Top 5 financial things to do before labour get in?

[isleofthorns]

Condi said:

I would guess that most people paying IHT are doing so because of an increase in house prices, which is entirely unearnt income. The money they have "made" has been made off the back of the next person buying it, it hasn't come from nowhere, so should be taxed.

Similarly a lot of CGT is from BTL assets or whatever, for most people their savings will be in ISA wrappers. You can't really argue that if someone has made £100k from a £20k investment (eg leveraged property), that they should pay a low rate of tax on that because the first £20k was taxed at source. We are in the daft situation whereby buying things and sitting on them is more tax efficient than going out to work.

IHT / capital gains covers more than just property, although it's a fair argument that some form of capital tax should be applied to private property, maybe in the form of a LTA? This could be brought in alongside a scrapping of IHT.

However, raising CGT unilaterally could result in throwing the baby out with the bathwater. One day I hope to close /sell my business -- if capital taxes for private shareholdings are raised to income tax levels, then it would seriously impact on whether I'd bother to stay in business.

for a business owner to benefit from a capital gain on his shares, he will have likely already paid corporation tax on profits / growth along the way - so the marginal tax taken would be higher than just the income tax rates, Add in the fact that any funds realised after CGT has been paid and assuming these would be over the IHT threshold, they would then get hit again In the event of my death

[Car bon]

I'd consider anything that doesn't impact 'hardworking ordinary people' to be fair game. Anything 'unearned' particularly so - and full bonus points if they can squeeze an 'only affects milionaires' in there too, like LTA.

[Puzzles]

isleofthorns said:

IHT / capital gains covers more than just property, although it's a fair argument that some form of capital tax should be applied to private property, maybe in the form of a LTA? This could be brought in alongside a scrapping of IHT.

However, raising CGT unilaterally could result in throwing the baby out with the bathwater. One day I hope to close /sell my business -- if capital taxes for private shareholdings are raised to income tax levels, then it would seriously impact on whether I'd bother to stay in business.

for a business owner to benefit from a capital gain on his shares, he will have likely already paid corporation tax on profits / growth along the way - so the marginal tax taken would be higher than just the income tax rates, Add in the fact that any funds realised after CGT has been paid and assuming these would be over the IHT threshold, they would then get hit again In the event of my death

Very much not unearnt. To think entrepreneurs relief was £10m at one point.

[Condi]

isleofthorns said:

for a business owner to benefit from a capital gain on his shares, he will have likely already paid corporation tax on profits / growth along the way - so the marginal tax taken would be higher than just the income tax rates, Add in the fact that any funds realised after CGT has been paid and assuming these would be over the IHT threshold, they would then get hit again In the event of my death

That's quite a specific situation, although as thing stand you will pay only 10% tax as it comes under entrepreneurs relief if you are the business owner, and there is no need to change that.

However, if you were simply owning shares in other companies then at the moment you only pay 20% tax instead of the 20/40/45% rate you would from working.

You could index an allowance to CPI or whatever if that was deemed more palatable, and probably makes sense, but it is wrong that buying assets and sitting on them is more tax efficient than working.

Edited by Condi on Thursday 6th June 20:23

[Ken_Code]

Car bon said:

I'd consider anything that doesn't impact 'hardworking ordinary people' to be fair game. Anything 'unearned' particularly so - and full bonus points if they can squeeze an 'only affects milionaires' in there too, like LTA.

Lawn Tennis Assiciation?

[isleofthorns]

Condi said:

That's quite a specific situation, although as thing stand you will pay only 10% tax as it comes under entrepreneurs relief if you are the business owner, and there is no need to change that.

However, if you were simply owning shares in other companies then at the moment you only pay 20% tax instead of the 20/40/45% rate you would from working.

You could index an allowance to CPI or whatever if that was deemed more palatable, and probably makes sense, but it is wrong that buying assets and sitting on them is more tax efficient than working.

Edited by Condi on Thursday 6th June 20:23

Entrepreneurs relief is limited and doesn't apply in all situations and has associated restrictions - in my case, I'd probably not benefit from it.

As for owning shares in other companies - I'd argue that, a) the purchase is probably made from previously taxed income, b) the purchase fulfils an important economic role in the provision of a market in which companies can raise equity finance. The UK's role is the primary equity listings market is not great and taxing CGT more won't help this. In fact the govt acknowledges this issue with the policy proposal to use pension funds as a possible source of mandated equity liquidity for UK companies.

Shares are still productive, whether held in ones own business or in listed companies.

Real targets for CGT should be property, cars, personal collectable assets, crypto etc

[Car bon]

Ken_Code said:

Lawn Tennis Assiciation?

Life Time Allowance

[Condi]

isleofthorns said:

Entrepreneurs relief is limited and doesn't apply in all situations and has associated restrictions - in my case, I'd probably not benefit from it.

As for owning shares in other companies - I'd argue that, a) the purchase is probably made from previously taxed income, b) the purchase fulfils an important economic role in the provision of a market in which companies can raise equity finance. The UK's role is the primary equity listings market is not great and taxing CGT more won't help this. In fact the govt acknowledges this issue with the policy proposal to use pension funds as a possible source of mandated equity liquidity for UK companies.

Shares are still productive, whether held in ones own business or in listed companies.

Real targets for CGT should be property, cars, personal collectable assets, crypto etc

I don't disagree, but for "most people" they own shares in a pension (tax relief on the way in), or ISA (tax relief on the way out). The number of people who own shares outside of an ISA wrapper is probably quite small, and will likely be people with a larger amount of money in the first place.

Given as you can put £20k a year into an ISA, after 30-40 years of investment you could easily have £1m free from CGT.

[Car bon]

isleofthorns said:

As for owning shares in other companies - I'd argue that, a) the purchase is probably made from previously taxed income

as is anything you purchase that's subject to VAT, or fuel duty or endless other things.....

you're confusing what might make sense with what would be popular & easy to explain to the masses......

[NRS]

Car bon said:

isleofthorns said:

As for owning shares in other companies - I'd argue that, a) the purchase is probably made from previously taxed income

as is anything you purchase that's subject to VAT, or fuel duty or endless other things.....

you're confusing what might make sense with what would be popular & easy to explain to the masses......

It doesn’t ‘make sense’ - the UK and Europe have stalled out our economies for decades, with wages only matching inflation for over 20 years. Imagine if that was your experience of work in your early years, basically 1/2 your working life with no effective pay increase. Instead wealth is far more effective in outgrowing inflation. So it’s either older people, people who inherit or the relatively few who can build savings quickly due to very high paying jobs.

It’s weird many Conservatives who normally like that hard work is rewarded are often happy with the system that means actual work is not being rewarded much now and the economy actively encourages you to not aim for growth as you can make better returns sitting on assets, partly due to the tax system.

[Cheib]

isleofthorns said:

Real targets for CGT should be property, cars, personal collectable assets, crypto etc

Cars aren’t taxed because you would then have to allow maintenance costs to offset CGT as maintenance obviously has an impact on value. Imagine how complicated that would get. Carlos Fandango Wide Wheels for your Classic ? Oh yes you can offset those against CGT. Your HMRCinspector would have to make sure the Carlos Fandango wheels are still on the car when you sell it.

The Conservative Party had a very good look at CGT a few years ago but then decided not to raise it and instead removed the allowance. The problem is it is easy to delay realising gains and people with sizeable gains move offshore and then realise them once they are under a friendlier CGT regime.

It also reduces the amount of investment capital in the country which is obviously a key part of economic growth at a time when our demographics mean that the amount of investment capital is reducing. A lot of the capital owned by individuals is in the 45+ demographic who tend to be a lot more risk averse. Because we’re “having less babies” our population is ageing which means the risk capital is ageing with it.

I have had to pay some sizeable CGT bills over the last few years. Mostly on an asset/investment I made 20 years previously. Over which time I had to invest more money to stop the company going bust. It was by no means a one way street. That company now employs 650 people and pays a huge amount corporate tax every year. Would I and lots of other people invested in it 20 years ago if CGT was 40% ? Not sure I would.

At a time when we have little or no growth in the economy imposing CGT at income tax rates would be a hugely risky gamble.

[alscar]

Condi said:

I would guess that most people paying IHT are doing so because of an increase in house prices, which is entirely unearnt income. The money they have "made" has been made off the back of the next person buying it, it hasn't come from nowhere, so should be taxed.

Similarly a lot of CGT is from BTL assets or whatever, for most people their savings will be in ISA wrappers. You can't really argue that if someone has made £100k from a £20k investment (eg leveraged property), that they should pay a low rate of tax on that because the first £20k was taxed at source. We are in the daft situation whereby buying things and sitting on them is more tax efficient than going out to work.

Practically though, taxing peoples Property ( particularly those lived in as Primary and only residences over a long time ) would presumably be somewhat difficult and complicated to bring in given any money spent on said Property over the years would need to be deducted as an expense in order to see the current gain ?

IHT on ordinary" estates" of 40% as now is not exactly a small proportion.

[BAMoFo]

Car bon said:

I'd consider anything that doesn't impact 'hardworking ordinary people' to be fair game. Anything 'unearned' particularly so - and full bonus points if they can squeeze an 'only affects milionaires' in there too, like LTA.

Unless the tax on the 'unearnt' bit includes inflation i think it would be very unfair.

[Ken_Code]

BAMoFo said:

Unless the tax on the 'unearnt' bit includes inflation i think it would be very unfair.

Labour’s unlikely to base their decisions on what’s fair, it’ll be more about loading ever more of the financial burden on the top quarter of earners.

[BAMoFo]

Ken_Code said:

BAMoFo said:

Unless the tax on the 'unearnt' bit includes inflation i think it would be very unfair.

Labour’s unlikely to base their decisions on what’s fair, it’ll be more about loading ever more of the financial burden on the top quarter of earners.

I agree. It was really intended as a response to other posters that are suggesting that increasing taxes such as CGT and IHT is fairer than taxing earned income. The government will dress up whatever they do to appear fair regardless of whether it is or not and many will fall for it

[Condi]

BAMoFo said:

I agree. It was really intended as a response to other posters that are suggesting that increasing taxes such as CGT and IHT is fairer than taxing earned income. The government will dress up whatever they do to appear fair regardless of whether it is or not and many will fall for it

Reality is that the bottom 1/3 or half of earners are in many ways just getting by, inequality is increasing not decreasing, and so any increased tax burden has to fall on the top few percent of earners because they're the only ones who can afford to pay more.

Regarding CGT and IHT, the increase in value has come largely from government policy (or BOE policy/QE), and so they shouldn't feel hard done by if another government policy takes it away.

[Ken_Code]

Condi said:

Reality is that the bottom 1/3 or half of earners are in many ways just getting by, inequality is increasing not decreasing, and so any increased tax burden has to fall on the top few percent of earners because they're the only ones who can afford to pay more.

Inequality isn’t increasing, it’s been steady for over a decade now.

https://closer.ac.uk/data/gini-coefficient-income-...

Thus sort of thinking, that we can just load ever more burden onto higher earners while not asking most households to contribute even a penny is why some people choose to move their money and tax residency elsewhere.

Edited by Ken_Code on Friday 7th June 09:29

[BAMoFo]

Condi said:

Reality is that the bottom 1/3 or half of earners are in many ways just getting by, inequality is increasing not decreasing, and so any increased tax burden has to fall on the top few percent of earners because they're the only ones who can afford to pay more.

Regarding CGT and IHT, the increase in value has come largely from government policy (or BOE policy/QE), and so they shouldn't feel hard done by if another government policy takes it away.

I only believe in equality of opportunity not equality of outcome. Perhaps that makes me a bad person.
Do I remember correctly that you have previously stated that the changes to taxation that you are suggesting will negatively impact you? If that is correct, and you also believe in equality, there is nothing to stop you voluntarily increasing your tax contributions to put your own conscience at ease.

[Condi]

Ken_Code said:

Inequality isn’t increasing, it’s been steady for over a decade now.

https://closer.ac.uk/data/gini-coefficient-income-...

Thus sort of thinking, that we can just load ever more burden onto higher earners while not asking most households to contribute even a penny is why some people choose to move their money and tax residency elsewhere.

Yes and no.

INCOME inequality isn't changing much (although the top 1% and 0.1% are seeing a steady increase in the amount of national income they collect), however WEALTH inequality (largely driven by increases in house and asset prices, as well as savings made during Covid when higher earners didn't spend so much going out) is increasing.

If you interpret anything from that it's that wages are underperforming, but younger people are having to pay more to buy houses, with the money going to the older people who bought theirs 10/20/30 years ago. This bakes in inequality as that money is then handed down via inheritance, and so while millennials will be the richest generation ever we will also be the most unequal as your wealth with almost directly depend on the value of your parents house rather than how well you've done in the jobs market.

Even the Government admit the UK is one of the most unequal countries in Europe and that our tax system does less to redistribute that wealth than other countries which have seen the same trajectory as the UK.

https://researchbriefings.files.parliament.uk/docu...

Edited by Condi on Friday 7th June 11:50

[Ken_Code]

That link isn’t about wealth inequality.

What data are you basing the claim on that wealth inequality is increasing? I don’t think that it is.

https://www.statista.com/statistics/1233856/wealth...