Changes aimed at taxing wealth could still touch your finances even if your income comes from a salary rather than investments or property
Wealth taxes have become one of the most politically charged questions ahead of November’s Budget.
While the Government insists it will not raise income tax, national insurance, or VAT, ministers have been signalling for weeks that “those with the broadest shoulders” will have to contribute more.
That shift in emphasis has sparked speculation over changes to taxes on property, pensions, and investments — measures that are typically aimed at the rich but can have knock-on effects across the economy.
Adjustments to capital gains tax, national insurance on rental income, or council tax for higher-value homes could influence rents, savings, and local bills for ordinary households.
Labour’s challenge is to raise revenue without undermining confidence or fairness. Each of the options under review would fall hardest on wealthier individuals, but few would leave everyone else entirely untouched.
Raising the rate of capital gains tax
Capital gains tax (CGT) is charged when individuals sell assets such as shares or investment properties for more than they paid.
Labour has pledged to close loopholes and ensure those “with the broadest shoulders” contribute more, but it did not promise higher rates.
The Government has already closed the private-equity carried-interest loophole and is reviewing business asset reliefs and share-option schemes.
At the Budget, Reeves could narrow the gap between CGT and income tax, reduce the £6,000 annual exemption, or restrict certain reliefs.
How it could affect the wealthy: Investors selling shares or second homes could face substantially higher tax bills, reducing the net return on their assets.
How it could affect average earners: Some households with modest investments in shares or buy-to-let property could see smaller gains reduced by higher CGT, though this would likely affect only a small number of people.
National insurance on rental income
Currently, national insurance contributions (NICs) apply only to earnings from work, not to income from property, pensions, or savings. Landlords pay income tax on rental income after mortgage interest relief but are exempt from NICs.
The Treasury is reportedly considering extending NICs to rental income, as well as to profit distributions received by partners in law firms, consultancies, and other professional partnerships.
If introduced in line with existing NIC rules, landlords could pay 8 per cent on monthly rental income up to £4,189, and 2 per cent above that.
Tom Darling, director at the Renters’ Reform Coalition, told The i Paper earlier this year: “If the Chancellor is looking for additional revenue she could do a lot worse than equalising national insurance contributions on landlord’s income – working people pay this tax on income, and that’s before landlords get a huge slice of it through rent.”
Shaun Moore, tax and financial planning expert at Quilter, also said the move “would be another significant blow to the buy-to-let sector” and could accelerate landlords leaving the market.
How it could affect the wealthy:
Landlords and high-earning professional partners would face significant additional contributions, reducing net income and profitability.
How it could affect average earners:
Tenants could face higher rents as landlords pass on some of the NIC cost, particularly in areas with a high proportion of buy-to-let properties.
Higher council tax bands
Council tax in England and Wales is based on eight property bands, from A to H, originally set in 1991 and 2003. Because property values have shifted dramatically since then, many critics argue that the current system does not accurately reflect modern wealth.
The Institute for Fiscal Studies (IFS) has suggested several measures to make council tax less regressive, including doubling rates for bands G and H, introducing a national supplement, or replacing the system entirely with a new annual property tax based on current valuations.
Doubling council tax for the highest bands could add £3,800 to £4,560 per year, raising an estimated £4.4bn for local councils.
Thomas Lambert, financial planner at Quilter, told The i Paper earlier this week that “this would then give the Government the opportunity to redistribute the amount of money councils receive so that wealthier councils do not end up getting a disproportionate level of funding”.
The IFS also noted that removing the cap on annual council tax rises could affect all households, not just those in higher bands.
How it could affect the wealthy:
Owners of high-value homes could see bills rise by thousands of pounds, even if their personal incomes remain stagnant.
How it could affect average earners:
Households living in mid-to-upper band properties could see smaller increases if broader reforms or uncapped rises are applied, though the number of households affected would likely be limited.
Pension tax relief
Pension tax relief allows individuals to deduct contributions from taxable income at their marginal rate, giving higher-rate taxpayers more generous support than basic-rate earners.
The IFS has described this system as regressive, and some experts have suggested capping relief at a flat 20 per cent or applying it only to contributions above £2,000 per year.
Such measures could raise several billion pounds while keeping the incentive to save for retirement.
How it could affect the wealthy:
High earners would receive smaller tax benefits on pension contributions, limiting the advantage they currently enjoy.
How it could affect average earners:
Middle-income households contributing more than £2,000 annually could see slightly smaller tax relief, though the impact would probably be modest for most savers.
Inheritance tax
Inheritance tax (IHT) currently applies to estates above £325,000, with some reliefs for agricultural and business property.
Reeves has already targeted offshore trusts and the non-dom regime to ensure global assets are taxed.
Analysts suggest that tightening reliefs for agricultural or business property, or reducing the £325,000 threshold, could raise up to £6bn.
Past changes have prompted backlash from family-owned businesses and farms, but the Treasury has framed them as measures to ensure those with the largest estates pay their fair share.
How it could affect the wealthy:
Families with substantial assets could face higher IHT bills, reducing the inheritances they pass on.
How it could affect average earners:
Some families expecting inheritances just above the current thresholds could see smaller windfalls, though this would probably affect a relatively small number of households.
