Britain's middle class have been warned "nothing will be safe" as Labour looks to hike up capital gains and inheritance tax in the October Budget.
The Prime Minister said yesterday that the country must put up with "short-term pain' for long-term good", with higher tax payers told those with "the broadest shoulders should bear the heavier burden".
In a speech in the Downing Street rose garden, the Prime Minister warned “things are worse than we ever imagined” because of a £22billion “black hole” in the public finances.
He said: “There is a Budget coming in October, and it’s going to be painful. We have no other choice, given the situation that we’re in."
Following the speech wealth managers are reported to have received phone calls from panicked clients, with middle class savers thought to be ready to sell off shares and properties to avoid paying higher rates if capital gains tax is increased.
Although Labour has pledged not to raise income tax, national insurance or VAT, it is likely they will find other ways to make the £22billion savings.
The Prime Minister made a speech in the Downing Street rose garden
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Speaking on the inevitable bad news to come, Conservative Shadow Chief Secretary Laura Trott said: "Starmer's speech has made it clear. Ruinous tax rises, which he's always planned, are on the way.
"Pensions, investments, homes – nothing will be safe. And, when introduced, he will have broken his election promise to the British people."
Experts predict the Chancellor will hike capital gains tax to align it with income tax - with the higher rate of 20 per cent increased to 45 per cent.
Trott added: "Increasing tax is a political choice. One (Sir Keir) has chosen to make so he can afford inflation-busting payouts to his union paymasters."
Labour did not commit to freezing CGT, though Starmer has ruled out charging the levy on first homes. It only applies to second homes and buy-to-let properties.
Andy Butcher, of wealth manager Raymond James, said: “We’ve had lots of enquiries about how to minimise capital gains tax – and whether it’s worth realising gains now and paying capital gains tax ahead of the Budget.”
Stuart Adam, from the Institute for Fiscal Studies, added: “Labour has not said anything about CGT, but even speculation – anecdotally – is causing lots of people to sell assets at the moment, which is going to lead to a spike in receipts this year and a drop in receipts next year, even if there isn’t any reform.”
According to analysis by Quilter, an increase to capital gains tax rates under Labour could cost higher taxpayers an extra £900 in tax.
This assumes a £250,000 capital gain from a property sale and that capital gains tax rates are aligned with income tax rates, as some have called for.
Selling a second home incurs capital gains tax at 24 per cent (down slightly from 28 per cent in 2023-24) for those who are higher-rate taxpayers and 18 per cent if they pay the basic-rate of income tax.
The rate is 20 per cent and 10 per cent for other assets such as shares.
Starmer also claimed his Government has inherited a “societal black hole” made worse by recent rioting
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The suggestion to align income and capital gains rates was first made by the Office for Tax Simplification, a now-disbanded government agency.
Starmer also claimed his Government has inherited a “societal black hole” made worse by recent rioting, and said his decisions to release some prisoners early and means-test the pensioners’ winter fuel allowance are “tough actions” needed to fix the country’s foundations.
He said: “There is a Budget coming in October, and it’s going to be painful. We have no other choice, given the situation that we’re in. Those with the broadest shoulders should bear the heavier burden, and that’s why we’re cracking down on non-doms.
"But, just as when I responded to the riots, I’ll have to turn to the country and make big asks of you as well, to accept short-term pain for long-term good, the difficult trade-off for the genuine solution.
“And I know that, after all that you have been through, that is a really big ask and really difficult to hear. That is not the position we should be in. It’s not the position I want to be in, but we have to end the politics of the easy answer – that solves nothing.”