A new tax blow for the middle classes: We reveal how wealth levies will rake in extra £50bn as Rishi tries to plug the Covid black hole

  • Rishi Sunak lies to claim that he will make tax cuts even though the tax burden has risen 
  • He will be able to raise a lot of capital gains tax and inheritance taxes.
  • Covid Black Hole in Country’s Finances: Chancellor tries to Plug it 
  • Sunak is also being criticized for not doing enough to assist the poorest households 

The Chancellor of the Exchequer will rake in an extra £50.5billion from wealth taxes – hitting tens of thousands of middle-class families. 

Rishi Sunak is a “fiscal illusionist” for making claims about tax cuts, when in fact the tax burden has risen. 

But now, an investigation by The Mail on Sunday can reveal the amount he raises from Capital Gains Tax and Inheritance Tax will soar over the next five years – delivering the extra windfall into the hands of the Treasury. 

'Fiscal illusionist': Rishi Sunak is attempting to plug the Covid black hole in the country's finances

Rishi Sunak, a fiscal illusionist, is trying to fill the Covid hole in India’s finances

Covid’s financial black hole is being addressed by the Chancellor. However, critics claim he fails to account for the increased cost of living due to tax increases that will lead most families to have significantly greater expenses. 

Sunak was also criticized for not doing enough to assist the most vulnerable households, who are facing soaring prices and huge increases in their energy bills. 

The Treasury will raise £125billion from Capital Gains Tax and Inheritance Tax over the next five years, according to the Office for Budget Responsibility – £50.5billion more than the amount before the start of the pandemic. 

Critics claim that the current way levies are calculated are outdated. They point out that the thresholds have remained static instead of rising in line with inflation, meaning more families are being caught out. The government has frozen thresholds of Inheritance tax until 2026 due to an increase in house prices. 

Shaun Moore (a wealth manager at Quilter) said that Inheritance is now a tax and financial plan expert. This tax was initially viewed as an exclusion for those extremely wealthy. 

He said the average UK house price is now just £51,000 below the Inheritance Tax threshold. 

The extra Capital Gains Tax poured into Treasury coffers is forecast to hit £39billion in total over the next five years, compared with sums paid before the pandemic. This levy applies to profits earned on certain assets, such as shares and holiday homes. 

The additional Inheritance Tax over the next five years is forecast to be £11.5billion, compared with the pre-pandemic levels. 

Quilter’s data shows the biggest Inheritance Tax bills are incurred in London, the South East and West of England, where residential properties are typically more expensive. Mark Littlewood is the director general of The Institute of Economic Affairs. He stated that these taxes are among the most disliked by the prudent middle class Britons. 

He called for the simplification of tax rules that have enabled super-rich people to avoid paying some taxes. He said, “This is part of having a complex tax code that’s 13 times longer than War And Peace.” 

The Resolution Foundation last week said the average family faces a £1,100 hit in real incomes in 2022-23, rising to £3,200 for better-off working households. 

Paul Johnson, Director of the Institute for Fiscal Studies, called the Chancellor a “fiscal illusionist”. 

Under the current rules, estates up to £325,000 can be passed on without paying Inheritance Tax, or £500,000 if you are passing on your home to children or grandchildren. Over that threshold there is a 40% levy. For married couples the threshold is £650,000, or £1million if it includes the home. 

Taxpayers at higher rates pay 28 percent on capital gains for residential property, and 20 percent on assets. Basic rate taxpayers pay 18% and 10%, respectively.

Stealth tax was a mistake that we made last time

According to the Office for Budget Responsibility, millions of Britons are likely to be made pay higher income taxes after the Government’s repressive freeze on thresholds. 

A report by the Centre for Economics and Business Research commissioned by The Mail on Sunday last month predicted a surge in the number of workers who will be forced to pay extra income tax over the next five years – bringing in £40billion for the Treasury. 

A four-year freeze on thresholds begins next month and rising wages will draw more workers into the net. By 2026, 1.5 million more earners will be required to pay the basic income tax rate. A million more people will be required to pay higher rates of income tax.

Tax take would be boosted by higher earnings, larger bonuses and lower thresholds.