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Tax warning: Labour to throw 'kitchen sink' at us and capital gains tax hike is only start

The phrase “kitchen-sinking” is common in political and business circles, I’m told. It happens where a new leader releases every possible piece of bad news at once, thereby justifying drastic measures.

And that’s what shadow chancellor Rachel Reeves, backed by Labour leader Keir Starmer, will do if Labour wins the election on July 4.

She’s going to throw the kitchen sink at us, tax-wise. That will involve hiking up to 12 taxes in a single devastating fiscal onslaught.

It’s not Prime Minister Rishi Sunak saying that. This report has been confirmed by Labour sources. There’s a huge battle raging within the party, as members of the shadow cabinet push Reeves into taking the gloves off and unleashing a one-woman tax barrage.

It will play out like this.

If Labour wins the election, as is likely, Reeves will spend a few hours rummaging through Treasury drawers, looking busy.

Then she’ll emerge, face white as a sheet, to tell us the Tories left the public accounts in an even worse state than she imagined and there’s no money left, to coin a phrase.

Then she will regretfully inform us that the only way to plug the gap is to hike every tax she can think of.

The hope is that once the kitchen sink has been thrown, Labour has five years before voters can vent their fury at the polls.

By which time they may have forgotten or died. It’s an age-old political tactic.

So what nasties are lurking in Reeves’ kitchen sink?

Hiking capital gains tax (CGT) is in there. The left has been pushing this for ages. Now they’ve got their chance.

Today, basic rate taxpayers pay CGT at 10 percent, or 18 percent if selling a second property. Higher earners pay 20 percent or 24 percent.

Reeves is likely to bring these into line with income tax bands, so basic rate taxpayers pay CGT at 20 percent, while the better off pay 40 or 45 percent.

Hiking CGT will bash the better off – especially landlords who are demonised on the left – and will play well with the party faithful.

Reeves might also scrap the £3,000 annual CGT exemption, for good measure. Anyone sitting on a capital gain might want to realise it while they can, although that won’t be easy with property, as sales take time.

What else will she do?

An inheritance tax raid looks inevitable to me. That’s another bash-the-rich tax. If it bashes middle-England, too, well that’s just collateral damage.

They’re probably all Faragists anyway.

Reeves has promised she won’t hike income tax or National Insurance, while Starmer was pressured into saying that he wouldn’t increase VAT.

Happily for Labour, they still have our pensions to aim at. I expect Reeves to charge inheritance tax on pensions, which are currently exempt.

She’ll almost certainly cut the pensions annual allowance, to reduce the amount we can contribute each year while claiming tax relief.

We already know Labour will restore the pensions lifetime allowance with its brutal 55 percent tax charge, as well as remove tax exemptions on private schools and tax non-doms on their worldwide wealth.

We also know that this won’t be anywhere near enough to fund Starmer’s spending plans, so we can expect more.

Stiffer stamp duty? Probably. Council tax hikes? Almost certainly.

Labour’s kitchen sink will presumably fly when Reeves delivers her Autumn Statement. That’s usually in November, although I’m not sure she’ll be able to wait that long. We might even get an emergency budget. Either way, get ready to duck.


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