With speculation around Andy Burnham potentially becoming the UK’s next Prime Minister continuing to make headlines, many business owners, investors and higher-rate taxpayers will no doubt be starting to wonder – what will that mean for the UK’s tax system and my business.
The honest answer is that nobody knows. I’m not even sure Andy Burnham knows just yet – although I’m fairly confident he knows what colour his t-shirt is.
There is no published manifesto and certainly no confirmed tax policy. But part of my role as a tax adviser is looking beyond today’s headlines, keeping my finger on the political pulse and considering what the future developments could mean for our clients.
The broad theme appears to be a greater focus on taxing wealth while reducing the burden on earned income. Of course, this is speculative, but if I were advising clients on the areas I’d be watching most closely, these would be near the top of my list:
A continued focus on wealth rather than earnings
If there is one consistent thread running through many of Burnham’s previous comments, it’s the idea that wealth should contribute more to public finances, while the tax burden on earned income remains relatively stable.
That doesn’t necessarily mean dramatic tax rises, but it could influence where future governments choose to make changes.
For business owners, investors and individuals with significant assets, that’s an important distinction.
What may not change
If Labour were to remain committed to its current fiscal position, I think it’s less likely we would see increases to the main rates of Income Tax, VAT or employee National Insurance in the short term. Maintaining confidence in the UK’s public finances is, in my opinion, likely to remain an important priority, regardless of who leads the party.
Of course, political priorities can change, but this feels like one of the more stable areas.
Areas of tax I’d be watching
Capital Gains Tax
Capital Gains Tax has been the subject of speculation for several years. One possibility is that Capital Gains Tax rates could move closer to Income Tax rates. If that ever happened, the cost of selling investments, second properties or businesses could increase significantly.
For anyone considering succession planning or a future business sale, it’s certainly something worth keeping on the radar.
Property taxation
This is one of the ideas that has been talked about most since Andy Burnham’s name started featuring more prominently in discussions about the UK’s next potential Prime Minister.
Burnham has previously supported replacing both Stamp Duty and Council Tax with some form of Land Value Tax. If introduced, it would represent one of the biggest reforms to UK property taxation in decades.
Whether it ever becomes government policy is another question entirely, but it illustrates a willingness to rethink how property is taxed rather than simply adjusting existing rates.
Landlords
Investment income has also featured in previous discussions. One idea that has been raised is extending National Insurance to rental income. Again, this is far from government policy today, but it would continue a broader trend of narrowing the gap between the taxation of employment income and investment income.
For landlords with larger property portfolios, that could have a meaningful financial impact.
Inheritance Tax
Rather than making incremental changes to the current Inheritance Tax system, Burnham has previously floated the idea of a broader approach to funding social care through wealth.
One concept that has been discussed is a form of ‘National Care Levy’, where larger estates contribute more towards the cost of care.
Income Tax allowances
Interestingly, not every idea points towards higher taxation.
Burnham has previously spoken about reviewing the freeze on Personal Allowances and has backed the idea of a 10p starting rate of Income Tax, which could benefit lower earners.
Whether these ideas ever progress remains to be seen, but they suggest an emphasis on reducing the burden for those on lower incomes while seeking revenue elsewhere.
Business rates
Another area I’d expect to remain under review is business rates.
There has been growing political support for giving high street businesses a fairer footing against online retailers. One way of funding that could be through higher business rates on larger out-of-town distribution centres used by online retailers.
So, what should people actually do?
At this stage, these are ideas rather than government policy and I don’t think anyone should make financial decisions based on political speculation alone. Any future leadership contest would also make major tax reform difficult before the next Budget.
With that said, if future governments continue moving towards greater taxation of wealth, anyone with investment portfolios, property holdings, family businesses or succession plans may benefit from reviewing how those assets are owned and structured.
Good tax planning is about understanding where potential risks may lie, reviewing your position regularly and making considered decisions rather than reactive ones. That way, whatever changes come next, you’re already in a strong position to deal with them.
Final thoughts
This isn’t a prediction of future government policy, nor is it intended to be.
It’s simply my view, based on comments and policy ideas that have entered the public conversation over a number of years. The political landscape and priorities can change quickly, and any future leadership contest would inevitably reshape the debate.
The aim isn’t to try and guess what the next Chancellor or Prime Minister might do. Very few people get that right consistently.
Instead, it’s about making sure your finances are structured sensibly, your plans are robust and your assets are held in a way that gives you confidence, whatever direction tax policy takes in the years ahead.
That’s exactly where good tax advice adds value. At The Arkk Alliance, we work with clients to build long-term strategies that aren’t dependent on predicting the next Budget. By reviewing your position regularly, considering the options available and planning ahead, you can be better prepared for change rather than reacting once it arrives.
