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From riches to rags?

The party conferences are now over and we are starting to get an idea of what the post-2015 election UK tax system might include.

There is now a clear divide opening with Labour and the Lib Dems on one side, seeking to raise taxes, particularly on the wealthy, while the Conservatives hint of tax cuts, without further borrowing.

For companies, there is the prospect of halting the planned decrease in the top rate of corporate tax and increases to the bank levy. For employees, Labour intends to reverse the Coalition’s planned rights-for-shares plan.

Overall, the biggest tax raising, however, is intended to come from ‘the wealthy’ with the usual talk of restricting higher rate pension relief and a return to the 50% tax rate for those on the highest earnings.

The biggest tax raising could come from a Mansion Tax which the Lib Dems estimate will generate around £2bn of new tax revenue. We estimate it nearer £1.5bn, but either way, it’s a big sum of money.

It is useful to remember that that the top 1% of earners already pay 27% of UK personal taxes, with the top 10% of earners paying 57% of taxes while taking very little, comparatively, out of the system. So is taxing the wealthy further the right course?

The problem, though, is fairness. A Mansion Tax, for example, is a very blunt instrument with property ownership only one measurement of wealth and can create a liability for those who can’t afford it while missing the wider wealth of those who could.

More worryingly, after successive tax and national insurance rises imposed on individuals, restrictions to pension and loss reliefs, the removal of personal allowances and child benefits for high earners and increases in other areas of personal taxes, will placing yet further burdens on the wealthy be the tipping point for driving away those who make the biggest contribution to this country’s tax take?

This was posted in Bdaily's Members' News section by Baker Tilly .