The UK's wealthy elite are bracing for a significant tax increase under the new Prime Minister Andy Burnham, with potential reforms to income tax, stamp duty, and Capital Gains Tax on the table. A staggering £10 billion in additional revenue is projected from the measures, which could see higher earners facing a greater share of the tax burden.
Mr. Burnham's plans have been shrouded in mystery until now, but his intentions regarding taxation were clear even before taking office: he has ruled out increases to income tax, VAT, or employee National Insurance for lower earners, while leaving the door open for a wealth tax. A key area of focus appears to be the personal allowance, set at £12,570 currently, which Mr. Burnham is poised to raise – a move that would benefit those on lower incomes but could be offset by a freeze on higher and additional rate thresholds, pulling more middle-class individuals into higher tax bands.
This strategy could have far-reaching implications for 'HENRYs' – High Earners, Not Rich Yet – who, despite appearing affluent, often juggle significant financial commitments such as large mortgages, childcare costs, and pension contributions. The UK's progressive income tax system heavily relies on a relatively small group of higher earners, many of whom are already feeling the pinch from inflation and frozen tax thresholds.
There is also considerable debate around a potential increase in the top rate of income tax. Mr. Burnham has previously suggested there is 'definitely a case' for hiking the additional rate from 45 per cent to 50 per cent, a rate last seen under Gordon Brown's government in 2010 when Mr. Burnham served as Chief Secretary to the Treasury. Economists warn that such a move might generate limited additional revenue for the Treasury and could provoke a further 'wealth exodus' as high earners consider relocating to more tax-efficient jurisdictions, a trend observed following the recent abolition of the non-dom tax regime.
Financial experts are urging the government to provide clear communication regarding any proposed tax reforms. Tom Archer, a tax and planning expert at Quilter, stressed the importance of outlining a credible and affordable plan in the upcoming Autumn Budget to avoid damaging speculation and ensure long-term economic stability. The current uncertainty is causing concern among wealth managers' clients, with Rathbones reporting that many are contemplating moving assets or even their residency abroad.