Labour Hits Pension Tax Relief and Mansions

Labour Hits Pension Tax Relief and Mansions.

Labour Shadow Chancellor, Ed Balls, has suggested that as part of the Labour manifesto should they win the General Election in May 2015, they will deploy the following addition tax revenue options to fund their proposed “Jobs Guarantee” for the younger and longer term unemployed.

Additional Income Tax:  Payable by higher earners above £150,000 will be put back to 50%, it was introduced by the Labour Government at 50% and then reduced by the coalition government to 45%

High Earners Pension Tax Relief:  Pension Tax Relief for high earners, currently at 45% as this is the tax rate they pay, will be restricted to simple basic rate tax relief i.e. 20% for all those earning over £150,000.

Bank Bonuses:  Additional taxes will be levied for bankers bonuses

Mansion Tax:  For properties valued at £2m plus, a new mansion tax will be introduced.  This could raise £2bn per year.  There is already a type of mansion tax levied on properties owned inside corporate structures – the ATED (Annual Tax on Enveloped Dwellings). 

Comment

The moves are not entirely unexpected.  Labour has traditionally had a “Robin Hood” approach to the wealthy paying more to fund the less well off.  Depending upon whether you are “red, blue, yellow or green” for politics, some people will agree with the move, others will not.

The Mansion tax will hit many homeowners in London and the South East.

Simplistically, Labour has been here before employing c 0.5m more people in local and central government services than under the coalition.  Simply ‘inventing’ jobs or employment schemes for the longer term unemployed, young or old is not a solution.  If the money is invested, it should be vested in schemes that develop private sector businesses only.

Businesses that are forward thinking and looking to develop new markets, new products and services to grow the British economy rather than simply recycling money.  By this, we mean collecting tax, paying it out in “wages” and that money simply recycles in the UK economy not actually growing Britain’s international exports i.e. real, long term, sustained growth.