Andy Burnham is expected to become UK Prime Minister this month following Keir Starmer’s resignation and Burnham’s unopposed election as Labour party leader.
Whilst his first leadership speech focused primarily on economic renewal, devolution and public service reform, rather than tax announcements, it gave an early insight into the policies and priorities we may see under a Burnham-led Government.
Burnham re-iterated Labour’s commitment not to increase the headline rates of Income Tax, VAT or National Insurance. However, a commitment not to increase headline tax rates should not be mistaken for a commitment not to increase tax.
Burnham’s parliamentary voting record, public speeches and recent comments suggest that any future reforms are more likely to focus on how wealth, capital and property are taxed, rather than increasing taxes on earned income. Many of the comments below remain speculative, but they provide a useful indication of areas private clients and business owners may wish to monitor over the coming months.
Income Tax – Could Effective Rates Increase Without Changing the Headline Rate?
The commitment to maintain current headline rates of Income Tax & NI will undoubtedly reassure many taxpayers however; there remains considerable scope for a Burnham led government to increase the effective tax burden without altering headline rates.
Historically, Burnham has supported higher taxation for higher earners and has consistently voted in favour of measures increasing the tax burden on those with the greatest ability to pay. This raises the possibility that future reforms could come through changes to allowances, thresholds or the taxation of investment income rather than changes to the basic, higher or additional rates themselves.
Increase Dividend Tax Rates
Dividend taxation is also likely to remain an area of interest. Although there has been no indication that dividend tax rates would increase, Burnham has previously argued that the UK tax system relies too heavily on taxing earned income while giving more favourable treatment to wealth and investment returns.
Any future efforts to rebalance the tax system could therefore include changes to the taxation of dividends or other forms of investment income.
Clients should continue to monitor developments closely, particularly in the run-up to any Budget or fiscal announcements. Where changes appear likely, it may be appropriate to review the mix of income sources to ensure they remain tax efficient and, where practical, consider accelerating dividend or other income payments if there is a risk that increases could be introduced with immediate effect.
Capital Gains Tax: One of the Most Likely Areas for Reform
If there is one area where Burnham’s historic position appears particularly consistent, it is Capital Gains Tax.
He has consistently supported measures that increase CGT and bring the taxation of investment gains closer to the taxation of earned income. This aligns closely with his wider view that the UK tax system places too much of the burden on employment income and comparatively less on wealth and investment returns.
For investors, entrepreneurs and business owners, this could prove significant.
Any future alignment of CGT rates with Income Tax would materially affect:
- Investment portfolios
- Property disposals
- Business sales
- Family succession planning
Those considering significant disposals over the medium term should keep their plans under review. The timing of any changes will be important; while some tax increases have taken effect immediately following fiscal announcements, others have been introduced with a period of advance notice. Where reforms appear likely, clients may wish to consider accelerating disposals where appropriate, while also reviewing the availability and timing of capital losses and existing Capital Gains Tax reliefs to ensure tax-efficient planning.
Tax Avoidance and HMRC Enforcement
Burnham has consistently supported stronger action against tax avoidance and tax evasion, backing proposals to tackle this. In the past he has supported greater international tax transparency, increased scrutiny following the Panama papers and tougher anti-avoidance legislation.
More recently he has been reported as saying he would help fund cuts to business rates for pubs and venues by raising taxes on tech giants, but he has also publicly said that this would be supported by raising £500 million from tackling tax evasion. Burnham has fallen short of putting together a detailed plan of how he intends to do this.
Under any Labour administration it seems reasonable to expect continued investment in compliance activity, enquiries and measures designed to reduce the UK’s tax gap.
For taxpayers, this reinforces the importance of ensuring tax affairs remain well documented, accurately reported and fully compliant.
Wealth Taxes and Inheritance Tax
Burnham has consistently supported stronger action against tax avoidance and tax evasion, backing proposals to tackle this. In the past he has supported greater international tax transparency, increased scrutiny following the Panama papers and tougher anti-avoidance legislation.
More recently he has been reported as saying he would help fund cuts to business rates for pubs and venues by raising taxes on tech giants, but he has also publicly said that this would be supported by raising £500 million from tackling tax evasion. Burnham has fallen short of putting together a detailed plan of
how he intends to do this.
Under any Labour administration it seems reasonable to expect continued investment in compliance activity, enquiries and measures designed to reduce the UK’s tax gap.
For taxpayers, this reinforces the importance of ensuring tax affairs remain well documented, accurately reported and fully compliant.
Changes for Farmers
Interestingly, Burnham has also expressed sympathy towards concerns raised by the farming community regarding recent changes affecting Agricultural Property Relief (APR) and Business Property Relief (BPR).
Whilst there is currently no commitment to reverse those reforms, it would not be surprising to see a future review seeking to preserve reliefs for genuine family businesses and working farms whilst tightening their use for inheritance tax planning.
For private clients, the more likely direction of travel appears to be targeted reform of existing taxes rather than the introduction of an entirely new wealth tax. Clients with significant investment portfolios, landed estates or family businesses should therefore continue to monitor developments.
Mansion Tax – Could Existing Plans Change?
One question is whether the proposed Mansion Tax, due to be introduced from April 2028, would survive under a Burnham-led government.
Burnham has previously been critical of mansion taxes, describing them as “the politics of envy” and arguing they risk portraying Labour as being “against anyone who succeeded and made money.” Although those comments date back to 2015 and his views may have evolved, they suggest he may be less committed to the current proposals than other figures within Labour.
His criticism has previously focused on the design and practicality of a Mansion Tax, rather than opposing wealth taxation more generally. As a result, while the future of the Mansion Tax itself may be uncertain, alternative measures targeting wealth remain a possibility.
Property Taxes – A Shift Away from SDLT?
Property taxation is another area which may see more significant reform under Burnham.
He has previously supported reducing Stamp Duty Land Tax (SDLT), expanding “rent-to-own” schemes and introducing a Land Value Tax (LVT). Unlike SDLT, which applies when property is bought, an LVT would be an annual charge based on the value of the land itself. Whether such a tax would replace SDLT or sit alongside existing property taxes remains unclear.
Burnham’s focus on improving access to home ownership may also mean the tax treatment of residential landlords remains under review. While there has been speculation about incentives for landlords to sell properties to tenants, there is currently little evidence that this forms part of a developed policy.
What Should Clients be Doing?
While much remains uncertain, Burnham’s voting record and public statements provide some indication of where future tax changes could emerge. The key areas to watch are Capital Gains Tax, dividend taxation, Inheritance Tax reliefs, property taxes and increased HMRC compliance activity.
If you would like to discuss how any of these potential changes could affect you, your family or your business, please speak to your usual Menzies contact. We can help you understand the implications, review your current position and identify any planning opportunities as the tax landscape develops. We will continue to monitor announcements and provide further updates as more detail becomes available.
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