As many of you will know, ‘There may be trouble ahead’ is the opening line to a 1930s’ Irving Berlin song (Let’s Face The Music And Dance), made famous by, among others, jazz legend Nat King Cole.
There may be trouble ahead
But while there’s moonlight and music
And love and romance
Let’s face the music and dance.
It’s a line which sprang to mind when I learnt last Tuesday that pensions minister Torsten Bell will help the Chancellor prepare her autumn Budget – although with a wee change. ‘There WILL be trouble ahead.’
Indeed, massive trouble, double trouble for the wealth we have accumulated over our lifetime. Be it our home, pensions, savings, investments or other assets such as a buy-to-let property. It’s all about to come under attack.
Pensions minister Torsten Bell believes in reducing societal inequality by soaking the relatively well-off in a cascade of frightening taxes, writes Jeff Prestridge
Dear readers, I’m not having a rant. Bell has form. It’s time to shelter as much of your wealth as possible in tax-friendly vehicles so Mr Trouble can’t get his clutches on it. Time is of the essence.
Throughout his working life – be it as an economic adviser, head of think-tank the Resolution Foundation and now as a government minister – Bell has railed against wealth and how it is taxed.
He’s a well-off socialist (some would say a champagne socialist), who believes in reducing societal inequality by soaking the relatively well-off in a cascade of frightening taxes.
A stance that is more in line with the tax assault approach of ‘threeproperties’ Angela Rayner than the slightly more pragmatic (but incompetent) Rachel Reeves from Accounts.
With Bell now shaping the content of the Budget, I fear more of Berlin’s lyrics will ring true.
We are facing the music for doing the right thing and building a nest egg to see us through retirement.
Mr Bell will help Chancellor Rachel Reeves with her autumn Budget, as she searches for £50billion of extra revenue to shore up the nation’s finances
As for the dancing, we will have to wait until New Year’s Eve because we won’t feel like dancing post-Budget (more like crying into our pillows).
With the Chancellor seeking £50billion of extra revenue to shore up the nation’s finances Bell must be licking his lips in anticipation. It’s as if all his dreams have come true at once.
Bell has never been backward in coming forward when sharing his views on what politicians should do to make the UK a more forgiving place to live.
Rather than encouraging people to better themselves, he believes the less well-off (not pensioners, mind you) should be helped by a more friendly welfare system. For example, in April last year, he described the two-child cap on child-related benefits as damaging. Its abolition, he argued, would lift half a million children out of poverty. Don’t be surprised if this happens in the Budget.
The cost of this spending, Bell believes, should be funded by taxes on the better-off.
This pursuit of greater societal equality was fervent when he ruled the roost at the Resolution Foundation.
Time after time, he called for an inheritance tax (IHT) clampdown, a ‘fairer’ system of tax relief on contributions we make into our pensions, a squeezing of the amount of tax-free cash that we can take from our pension when we come to retire, and an Isa overhaul.
There’s more. He has demanded an end to the state pension triple lock, higher taxes on capital gains and share dividends – and National Insurance (NI) on rental income earned by landlords (a tax now under consideration, according to reports in recent days).
He also said that family homes should not be exempt from capital gains tax – a potentially explosive idea that, like NI on rental income, now seems under consideration. On Friday, I read the mound of reports on wealth taxes which Bell wrote while at the Resolution Foundation. An early 2019 report gives you an indication as to how he views wealth.
It was headed ‘How wealth taxes can raise billions more without scaring any horses’ – and written during the Conservative minority government led by Theresa May.
He argued for numerous changes – some of which have already been embraced by either Conservative governments or the current Labour administration.
On inheritance tax, he said that the nil-rate and residence nil-rate bands should be frozen at £325,000 and £175,000.
‘Stopping there,’ he wrote, ‘would be very sensible’. That is exactly what has happened with both nil-rate bands now frozen until April 2030 after Reeves extended the existing freeze by two years.
Bell also called for a tightening of the agricultural and business property reliefs which have enabled farmers and business owners to pass on assets without being clobbered by IHT. In 2019, he claimed the reliefs were ‘hugely abused’.
In last year’s Budget, Bell got his way when the Chancellor announced a capping of the reliefs, which kicks in from the start of the new tax year in April.
Another win for Bell was Reeves’s decision last year to include unused pension pots in the IHT net.
Back in 2019, Bell called for such a measure, describing their exclusion as a ‘totally unjustifiable’ risk to the government’s finances. He went on to say: ‘This has the ludicrous effect that people will perversely be encouraged to spend all other assets in retirement before touching their pensions.’
On the taxation of pensions, Bell has not had as much success, which suggests that an assault on pension tax breaks could well feature in the Budget.
Six years ago, he argued for three changes.
First, a draconian cut in the tax-free cash that can be taken from your pension. He called for a cap of £40,000 compared to the current rules which typically allow 25 per cent of a pension pot to be tax-free, subject to a cash cap of £268,275.
Secondly, he said a flat rate of tax relief on pension contributions should be introduced, replacing the current system where tax relief is based on whether you are a basic, higher rate or additional rate taxpayer.
Thirdly, he suggested employers should pay NI on payments they make into workers’ pensions.
While this latter idea is probably a no-go, given the devastating NI assault already launched on businesses by Labour, a horrible curb in tax-free pension cash looks increasingly likely by the day.
And if Bell helps out in future Budgets (or heaven forbid, delivers them as Chancellor), flat rate tax relief could well come into play.
Bell’s final thought in his 2019 missive was to take a pop at tax-friendly Isas, saying they exempt ‘huge amounts of better-off individuals’ savings income from tax’ – when they should be a means ‘to encourage lower-income families to save’.
We already know the annual Isa allowance for cash savers is likely to take a severe haircut at some stage. But with Bell now dictating Budget policy, I imagine details of the savaging will be announced on Budget Day with a reduced allowance (£4,000 if I was a betting man) kicking in from April 6.
Given Bell’s loathing of tax breaks for well-off savers, I wouldn’t be surprised if the tax-free personal savings allowance was limited to basic rate taxpayers. Currently, 40 per cent taxpayers get an allowance of £500, half that available to basic rate taxpayers.
Yes, dear readers, there’s trouble ahead. Big trouble. Get your finances in order. The ‘Bell’ tolls for our wealth.