You are here: Home - Investing - Experienced Investor -

Should savers and investors pay more tax?

0
Written by: Emma Lunn
09/09/2019
A think tank has published a report calling for a change to the way wealth is taxed.

The Institute of Public Policy Research Commission on Economic Justice (IPPR) says it’s unfair that those who work for their income are taxed more highly than those whose income is derived from wealth.

The IPPR report titled  suggests that capital gains should be taxed at the same rates as income from employment, and the separate reliefs applied to capital gains tax (CGT) should be abolished.

This would see tax rates on gains from share price rises hiked from 18 per cent to 45 per cent for higher rate taxpayers, and could mean investors pay another £120bn in tax over five years.

The IPPR says that lower tax rates for the wealthy than for ordinary earners are fundamentally unfair; they also distort economic behaviour and create opportunities for tax avoidance.

Its second proposal is a fundamental reform of the income tax system, taxing all sources of income (earnings, dividends and savings) together and equally under a single tax schedule, with a gradually rising marginal tax rate as income rises.

The report says the current system of tax band “dates from the pre-computer age and is no longer fit for purpose”. The think tank says it is time to follow other countries such as Germany which already use a similar approach.

The IPPR argues that, among other advantages, this new system would be significantly more transparent, would eliminate the “tax cliffs” endemic in the current system, and would have the potential to raise significant revenue in a progressive manner.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The IPPR wants the government to ramp up the tax on savers and investors – both on the gains they make and any income they receive.

“It underlines how tax allowances and rates can change overnight, and the importance of wrapping as much of your savings and investments in ISA wrappers as possible – to help protect your money from tax, regardless of any policy change.

“The think tank says its proposals are fairer than the current system. It underplays the fact that in reality, the vast majority of savers and investors pay tax on their income from work, they save and invest diligently for their future, and may pay a second round of tax on their investment income or gains.

“At the moment, these are just think tank proposals, so there’s no guarantee anything will happen on the back of them. Investors don’t need to panic just yet.”

 

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

  • RT @DomWrong: UK avoiding a recession but it will be harder to grow if the rest of the global economy slows according to @ArtBLondon on @Yo
  • RT @HendersonRowe: “Brexit aside, the UK will struggle to expand if the rest of the global economy is slowing down. After a strong July and…
  • RT @HendersonRowe: “Brexit aside, the UK will struggle to expand if the rest of the global economy is slowing down. After a strong July and…

Read previous post:
Shocking fortnight for savers as top rates tumble

It’s been a bad fortnight for savers with a string of providers pulling market-leading deals.

Close