Mansion Tax Threshold Could Be Lowered
Alex Pugh, chartered financial planner and Partner at wealth manager Saltus, predicts that Andy Burnham could lower the proposed mansion tax threshold from £2 million to £1.5 million. This would significantly increase the number of homeowners facing an annual surcharge on top of council tax, particularly in areas where property prices have grown substantially. Pugh noted that a £1.5 million property does not necessarily indicate significant disposable wealth; many households are asset-rich but cash-flow constrained, especially retirees. An additional annual charge of several thousand pounds could force some to reconsider whether staying in their home remains viable. The impact would vary by region, with parts of London and the South East seeing family homes affected rather than luxury properties.
Land Value Tax Could Replace Stamp Duty
Pugh suggests a move from transaction-based taxes like Stamp Duty to an annual land value tax. While removing Stamp Duty may benefit homebuyers, a recurring levy based on property values could significantly increase annual costs for all homeowners. Those with high-value homes, second properties, and investment portfolios could see costs soar. Pugh highlighted the human cost: many have inherited family homes now worth significant amounts on paper but lack the income to support an annual tax bill. This could force asset-rich, cash-poor individuals to sell homes that have been in families for generations. Additionally, such a tax could weigh on house prices, particularly in historically strong areas, creating uncertainty for investors and families.
50p Income Tax Rate Could Return
Although Burnham has ruled out increases to main Income Tax rates, Pugh believes he remains open to asking high earners to contribute more. A 50p additional rate could return, affecting business owners, professionals, and senior executives. Pugh warned that successive changes to thresholds, allowances, and reliefs can meaningfully impact net income, even if headline rates appear unchanged. The direction of travel suggests a more challenging environment for top earners.
Capital Gains Tax Could Rise
Capital Gains Tax (CGT) has already seen significant changes through reduced allowances and speculation about alignment with Income Tax rates. Pugh expects further reductions in reliefs, tighter allowances, and a clearer push towards treating capital gains like income. This would increase the effective tax burden on investment gains, disincentivising domestic entrepreneurship and making the UK less attractive for global capital. For higher net worth individuals and business owners, CGT is a sensitive area directly affecting investment decisions and business exits.
Social Care Levy May Replace Inheritance Tax
Pugh predicts a new 'social care levy' could replace Inheritance Tax (IHT), charged on inherited assets. IHT planning is already facing changes, with pensions set to form part of estates from 2027. Replacing IHT with a different levy introduces uncertainty for families, with the practical impact depending on the new system's structure. Investors dislike uncertainty around wealth taxation, as it affects long-term financial planning. Pugh concluded that a Burnham premiership is more likely to shift the tax burden from earnings to assets, creating a more challenging tax environment for wealthy households with significant property, investments, businesses, and inherited wealth. However, he stressed that these are speculative, as Burnham is not yet PM and radical policies are unlikely to be implemented immediately.
