Rachel Reeves is preparing to introduce a £2 billion tax increase targeting some of the wealthiest individuals in the country to generate additional revenue for public funds.
The Chancellor is anticipated to unveil a new fee for individuals utilizing limited liability partnerships in an effort to cover a £30 billion deficit left by the previous government.
These partnerships, commonly utilized by legal professionals, general practitioners, and accountants, provide tax advantages to over 190,000 individuals, exempting them from employers’ national insurance contributions due to their classification as self-employed partners.
According to reports from The Times, Reeves will argue that this arrangement is inequitable and will reveal the proposed change during the Budget announcement. The Centre for the Analysis of Taxation (CenTax) disclosed that solicitors receive a significant portion of partnership income, averaging £316,000 annually in company profits, while GPs and accountants earn averages of £118,000 and £246,000, respectively.
This adjustment forms part of a series of measures in the Budget aimed at targeting affluent individuals. The Chancellor has consistently emphasized the principle that those who are most affluent should contribute their fair share of taxes.
Reeves is also expected to introduce a “mansion tax,” which will impose capital gains tax on the sale of high-end properties. She highlighted the impact of Brexit and austerity on public finances, leading to the need for tax adjustments targeting the wealthiest individuals.
The Office for Budget Responsibility (OBR) is projected to revise down Britain’s growth forecasts next month, raising concerns that the Chancellor may need to renege on her promise not to increase income tax, VAT, or national insurance to achieve financial balance.
Ms. Reeves stated, “We recognize that austerity, cuts in capital spending, and the consequences of Brexit have had a more significant impact on our economy than previously estimated. We are actively working to mitigate these costs by rebuilding our relationships with the EU to alleviate unnecessary burdens on businesses since 2016.”
In response to the proposed tax changes, economist Stuart Adam from the Institute for Fiscal Studies commented on the potential impact, highlighting concerns about preferential treatment for partners and the need for a comprehensive review of taxation policies affecting self-employed individuals compared to traditional employees.