Rachel Reeves is gearing up to introduce a £2 billion tax increase targeting some of the country’s wealthiest individuals to generate additional funds for public spending. The move is part of efforts to address a £30 billion budget shortfall left by the Conservative government.
The proposed measure involves imposing a new levy on individuals utilizing limited liability partnerships, commonly used by professions like lawyers, general practitioners, and accountants to enjoy tax advantages and avoid employers’ national insurance contributions. This change aims to ensure fairness in the tax system.
According to research by the Centre for the Analysis of Taxation (CenTax), solicitors, on average, earn £316,000 annually from partnership profits, while GPs and accountants make around £118,000 and £246,000, respectively. The tax revision is part of a broader strategy in the Budget to target affluent individuals, with the Chancellor emphasizing the principle of equitable tax contributions.
In addition to the partnership tax, Reeves is expected to introduce a “mansion tax” imposing capital gains tax on the sale of high-value properties. She highlighted the impact of Brexit and austerity on public finances, which has necessitated these tax adjustments.
Economic forecasts indicate a potential downgrade in Britain’s growth projections, raising the likelihood of the Chancellor breaking her pledge not to raise income tax, VAT, or national insurance. Reeves emphasized the need to strengthen relations with the EU to mitigate economic challenges stemming from Brexit.
In response to the proposed tax changes, economist Stuart Adam raised concerns over potential disincentives to work and the need for a comprehensive approach to taxing self-employed individuals compared to employees. The focus remains on addressing underlying issues in the tax system rather than just shifting boundaries.
