Rachel Reeves, the shadow chancellor, is set to announce Labour’s plan to close an inheritance tax loophole for non-domiciled individuals and target tax avoiders to fund investments in schools and the NHS, as reported by The Telegraph.
This move aims to address a funding gap created when the Tories scrapped the non-dom tax regime. Labour’s measures include preventing current non-doms from transferring their assets into offshore trusts before the ban takes effect next April, as well as eliminating a 50% tax discount for non-doms in the first year of the ban.
The funds raised will be allocated towards improving healthcare services and providing free breakfasts for primary school children. Additionally, Labour plans to bolster HMRC’s efforts to collect owed taxes by hiring 5,000 compliance officers, investing in digitalisation, and leveraging artificial intelligence. The estimated revenue from closing the non-dom inheritance tax loophole is £430 million annually, while scrapping the tax discount would yield a one-off saving of £600 million.
Labour anticipates savings from the tax avoidance crackdown to start at £700 million per year and increase to £5 billion annually within five years. This initiative follows calls from Gareth Davies, the head of the National Audit Office, to address the tax gap between owed and paid taxes. Ms Reeves said:
“At a time when working people in Britain are being asked to pay more in tax because of the Conservatives’ economic failures, it is wrong that a minority continue to avoid paying what they owe. After 14 years in power, the Conservatives have failed to tackle this issue, and the tax gap remains unacceptably high.
With Labour, things will change. We will take on the tax-dodgers, because if you make your home and do your business in Britain then you should pay your taxes here too. The plan we are announcing will give HMRC the resource it needs to go after those who are avoiding or evading tax, and to modernise the tax office so we have a system that is fit for purpose.”
Laura Trott, the Chief Secretary to the Treasury, said:
“After a month of searching for a plan to pay for Labour’s unfunded spending, the shadow chancellor still cannot say how she will fill the enormous black hole in their promises. And that means one thing – more taxes. The Labour Party hasn’t changed. They remain committed to unfunded spending, including their £28 billion a year decarbonisation promise, meaning they will have to raise taxes on working families – taking us back to square one.
The Conservatives have introduced over 200 measures to clamp down on tax non-compliance and we are sticking to the plan to strengthen the economy so we can cut taxes, putting £900 in the pockets of the average worker and helping families to build a brighter future.”
