How will you look to mitigate Labour’s tax hikes? (Part deux)

[EverythingAllatOnceAllTheTime]

How will you look to reduce the impact of Labour’s seemingly endless (imminent) tax hikes?

Yes, OK - fair points.

If you change the tax environment you change behaviour, it’s obvious really. I remember when tax credits were introduced, Labour thought it would encourage more mums into work and it had the opposite effect, more stayed at home with their kids. Which is a really very obvious outcome.

I don’t know why people think that high earners won’t/shouldn’t change their behaviour in response to a new environment. Increasingly theres a protected class of public sector workers whilst private sector workers are left to scrabble around to find ways to actually have a reasonable retirement and build some wealth. Obviously most won’t be as well off as OP but there are plenty of people who feel like they are constantly being shaken down because they work full time in the private sector.

A government hoovering money up from people who generate growth is a really bad idea. The more extractive the government gets the more people will change their behaviour. Changes to CGT could also affect how people invest. I know someone desperately trying to dispose of an asset now and DH and I are sitting on some that we feel no urgency to dispose of but definitely won’t if CGT rates are equalised with income tax rates. You may quickly find that tax receipts start falling rather than increasing.

Thats right Flib.

The good old Laffer curve etc.

Sensible people, including every poster on this thread, try to consider how their family finances are arranged to keep as much as possible out of the grasp of the blob. Our family finances are not thrilling, and the numbers wouldn't make anyone's eyes rotate, but on balance I think I make better calls about spending decisions than an anonymous civil servant.

We probably won't emigrate because we are almost certainly too old now to negotiate our path through an unfamiliar society happily and successfully. We both did in our 20s. DH fancies Malaysia, which has a decent retirement offer, because he grew up in Singapore and likes Chinese food. I like it too, but prefer NW Spain, which still has a golden visa if you buy a property over €500K, which is not a massive threshold.

Sorry for your loss @Papyrophile

Or Portugal, which has a fairly generous D7 retirement option. Obviously, plus health insurance costs. we both loved Portugal and the Portuguese people but Portugal does not want to import millions of elderly impoverished North Europeans coming for the warm weather. They have their own social problems.

I also think people need to stop with the ideological nonsense. It is not enough for you to feel something is virtuous, it also has to work. theres no point in putting VAT on school fees if it ends up costing you more than it generates, or increasing CGT if people just stop selling their assets. IHT is an interesting one, you will just find the few that do pay it may alter their behaviour and start handing over the cash to their kids now (this may not be a bad thing for their kids).

I am fairly sure that Labour are going to be ushering in a few years of restrained economic growth which is bad for government tax receipts.

People giving money to their kids now is probably far better for the economy and overall tax take. If more money is in the pockets of people who are likely to spend it rather than save it, then that has a stimulus effect on the economy and could improve overall tax take. This current labour government isn’t really interested in IHT that people might pay in 10, 20 or even 30 years when they won’t even be in government any more. People changing their behaviour to give more money to kids and grandkids who go out and spend it isn’t necessarily a bad thing for the amount of tax coming in.

And anyone who now gives away a chunk of money to avoid IHT will be too late to avoid paying anything that would be due before the next election.

it depends.

Wealth transfer under IHT would attract some tax and stimulate spending by beneficiaries. Under current scenario whilst spending might be facilitated, IHT receipts are unlikely to be increased and there is also a risk of parents transferring too much and not having enough for old age care so taxpayer will need to step in.

I agree with your point that Labour won't care about it as they don't expect to be in power for that long.

I do expect that Tory will promise to abolish IHT in their 2029 manifesto.

Spending money isn't what makes the economy grow, although a glut of consumer spending might give that illusion. The spending will indeed result in more tax take - but that's just realising the tax due from previous growth, not actual growth.

The economy grows when additional value is created. Whether that's tomatoes being grown, wood turned into a table, a company audit being completed, an operation done, a client's financial portfolio tweaked so that their money is funnelled as investment for the company which will itself create the most value. These are all value being created.

So people working - or working more productively - is what fundamentally creates economic value.

Money being saved also creates economic value: because 'saved' means invested, which enables the companies who are given that money to use it to create value.

But people spending and consuming the 'value' that someone else created through their work 30 years ago doesn't grow the economy. It's just consumption.

What they've said

Note that motivating someone to work now and save it so that they or their children will have it in 30 years time is amazing for the economy.

They create value now through their work.

And then because they invest the money they received (in return for the value they've created) that money is available to a company which uses it to create yet more value. Double whammy!

So disincentivising pension saving isn't just terrible policy because it will increase the state burden in 30 years time, if people haven't saved enough to support themselves. It's also terrible for economic growth in the short term.

so on one hand you have the people saying they are going to leave the uk because the public services are so bad and on the other people saying they are going to leave rather than pay (fair) taxes.
People paying higher taxes don't equate to the people creating growth - how does holding shares which increase in value = create growth, inheriting property

True in theory but U.K. pension funds are not investing enough in U.K. companies and that has to change.

I think the only real problem in the U.K. right now is the massive erosion of a wide middle class base. That tends to be the bedrock of a successful and happy society and is why countries in Scandinavia and Switzerland do so well.

I'm retraining to work in a new career where I can be self employed with part time hours and dh is trying to sell his business so he can semi retire. He's taking his tax free lump sum on his 55th birthday which luckily is in two weeks so avoiding any possible tax on that.

We are both absolutely sick and tired of working all hours only for the government to use us as cash cows to try and support all the terrible public services and the NHS, which is completely broken.

I'd rather pay less income tax due to less salary and have a more relaxed lifestyle less subject to the whims of whoever is clinging onto power in Downing Street.

I can't tell you how low my opinion is of people who would waltz off to another country to avoid paying a bit more tax.

When a significant number of the country are using food banks, can't access decent housing, the NHS is barely functioning etc - it's pathetic to flounce off or whinge about school fees going up.

People have become all about self interest post Thatcher. For all the people who harp on about patriotism and sovereignty, this is what standing by your country looks like.

And if we hadn't spent a decade wrenching our guts out over Brexit, we wouldn't be in this mess. Tories barely paid attention to the basics of governance.

Agreed.

I was thinking about it this morning.

As a household, we employ a gardener, cleaners, window cleaners and dry cleaners on an evergreen rolling contract, in addition to ad hoc plumbers, electricians, building contractors.

If the middle feels the squeeze - what do you think they are going to cut? And yet, Labour think they can get away with targeting us.

Fools.

The best possible scenario for the UK is if the pension funds were enabling the growth of UK companies - since then the UK government gets the corporation tax on the growth as well. Triple whammy! RR did mention something about encouraging that. So long as it's incentivising rather than coercion, I'd be all for that. (but I do fear that Labour's instinct is towards punitive coercion...)

But it's still beneficial to the UK for the money of a UK resident to be invested even if the company isn't in the UK, since the share of the company's growth which they have through their investment will accrue to them in the UK.

People get fed up with being made to feel it is their personal role to support everyone in society and yet there are a huge amount of people who don't support them in return. Whether you have a low opinion of them or not, some people get to the point in life where they are absolutely sick of it. I doubt your judgement helps them or informs them in any way.

You are very clearly not “the middle”. The middle 20% in the UK earn £30-60k. I’m tired of people on mumsnet who are clearly very wealthy describing themselves as the squeezed middle. You are not the people that phrase refers to.

https://www.theguardian.com/business/2024/feb/20/uk-middle-classes-jobs-housing-costs-abrdn-financial-fairness-trust#:~:text=“It%20is%20people%20earning%20between,incomes%20have%20become%20more%20apparent.

I think plenty of people on 40k - 60k have cleaners and window cleaners.

And does that change my point?

Others will suffer, including cleaners and gardeners.

Where do you pigeon-hole those people?