Jeremy Corbyn's Wealth Taxes

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May 26th 2019
Tax Week 8
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Jeremy Corbyn's Wealth Taxes

The Labour leader has the rich running scared, but why?

Jeremy Corbyn could possibly become the next Prime Minister of the UK. Betting odds are getting shorter, currently 3 to 1, and those with the top slices of income are getting worried.

A survey of individuals within this category showed people worried more about the effect on their wealth brought about by change of government, than any economic downside from leaving the European Union.

The super rich are already purchasing homes on the island of Guernsey in order to benefit from the double taxation treaty with the UK and the flat 20 percent income tax rate there - with additional benefits being the ability to cap the maximum tax payable, no CGT and no inheritance taxes.

The reason for the panic is the notion that Jeremy Corbyn will be clamping down on the rich with wealth taxes.

After the close of the 2018 UK Budget, Labour shadow Chancellor John McDonnell proposed his alternate version of the income tax bands, rates and allowance. The same John McDonnell once outlined a plan to take a fifth of the top 10 percent wealthiest UK resident's money - worth £4 trillion - as the one-off tax take that would eradicate the deficit in one swoop.

Initial signs of a tax on wealth were McDonnell's adjustments to the 2019 tax rates so that a new band is inserted after the higher rate band and the top rate of tax starts much earlier. After tax-free allowances (£12,500), the higher rate tax band (40%) would start at £50,000, the upper-higher rate (45%) would start at £92,500 and the top rate band (50%) would start at £125,000 - and no personal allowance would be available for incomes over £125k as tapering starts at £100k.

There is a balance to taxation, doubling taxes for a doubling in tax receipts does not compute - evidentially with the cut in corporation taxes earlier this decade resulting in increased tax take.

The tightening of rules for buy-to-let landlords on factors such as tax reliefs and stamp duties have already caused a sharp spike in CGT tax take, but only as landlords sell up due to less profitable returns from holding on to the rentals.

A number of factors would hit those at the upper end of the income pie, including slashed tax relief on pensions, closure of loopholes within the inheritance tax system, private school fees taxes and then restrictions of money in and out of the UK, financial transaction taxes.

On top of all this, McDonnell's one-off wealth tax could also be a possibility.

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