'Higher taxes on shares and second homes are just the start': JEFF PRESTRIDGE says there'll be more wealth taxes around the corner if Labour wins next month's Election

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There will be more wealth taxes around the corner if Jeremy Corbyn’s Labour wins next month’s Election, claims Jeff Prestridge

Don't think for one moment that Labour’s assault on our wealth will end with what is outlined in last week’s manifesto. 

Higher taxes on shares – profits and income – and second properties are just the hors d’oeuvres. As sure as night follows day, there will be more wealth taxes around the corner if Jeremy Corbyn’s Labour wins next month’s Election.

Labour has history here. Those with long memories will remember Gordon Brown’s £5billion-a-year tax raid on company pensions that he announced out of the blue in his first Budget as Chancellor of the Exchequer following Labour’s General Election victory in 1997 (not a sniff of it in the manifesto).

It was a tax grab that triggered the beginning of the end for company pension schemes (so-called defined benefit plans) set up to deliver workers a ‘guaranteed’ retirement income based on a mix of years worked and final salary. 

Today, such schemes are either closed to new employees on expense grounds or/and they are often in a parlous financial state with insufficient assets to pay all their pension promises. Their demise can be directly traced back to Brown’s move.

John McDonnell, Labour’s new Gordon Brown, is also likely to have pensions in his sights if he is ever (God forbid) in a position to deliver the next Budget speech in the House of Commons. 

Although there was not a whisper of it in the manifesto, there is little chance he will allow the current pension contribution tax relief system to continue – one that in very crude terms rewards higher earners the most.

So put £100 into a works or personal pension every month as a basic rate taxpayer and it will only cost you £80. But if you are a higher rate taxpayer, the same £100 contribution only costs £60. 

For an individual who eats, sleeps and breathes socialism and balks at the very thought of giving high earners tax breaks, reform of pension tax relief represents low hanging fruit as far as McDonnell is concerned.

Why? Well, for a start, George Osborne considered such an overhaul of the pension tax break after the 2015 Conservative Election victory. So if Osborne could think reform, McDonnell certainly can.

John McDonnell is likely to have pensions in his sights if he is ever in a position to deliver the next Budget speech in the House of Commons, claims Jeff Prestridge

Osborne went as far as publishing a Treasury consultation on the issue and inviting views on reform, but the project disappeared into the long grass once the Chancellor realised any change would meet with widespread hostility from prudent savers – and it could lose the party support ahead of the 2017 Election.

McDonnell will have no such sensitivities to worry about. Indeed, his party’s proposed higher income tax rates on those with annual incomes in excess of £80,000 will probably push him towards an overhaul of pension tax relief sooner rather than later. 

This is because the higher tax rates he wants to impose on big earners will provide those affected with even more generous pension tax relief. Not on McDonnell’s patch surely.

So, he could do what Osborne considered and offer the same tax relief to all pension savers – say 20 per cent. 

He could also rein back on the maximum annual contribution that can be made into a pension – currently at £40,000 – and even look at ways of curbing the amount of tax-free cash (typically 25 per cent) that savers can take when they finally access their pension. 

Unthinkable? No. Think about it, McDonnell believes all accumulated wealth should be taxed.

Radical reform of inheritance tax could also be on the agenda. Five months ago, Labour floated the idea of a lifetime gifts tax that would result in anyone inheriting more than £125,000 paying income tax on the surplus. 

This would replace the current inheritance tax threshold which stands at a maximum £475,000.

At the time Labour said this reform would yield £9billion a year more in tax than the current inheritance tax regime. So a move in this direction cannot be ruled out if – and it’s a big if – Labour wins next month’s Election. After all, Labour equals tax. More tax.