Tax relief at risk under Labour's proposed £5.2billion HMRC 'crackdown'

Woman looking at laptop and HMRC letter

Experts are warning Labour could "get rid" of vital relief

Patrick O'Donnell

By Patrick O'Donnell

Published: 13/06/2024

- 15:04

Keir Starmer unveiled the Labour Party's plans for taxes and HMRC earlier today

Experts are warning that the Labour Party's proposed "crackdown" on tax avoidance could lead to the end of much-needed HM Revenue and Customs (HMRC) relief.

Earlier today, Sir Keir Starmer outlined the party's manifesto which includes plans to generate revenue by closing non-dom loopholes and targeting individuals not paying tax.

Based on Labour's manifesto projections, Labour is expecting to raise £5.2billion through closing non-dom tax loopholes and investing in clamping down on tax avoidance.

Furthermore, the Official Opposition is estimating that an additional £565millon will be made from closing the "carried interest loophole" in the private equity sector.

Other announcements included generating Government revenue from applying VAT and business rates to private schools, as well as increasing stamp duty rates on non-UK residents.

Notably, Starmer promised to not raise income tax and National Insurance on taxpayers.

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Keir Starmer

Sir Keir Starmer announced Labour's manifesto earlier today


Among the policies that will be paid for trough this tax "crackdown" on non-dom loopholes include 40,000 more operations, scans and appointments every week, doubling the number of NHS CT and MRI scanners and free breakfast clubs in every primary school.

Earlier this year, Labour claimed the Conservative-led Government's plan to ban non-dom status would leave a tax loophole worth £400million which will be taken advantage of.

During the Spring Budget, Chancellor Jeremy Hunt outlined plans to scrap the iteration of "non-dom" status which means non-domiciled, wealthy foreigners only have to pay tax on their UK earnings.

Despite Labour's commitment to tackling any loopholes, tax analysts are sounding the alarm that valuable tax relief could be on the chopping block in the next Parliament.

Jason Hollands, the managing director of Evelyn Partner, called into question what Labour's tax plans will mean for hard-working Britons down the line.

He explained: “Some of the figures bandied around by both parties on how much can be saved by closing the so-called ‘tax gap’ and cracking down on tax dodging have been labelled frankly unrealistic by several think-tanks and tax experts.

“In part this is about beefing up HMRC resources to investigate claims and crack down on evasion, but it looks like it could be accompanied by some sort of review into how tax reliefs are being used by savers, investors and households passing on wealth.

“Some quite legitimate tax reliefs tend to get portrayed as ‘loopholes’ when a Government is in need of money, and it’s not unthinkable that a crackdown segues into a sally against reliefs that seeks to get rid or water down many of them.

“Labour has already suggested in the recent past that it regards some of the reliefs available from inheritance tax are too generous, particularly business and agricultural reliefs, so although there is nothing in the manifesto we could see some movement in that direction in the next parliament.”

While taking questions from journalists, Starmer described his party's manifesto as being one based on "hope".


HMRC tax formTories claim Labour will raise tax bills significantlyGETTY

The Labour leader said: "This manifesto is a manifesto for change. A total rejection of the cynicism.”

According to Starmer, the policy pledges are “based on four years of hard work, hundreds of engagements”.

Starmer added: “I understand the cynicism… for many people the hope has been beaten out of them, but this is a manifesto for hope.”

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