Ministers Eye Up High Earners For Rich Pickings

Wealthy landlords, expats and investors could be in the firing line as ministers look for ways to raise more tax.

Even though taxpayers are paying more towards government revenue now than at any time in the past 50 years, Whitehall still needs more cash.

Tax experts suggest the Treasury is already looking at a radical overhaul of pension contribution relief that may see tax breaks scrapped for higher earners.

They also believe HM Revenue & Customs will pay closer scrutiny to filings by the wealthy to ensure they are paying the right amount of tax.

Tax take up already

Accounts published by HMRC for the first three months of 2018 show the tax take is already up £5.2 billion on the same period last year at £142 billion.

The problem for the government is Whitehall still needs to find billions of extra cash from somewhere to finance a promised £20 billion input to the National Health Service – and higher earners have assets that are hard to hide for ministers to tax.

“If the Chancellor can’t raise taxes but needs receipts to increase, there are two likely options on the table: cut tax reliefs or take a more aggressive approach on existing taxes. In either case, it’s higher earners – those paying 40 or 45% income tax – who will be squeezed the hardest,” said Sean McCann, a chartered financial planner at NFU Mutual.

Pension tax relief faces axe

“We’ve already seen a crackdown on inheritance tax in the last financial year with a record £5.2 billion taken from people’s estates. A more aggressive approach to Capital Gains Tax is likely, particularly as amateur landlords start to jettison buy to let properties following a series of tax changes that make buying and letting out residential property much less lucrative.

“Pension tax relief looks increasingly likely to be slashed at some point soon with either a flat rate of 25% or a reduced annual allowance of £20,000 two possible options. Higher earners are likely to be hit in either scenario, but such changes would create serious erosion of public trust and confidence in pensions at a time when people need to be saving more for their future.”

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