Rachel Reeves called for eight tax rises and two benefit changes in a memo to Rachel Reeves.
Angela Rayner arriving at Downing Street (Image: Getty)
Angela Rayner’s full memo to Rachel Reeves which was leaked earlier this week has been released in full. It provides all the details of what was being proposed by the Deputy Prime Minister behind closed doors.
The memo with a string of proposals was submitted in the middle of March before the Chancellor unveiled her spring statement on March 26. The Telegraph, who fobtained the documents, said there were 10 proposals were made in the text – including eight tax rises and two benefit changes.
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Angela Rayner sparks Labour civil war as she demands Rachel Reeves hikes pension tax
Ms Rayner suggested raise the bank surcharge to 5%. When corporation tax increased in April 2023, the previous Chancellor cut the banking surcharge paid by banks on profits from 8% to 3% as an offsetting measure.
A surcharge to 5% could still raise £500-700m a year and take the rate of tax paid by banks on their profits back to the 2008 levels of around 30%.
2. Remove inheritance tax relief for AIM shares
Sir Keir Starmer‘s second in command called for the removal of Inheritance Tax (IHT) Relief for AIM Shares completely.
Shares designated as ‘not listed’ (notably AIM shares) receive 50% relief (reduced from 100% relief at Autumn Budget).
Removing the relief completely for AIM shares could raise between £100million to 1 billion per year.
3. Remove dividend allowance
The memo also called for the removal of the dividend allowance. Tax is not paid on dividend income that falls within a person’s income tax Personal Allowance. There is also a £500 dividend allowance each year.
It was reduced from £2,000 to £500 over the past few years but removing it altogether would be worth £325 million a year.
4. Freeze income tax threshold
Ms Rayner also called for a freezing of the additional rate income tax threshold. The additional rate of income tax (45%) applies to income above £125,140.
The Chancellor announced that income tax thresholds will remain frozen until 2028 before being uprated.
5. Increase annual tax on dwellings
The memo made another point of an annual tax on enveloped dwellings.
It said: “The Annual Tax on Enveloped Dwellings could be increased. Our main arguments to increase this tax are that (i) we are leaving money on the table by setting it too low, potentially c.100-200m a year; and (ii) the people who pay it are nearly exclusively living in big homes in exclusive London postcodes (over 8 in 10 are in London and over 7 in 10 in Westminster or Kensington and Chelsea).”
6. Close stamp duty loophole
The sixth point was to close the commercial property stamp duty loophole. The memo suggested closing it could raise up to £1 billion a year from the commercial property market. It added that it was “an obvious loophole” that is “impossible to explain to the public”.
7. Bring back pensions lifetime allowance
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The list added moving higher and additional rate Dividend Taxes closer to Income Tax and reinstating a pensions lifetime allowance.
Forer Chancellor Jeremy Hunt in March 2023 announced the abolition of the pensions lifetime allowance.
The memo is believed to have said: “The lifetime allowance was a limit on the total value an individual’s private pensions could reach before high tax rates were applied. One option would simply be to reinstate the lifetime allowance at around its previous level of £1,073,100. Costing such a reform is difficult, but given that the OBR’s assessment was that abolishing the allowance cost £800 million a year, reversing it might be expected to raise almost as much. Another option would be new higher lifetime allowance, for example the last Labour government set the lifetime allowance at £1.8 million in April 2010, although that would raise less than the 800m.”
8. Reversing Child Benefit charge
Two other proposals put forward for potential consideration but would be more contentious and take longer to deliver included reversing the changes to the High Income Child Benefit charge and tightening migrant access to the welfare system.
Most Popular Comments
1st Most liked comment • 1 hour ago20
“leave her alone she is doing wonders for REFORM”
2nd Most liked comment • 30 minutes ago19
“Labour has just given away billions of your money to the Mauritian government for an …”
3rd Most liked comment • 1 hour ago15
“She would be more suited to be doing a Sticky Vicky tribute act at Ceasars Palace …”