Labour’s war on wealth will drive investments overseas, Sunak’s accountant warns

Angela Rayner - Dominic Lipinski/Getty Images
Angela Rayner - Dominic Lipinski/Getty Images

Labour’s capital gains tax plans will spark a selloff of British assets, Rishi Sunak’s accountant has warned.

Business leaders have said that proposals to hike the tax would deter investment or drive it overseas.

Labour’s deputy leader Angela Rayner last week suggested that the party should raise taxes on investments.

Ms Rayner made the comments after Mr Sunak published a tax return which revealed he earned nearly £5 million in three years but paid an effective tax rate of just 22 per cent.

She wrote on Twitter: “Rishi Sunak’s much-delayed return reveals a Tory tax system where the PM pays a far lower tax rate than working people - who face the highest tax burden in 70 years.”

Capital gains duties are currently levied at 20 per cent on most assets, meaning it would have to be doubled to align it with the 40 per cent income tax rate.

But Jason Hollands, director at Evelyn Partners wealth management - which produced Mr Sunak’s tax return - warned that fears over the rate being hiked could result in a selloff of assets.

‘We should be supporting entrepreneurs’

“The bigger issue will be for business owners,” he said. “Obviously an environment with much higher capital gains tax would be very stifling to entrepreneurialism.

“Some of our clients who are business owners are thinking about whether they should exit their businesses and crystallise a sale earlier than they would have done otherwise because they are becoming concerned about the direction of tax in the UK.”

Lord Cruddas, the Tory donor and billionaire founder of the online trading company CMC Markets, said hiking capital gains tax would “discourage longer term entrepreneurs’ investments” and “cause the UK to be less competitive compared to other major financial centres”.

“We should be supporting entrepreneurs and business owners to invest and build businesses,” he said. “We should be looking to increase taper relief to encourage entrepreneurs to build businesses.”

On how he would respond to a hike, he said: “I will not make any changes to my current investment portfolio per se but it will deter me from selling some investments and re-investing funds into start-ups.”

He added that there was “no point if you are going to get taxed for taking money out and then reinvesting. It just adds another layer of costs.”

John Longworth, the co-founder and chairman of the Independent Business Network, said that business people were already making plans to limit their tax exposure in the event of a Labour government.

‘It’s completely bonkers’

Mr Longworth, a former director general of the British Chambers of Commerce, said: “The idea that Labour have that they can simply tax people and therefore they’ll get the money and all the rest of it, it’s completely bonkers.

“They must think that business people are stupid. As soon as they see that coming down the line, they’re going to do things to avoid it… it’s not just the day before Labour is elected, it’s starting to have an effect on the economy even now."

A major UK investor - who asked not to be named - meanwhile said: “Given the expected tax rate and cremation of the pound in a Labour government it makes sense to crystallise some profits and move money abroad.”

However, polling has found that the public is still more likely to associate the Conservatives with higher taxes.

According to a survey by Redfield & Wilton Strategies of 1,500 Britons, 43 per cent associate the Tories with raising taxes, compared to 22 per cent who associate the party with lowering them.

Only 23 per cent of Britons associated Labour with raising taxes, compared to 33 per cent who associated the party with lowering them.

Forty-three per cent of voters thought that the Government should lower taxes at the moment, compared to 30 per cent who thought it should maintain them and only 11 per cent who thought it should raise them.

A Labour spokesman said: “We have no plans to raise capital gains tax. Working people are facing the biggest fall in living standards on record yet the Government refuses to scrap non-dom status, put in place a proper windfall tax, or end tax breaks for private schools.”