Latest news with #RachelReeves'
Reuters
19 hours ago
- Business
- Reuters
Breakingviews - Britain's non-dom melodrama has uncertain finale
LONDON, July 23 (Reuters Breakingviews) - Britain is haemorrhaging rich taxpayers, and it is all Rachel Reeves' fault. That's the received wisdom about the finance minister's decision to kill off so-called non-domiciled status, which allowed non-Brits to live in the United Kingdom without paying tax on their overseas income and capital gains. Yet the fiscal upshot of any expat exodus is hard to nail down. So-called non-dom status originated in the 18th century to shield citizens working in the British Empire from taxes back at home. Its modern iteration, which allowed those born overseas to only pay tax on what they earned in the UK or brought into the country, was increasingly hard to defend. After 2008, the government made those holding non-dom status for more than seven years pay a hefty annual charge, while ministers later capped the perk at 15 years from 2017. Prior to losing an election last year, Reeves' Conservative predecessor Jeremy Hunt scrapped the category. So when Reeves confirmed, opens new tab non-dom status was no more last October, it was hardly a surprise. Even so, her reforms had several important nuances. Recent arrivals who have been in Britain for less than four years are still able to swerve taxes on overseas earnings. Until 2028, they can also bring accumulated wealth onshore at a discounted tax rate that starts at 12% and rises to 15%, well below the typical 40%-plus charge. But former non-doms who stayed beyond April 2025 are on the hook for UK inheritance tax on their worldwide assets, also charged at 40%. This can apply for a decade, even if they subsequently move elsewhere and die there. This last provision caused deep consternation among Britain's wealthiest expats. High-profile non-doms like Egyptian billionaire Nassef Sawiris, opens new tab are upping sticks, while an Oxford Economics survey, opens new tab last year predicted over 60% of the group would follow within two years. On paper, this looks like a fiscal own goal for the UK. A cohort of wealthy but highly mobile people who previously paid some UK tax will take their contributions elsewhere. Some have decamped to Italy, which lets new arrivals shelter overseas income for a flat fee of 200,000 euros a year. Yet the reality is more complicated. The consequences for Britain's fiscal position depend on how much UK tax non-doms previously paid; how many quit the country; and how much overseas wealth and income they take with them. The last two figures are hidden inside a black box. Reeves knows how much the non-doms previously contributed to the exchequer. New figures, opens new tab for the tax year ending April 2023 – the last for which there is detailed HM Revenue & Customs (HMRC) disclosure – show people claiming the status paid 7 billion pounds in tax on UK earnings and capital gains. That's how much is at risk if they all decamp. Yet such a universal exodus is implausible. And those who stay will in future pay tax on their worldwide earnings, just like ordinary Brits. Estimating that contribution requires guesswork, because non-doms did not previously have to disclose their offshore wealth. Arun Advani of the University of Warwick hypothesises, opens new tab that the average non-dom's overseas income is similar to the figure rich Britons disclose to the taxman. If he's right, the average non-dom had offshore earnings and gains of 440,000 pounds in 2018. That figure has probably swelled due to inflation and rising asset values. The problem is that there is no such thing as an average non-dom. Of the 42,300 people who used the status to shield offshore wealth, some 17,700 told HMRC that their overseas income and gains were less than 2,000 pounds a year, making them largely irrelevant to the exchequer. Of the remaining 24,600, some are still exempt from offshore tax because they have been in the country for less than four years. HMRC data shows that only 2,600 people paid a fee of 30,000 pounds a year or more to preserve their special status. This group may well have the largest hoard of offshore wealth. It also paid a big chunk of UK tax, accounting for 1.3 billion pounds of the 7-billion-pound domestic non-dom contribution, HMRC data shows. The tax consequences for Reeves, then, boil down to two numbers. How much does the UK tax paid by former non-doms shrink as some of them leave? And does the additional tax on foreign earnings paid by those who remain make up the shortfall? Answering that question involves lots of assumptions. The Centre for Economics and Business Research (CEBR), for example, estimates, opens new tab that the UK government will be worse off if more than a quarter of non-doms leave. By contrast the Office for Budget Responsibility, which monitors UK fiscal matters and has access to foreign governments' data on British taxpayers, reckons, opens new tab Reeves will on average pocket an additional 3.5 billion pounds a year between 2026 and 2030 from taxing former non-doms' overseas earnings and gains. The OBR does not disclose what happens to the domestic tax take, and stresses its figures are 'highly uncertain'. However, it assumes just 12% of non-doms will flee, implying a significant net gain for government coffers. Measuring the scale of the exodus is further complicated by the fact that this cohort is already highly mobile. Last year, for example, 8,900 non-doms left, opens new tab Britain while 12,900 new ones arrived. It's also true that the decisions of a small number of very wealthy people could swing the results one way or another. For Reeves, who expects the new regime and the temporary discount for bringing wealth onshore to raise 34 billion pounds by 2030, any shortfall is bad news, especially now that Labour's botched welfare reforms have left her with big fiscal holes. The Financial Times reported last month that she might limit the damage by tweaking the inheritance tax provisions, which the OBR projects will raise only 500 million pounds over the four years to 2030. Even so, any comprehensive assessment of Reeves' decision will have to wait until January 2027, when tax returns for the year ending April 2026 are due. Before then, any accusation that she has made a major fiscal faux pas is pure guesswork. Follow George Hay on Bluesky, opens new tab and LinkedIn, opens new tab.
Scotsman
3 days ago
- Business
- Scotsman
Ministers should heed warnings that crippling levels of taxation will only drive down growth
Sign up to our daily newsletter – Regular news stories and round-ups from around Scotland direct to your inbox Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... Evidence that the economy is heading in the wrong direction continues to stack up. Earlier this month, the Office for National Statistics said gross domestic product contracted unexpectedly in May, marking the second month in a row of falling output. Advertisement Hide Ad Advertisement Hide Ad It then emerged last week that inflation had risen to a near 18-month high in June. The increase to 3.6 per cent was unexpected, with most economists forecasting the rate would remain unchanged at 3.4 per cent. Shoppers in Glasgow city centre | PA This suggests the country faces the prospect of dreaded 'stagflation' - negative growth combined with rising inflation. To add even more to Chancellor Rachel Reeves' woes, UK unemployment has now reached its highest level in four years, hitting 4.7 per cent in the three months to May. Soaring national debt The national debt is now such that the Treasury is spending upwards of £100 billion a year simply on interest payments - and last week's inflation figures will only increase the rate of government borrowing. Meanwhile, the tax burden is at its highest level since the Second World War. Advertisement Hide Ad Advertisement Hide Ad Forecasters predict Ms Reeves will have to raise taxes even further or slash spending by £20 billion or more in her forthcoming budget. But as she considers ways to raise more revenue in the autumn, the head of the Office for Budget Responsibility, Richard Hughes, has warned the Chancellor that 'higher and higher levels of taxes' are not good for growth. It is a message that could also be directed at ministers in Scotland - the most heavily taxed part of the UK - where the Scottish Retail Consortium has today issued a warning that a business rates surcharge north of the Border means firms are paying £9 million a year more than their counterparts in England. Both Labour and SNP ministers appear unwilling or unable to understand that we are now well beyond the point at which current levels of taxation are sustainable. Ever higher taxes will only drive down growth, as wealth and wealth creators leave the country.
Bloomberg
7 days ago
- Business
- Bloomberg
TSMC Stock Surges on AI Hype, UK Unemployment Highest in Four Years
TSMC boosted its outlook for the year after delivering record profit despite currency headwinds and the drag from US tariff uncertainty. The company raised its full-year revenue growth forecast to 30%, but said it's taking a 'conservative attitude'. Chancellor of the Exchequer Rachel Reeves' first budget appears to have cost fewer jobs than previously estimated, casting fresh doubt over the state of the British labor market after a string of data issues in recent years. Bank of England Governor Andrew Bailey guiding markets toward more reductions and traders putting the odds of a quarter-point cut next month at over 80%. The Opening Trade has everything you need to know as markets open across Europe. With analysis you won't find anywhere else, we break down the biggest stories of the day and speak to top guests who have skin in the game. Hosted by Anna Edwards and Lizzy Burden. (Source: Bloomberg)
Business Times
7 days ago
- Business
- Business Times
UK firms cut jobs; wage growth slows in cooling labour market
[LONDON] Britain's economy lost jobs again in June as the Labour government faces growing criticism for lifting the minimum wage and imposing a £26 billion (S$44.8 billion) payroll tax hike on companies. Tax data showed that the number of employees on payrolls dropped by 41,000 in June, said the Office for National Statistics on Thursday (Jul 17). It was worse than the 35,000 fall expected by economists surveyed by Bloomberg. The decline in May was revised to 25,000 from 109,000. Employers have been cutting back on hiring after their national insurance contributions rose in April, at the same time as a near 7 per cent jump in the minimum wage. Separate data showed that pay growth excluding bonuses dropped to 5 per cent in the three months to May from 5.3 per cent, slightly above the 4.9 per cent forecast. Evidence of the economic fallout from Chancellor of the Exchequer Rachel Reeves' first Budget has been building in recent data. Rising taxes have been cited as a factor for the back-to-back contractions in gross domestic product in April and May, and were also partly blamed for a pick-up in inflation to 3.6 per cent in the data for June released on Wednesday. Reeves may have to return with more tax rises in the autumn, despite warnings from the UK's Budget watchdog earlier this week that they risk stifling growth. She said last year that a one-off Budget of tax rises was necessary to fix a fiscal hole left by the previous Conservative administration. Bank of England governor Andrew Bailey has highlighted the deteriorating labour market as he guides markets towards more interest-rate cuts. Traders put the odds of a quarter-point cut in base rate next month at over 80 per cent. BLOOMBERG
Spectator
7 days ago
- Business
- Spectator
Rachel Reeves's tax raid is to blame for rising unemployment
Unemployment has hit 4.7 per cent – its highest level for four years after the Chancellor's taxes on business caused jobs to slump. The figures, published this morning by the Office for National Statistics (ONS), also show payroll jobs down by 178,000 in the 12 months to June and by 41,000 between May and June. The line that Rachel Reeves' decision – namely her £25 billion employer national insurance tax raid – is hampering the job market is becoming a strong one. Andrew Griffith, shadow business secretary, said: 'Unemployment is the only thing growing under Labour.' As Reeves weighs up tax rises likely to fall heavily on businesses to plug fiscal holes, it's an area we can expect the opposition to continue to push on. Meanwhile, pay rises slowed to their lowest pace in three years – though they remain well above inflation. The average worker saw 5 per cent pay growth in May, which the Bank of England is taking as a sign that the labour market is no longer pushing up inflation. That has led Bank Governor Andrew Bailey to talk up the prospect of a rate cut next month. But as I write in today's Spectator cover story, many critics would argue that the job of taming inflation – which rose to 3.6 per cent yesterday – is not yet done. The Bank is right to worry about the labour market given the rise in unemployment. Vacancies were down again by 56,000 to 727,000 – the 36th consecutive fall. Some 14 out of 18 sectors tracked by the ONS saw fewer jobs advertised. But focusing on propping up the labour market before inflation has been properly squeezed out of the system seems a dangerous move. With the Government's new Employment Rights Bill still to come – bringing additional costs and legal risks for employers – things could get even worse. Many businesses may simply shut up shop or quietly stop hiring and replacing staff who leave, compounding the jobs slump. In the end, it's likely to prove that any tax is a tax on working people.
