If Starmer was honest, he would have told us which taxes and benefits he was going after, but he didn’t. He didn’t do in his speech this morning, either. Which leaves everyone playing guessing games.
Which I can only assume is the intention.
If “stealth tax Starmer”, as we should call him, had told voters how much voting Labour would cost them, millions might have put their crosses elsewhere.
So Starmer did it by stealth.
He didn’t breathe a word about plans to axe the winter fuel payment for 10 million pensioners. Nor did chancellor Rachel Reeves.
And they said nothing about plans to scrap the £86,000 cap on social care costs, which Reeves buried without fanfare. That hidden manoeuvre could cost many older people their homes.
Stealth tax Starmer kept both under wraps.
This means we’ve got absolutely no idea what Reeves is going to do when she stands up to deliver her autumn Budget on October 30.
But it’s clearly going to be nasty. Starmer laid the groundwork today, with his gloom-laden speech about the rotten state the Tories left us in.
The worst things are, the more Labour can tax us. But Starmer ignored the fact that £9billion of his £22billion “black hole” is down to Labour granting the public sector a string of pay rises.
A hike in the capital gains tax (CGT) rate seems a shoo-in. This means instead of paying 24% CGT when selling a second home, higher earners will pay 40% or 45% instead.
That’ll cost them £11,000 each on average, and possible more.
They’ll also pay more when banking gains on businesses they spent a lifetime building. As well as non-Isa shares, antiques and any other asset that’s increased in value.
Reeves is banking on her CGT hike raising £7billion year but I suspect she’ll be disappointed, because many people will hang onto assets rather than sell them and write HMRC a fat cheque.
Hiking CGT will further backfire by giving entrepreneurs less financial incentive to set up the businesses we urgently need to get the UK economy growing again.
Why bother, when most of the eventual gains will accrue to the Treasury?
Nicholas Nesbitt, partner at accountants Forvis Mazars, reckons Reeves will slap inheritance tax (IHT) on unused pensions. Personally, I think that’s a shoo-in, too.
He suspects she’ll go further warning: “The government may look to tighten rules on gifting money away for IHT purposes, perhaps by taxing gifts over a certain size, or introducing a lifetime limit of gifts.”
And I reckon there’s a chance Reeves could scrap the £175,000 main residence allowance, which applies when passing on the family home to children or grandchildren.
For many people, their pension is the biggest source of wealth, after the family home. That makes it rich pickings for Reeves.
Today, higher earners get tax relief on pension contributions at 40% or 45%, as an encouragement to save.
Reeves may cut that to a flat rate of 30% for all.
Nesbitt is in two minds pointing out that “this has been discussed for years and is technically difficult to implement”.
We’ll find out in October.
Where will it end? Nesbitt makes one suggestion that will chill the blood of every homeowner.
Today, there is no CGT to pay when selling your main family home, even if you sell for more than you originally paid. This is known as “principal residence relief”.
Scrapping this would net a fortune for the Treasury but Labour would never dare go all the way. At least, not at first.
However, Nesbitt warned. “It could be replaced with a rollover mechanism or the introduction of a cap.”
In other words, gains on home sales over your lifetime could be rolled over, again and again, for decades. The lifetime total would be liable to inheritance tax when you finally die.
Alternatively, gains could be subject to a lifetime cap. Make too much as you move around during your lifetime, and HMRC will swoop.
Nesbitt said this would be “a significant change”. He isn’t wrong. It would terrify and enfuriate homeowners in equal measure.
It would also be thin end of the wedge.
Once introduced, any tax on our homes would surely become more punitive over time. Introducing a new tax at a low rate to head off a rebellion, then increasing it later is the oldest political trick in the book.
And we know that stealthy Starmer is as tricky as they come.
I hope Nesbitt is wrong. Only time will tell.
Today, we’re in the dark which makes taking evasive tax planning action almost impossible. And that’s exactly how stealthy Starmer likes it.
