The Autumn Statement, the UK’s budget update, is just around the corner. Chancellor of the Exchequer Rachel Reeves is expected to deliver Labour’s vision for the economy, which may include a host of tax increases.
Thought to be on the table include increases in capital gains taxes, property taxes (stamp duty), inheritance taxes, and dividend taxes, and maybe a freeze on income taxes, thus pushing some into a higher bracket. Other tolls on economic activity may also make an appearance.
The chatter has the more affluent, nervous. The UK has already experienced a flight to more accommodating jurisdictions where taxes are less punitive, causing some to predict an acceleration of wealth exit. Once again, it seems the Laffer Curve is being proven accurate.
Perennial commentator Nigel Green, CEO of deVere, predicts there will be an exodus of assets out of Britain.
“Every indication points to a Budget built on a patchwork of tax hikes that raise the overall burden without altering some of the headline rates,” says deVere. “A freeze that runs for years becomes a tax rise in everything but name. People feel it the moment they drift into higher bands, lose allowances, or face limits that no longer reflect real-world prices. The UK is edging toward the point where the effective burden crosses the line of tolerance.”
Green states that this is how asset migration begins.
“When a government relies on a smorgasbord of hikes — freezes, narrowed reliefs, new NIC liabilities, pension tweaks and property adjustments — it becomes clear the objective is revenue extraction rather than growth. This is when capital flows elsewhere.”
While the Labour government aims to fill the “fiscal black hole” and anemic growth, aggressive tax policy may have the opposite effect, as those who can vote with their feet, the wealthy, may choose to do so.
The presentation of the Autumn Statement will undoubtedly focus on supporting those less fortunate, but it is ephemeral to believe that capital flight will boost the situation of those who cannot flee.