the fiscal ‘hole’ is “closer to £20 billion” this week then she has £35 billion of revenue to raise. The Chancellor has to raise £15 billion as a “buffer for the future”…
Here are the likeliest tax rises Reeves could go for:
- Pay per mile for EVs: £2.5 billion
- End temporary 5p cut to Fuel Duty: £2 billion
- End NI exemption for salary sacrifice into pensions above £2,000: £2 billion
- Apply CGT to sales of higher value properties: £2 billion
- Mansion tax on properties over £2 million: £2.5 billion
- NI on rental income: £2 billion
- Extend Income Tax threshold freeze: £8 billion
- Apply CGT at death: £2 billion
- Exit Tax: £200 million
- Non-racing gambling tax hikes: £3 billion
- Capping all relievable pension contributions at £10,000 per person: £8.5 billion
- ISAs, taxing cyclists and other desperate gasps: £0.5 billion
The risk with these compared to Income Tax is HMT has far less of an idea of how much they will actually raise. Spoiler: In the case of most of them it will be less than they expect…
This approach will hurt the property sector, landlords, mobile high net worth individuals, drivers, drivers of electric cars, young people saving for retirement, anyone saving for their children, cyclists, and anyone paying income tax. You’ll be hearing about the various disastrous effects all the way until the next Budget…
As co-conspirators can see Reeves has backed herself into a corner in which her only option is to go extremely hard on a raid of pension contributions. Grind that economy to a halt…
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