Weekend reading: A capital idea or just crazy?

CGT – is the £3,000 annual allowance not enough for you?

More seriously, whilst your job (or trust fund) pays for your spending, and the ISA (and LISA) plus SIPP allow savings away from tax. The bother of having CGT liabilities can be lived with and slowly rotated from one ETF to another.
(Active fans will always have the risk of a 10-bagger, and no great mitigation for losses.

The tax on investments in the UK is very favourable if you compare it with others and if you play your cards right – but for how long???

Felt under the weather for much of spring. Lost about half a stone in the process. Strongly suspect covid as some weird symptoms, but have bounced back now.

I’ve been getting increasingly aware of the risk of having all financial info on my phone. One thing I’ve noticed recently is the helpful feature when a website is using two factor identification that the phone says “from message?” and fills it in for you. The second factor is adding zero security. Maybe the answer is a non internet connected burner to receive the code that stays at home?

More in the Telegraph today about Treasury plans to equalise CGT with income tax rates. In fact they could even make it higher than income tax to factor in NI if they really wanted to equalise with PAYE aka “earned income”.
I think it is fair to say Labour have been dishonest since as recently as June Reeves was saying she had no plans to raise CGT. That was an actual lie.
She should have just said it would have to be reviewed when they had full access to the books.

@Tharho. Labour may be generous and it might only become active from FY25/26. Nonetheless, I’m assuming anti-forestalling action so that any transaction after the announcement date could be caught.

It’s a bit like the private school fees. I made sure I paid the invoice for the rest of my childrens’ education during the dying weeks of the Tory govt. Impossible for Labour to use anti-forestalling on, despite their silly threats. Similarly I’ve rejigged investments this year to be more CGT friendly, moved stuff offshore etc. Illiquid stuff (such a house in Oz) we’ve left as is because it’s a PITA to shift them. Plus I now doubt we will be UK resident in 5 years+, so we can sell them then.

Double post deleted

I’m really not sure all these tax rises on wealth are going to raise much dough. I’ve got a large (for me) GIA that if I liquidated under 40% CGT rate would be a circa £80k tax burden. Why would I bother, well, we’re growing out of our digs and the ideal house for us and the kids means a stamp duty bill of £120k. So excluding all the other ancillary costs of moving house that’s a £200k bill – massive frictional cost. Will take me some time to save that from PAYE. So no thanks – I think we’ll just stick and go nothing. Tax raised for the govt there absolutely zero. For the green eyed monsters reading this (a) I couldn’t give a sh*t (b) I’m just trying to make the point that raising CGT is unlikely to do as much as people think.

So what then….are we going to (a) tax private homes (b) tax wealth aka the French which isn’t very successful? The only major revenue raiser (I mean the stuff that will raise the necessary tens of billions) is to increase tax on the majority of the people. Fiscal drag at the basic, higher and additional rate.

Taxes on wealth aint gonna fix the problem – it’s too big. A declining population in work as a % of the total population is a dead end. The problem is now picking up pace into the 2020’s and 2030’s

What about reducing corporate tax rates to the level in Ireland? https://www.bbc.co.uk/news/articles/clepve4qdn2o

What about rejoining the single market?

What about focussing immigration on very high skilled individuals?

What about taxing wealthy pensioners and means testing the state pension?

What about growing or maintaining tax relief on people who don’t use public services (a) private schools (you see what I did there?) (b) health care to reduce the burden on the state.

Would be very interested to hear from any very HNW at what point it’s worth setting up an offshore bond. I’m not convinced I’m there yet.

Assuming we stick around the plan will be to invest all surplus capital in very low yielding assets (e.g. global small cap), not liquidate so again zero tax for govt and kick the can down the road.

@ZXSpectrum48k Dan Neidle has a good summary of VAT on school fees here https://taxpolicy.org.uk/2024/05/09/private_school_vat_risk/

@TI. I would agree Australia is very vulnerable to climate change. Even now the pressure on the Murray-Darling river system is causing serious issues.

Nonetheless, we’d be going to Australia for only 5 years or so. The kids will be at uni within 5 years (no reason to think a UK uni). My better half can spend time with her parents before they pass (I’m already down to one and the stats are against surviving the next 5 years). My other half can easily lose both UK residency and domicile and the Oz assets are in her name. Thereafter we can live pretty much anywhere. Any residual pull to stay in the UK has been killed off in the last decade.

@platformer. Neidle, while a highly qualified tax accountant, is hardly unbiased being on a Labour NEC committee. He makes certain simple assumptions that most schools can see will cause issues downstream and will avoid for that reason. His views have been countered by the counsel of a number of the biggest legal and tax firms. Let’s say I’m not very worried. Worst case is I get a 4.125% discount on the fees (higher than 5 year Gilt) and HMRC offer us a an attractive deal (they always offer a deal) since they’d prefer to get something than lose.

I find it pretty damning that Starmer wants to punish me for taking my autistic children to a selective private school, when he benefitted from a selective grammar/private school. It’s not about private/state, it’s about selective/non-selective. In a state school, they would be forced to attend full-time, every day, by dumbass teachers who don’t have a clue and treat them like they have a disability. I don’t want to let them anywhere near my children. He offers no selective school for my children, no flexibility, no support at all. One size fits all BS. I suffered from exactly the same as a child. I refuse to allow my children to also suffer.

As Seidle admits this is an ideologically driven policy. The tax it will raise is miniscule. In most other countries, I’d get a tax credit for this, not pay additional tax. Moreover, this wouldn’t even be legal if we were still in the EU.

Doesn’t really matter who was lying, who was being careful with what they were saying, and who was being honest. Trickle down economics has been researched and basically the conclusion always is – it does not, and has not worked as proponents think it does, so the idea of improving productivity by reducing taxes, allowing those earning the most to keep more and encouraging growth is not something supported by evidence (NI & income tax and the rest, I use ‘tax’ here as a general term, not the technically defined categories). Further, it is unarguable that more money has been spent or commited than is coming in, regardless of who is to blame for this. The idea that you can reduce taxes enough to such a level and it will subsequently directly lead to the capability to dig yourself out of a black hole by improved GDP and people working harder/more is farcical.

I don’t care for politics, but I do care for attempting to fix the economic situation we find ourselves in and that does mean higher taxes, and wealth redistribution. I liked Rishi because he wasn’t a chancer, he tried to be a grown up. Similarly, the new government in general are doing the same but just also trying to position the realities in terms of economic situation and find palatable solutions to raise the money needed. It doesn’t matter why it’s ‘missing’ money, if we want to fund the basics, as well as optional things, we need to pay for it. It is quite simple.

Contrary to popular belief, the people living on state pension or minimum wage or even, exclusively benefits, are not living a good existence. Plenty of people are also too sick to work or do have genuine caring commitments, or, shock, horror, simply are content to leave the workforce and live a minimal cost existence even if they have years or decades of potentially productive work ahead of them. I make this point specifically as the entire premise of large parts of the FIRE community is this very aim that many of us are “guilty” of – economic inactivity of otherwise potentially highly productive individuals is often the *aim*.

Where does all of the above leave us? Well, my views, for one, are that a few passes of fixing the tax and allowances system are indeed warranted, and readers of this site will bear the brunt of the big costs coming. I probably wouldn’t have started with cold weather payments to be honest, but I am fine with the concept of doing the “no-brainer” changes e.g. I am fine with the idea that other than the state pension, genuine wealthy pensioners should not have the same entitlements as those who are living on the state pension or less. Similar changes make sense in other areas and most reasonable people would see the need and somewhat “fairness” in some similar options (if they can take their own position or that of their parents etc out of it and look at it overall as a policy).

The other side of this is being clear with what the state should be funding, as despite being fairly liberal I do believe the state should be primarily focussing on the bottom layers of the hierarcy of needs. I also take particular issue with quasi-privatised entities that can’t fail but are sucking millions from public funds indirectly or effectively being unofficially insured by the state, but that rant is for another time.

Politicians being fully honest does not win elections when other parties can say whatever they want with no real punishment. The easy short term “solution” to the tax problem is what Scotland will likely do for their next budget – work out how much money is needed, adjust the income tax thresholds and percent paid at each threshold, maybe even add 1 or 2 new thresholds (as Scotland already has done with the 19% rate), and then calculate combinations that cover expenses they want to fund. It is quite simple, transparant, and can be made as progressive as they want it to be. Ironically, Scotland has to do it this way because they inherit large chunks of UK government tax decisions and subsequent consequential payments – they then fiddle with their tax raising powers to form a final position. The UK government could have raised any amount of cash they wanted by tinkering with income tax & NI rates as a simple first pass which would have been so much more transparent for years 1-2 of a new government, and made redistributional by the use of <20% tax rates for lower earners, which does reward working at the lower ends of the income distribution.

The obscurities of winter payments and such should have been part of a wider tax system fix that came later. However, I understand why this is the approach they are taking. The average voter does not want to hear that taxes are going up prior to an election, and would elect in a circus if they thought it would save them some money. Tax rises are coming, and because stating income tax and NI rises were coming would be election suicide, the UK government are starting by pulling the tax raising levers that should not have been the initial tools to get the books balanced in the short term.

This is what happens when you have to put your most appropriate tools for the coming job into cold storage and smile politely while answering questions about tax rises. I didn't like any of the options at the last UK election, particularly as I am in Scotland, and they will largely re-engineer the tax decisions using the Scottish powers, but I do feel even one sensible UK parliament of trying to balance the books via wealth redistribution will be good in the long run.

Tax rises are coming and needed. I would have preferred this done via the tax system tools designed for such a very purpose in the short term, but sadly that is probably not happening.

Neil Woodford (yes him) doesn’t really see what all the fuss is about:

https://www.woodfordviews.com/post/lucky-labour