This is the FTSE 100 this morning, at an 11 month high:
Why is that? Three things.
Record low interest rates.
An expectation that rates will fall again, soon.
And the hope that there is more QE to come.
In other words some are gaining in the short-term because the government is having to deal with a looming economic crisis.
What is the solution? There are three.
The first is to increase the capital gains tax rate, which is now, quite ludicrously, as low as 10% for those who are basic rate taxpayers and only 20% on gains arising on shares for those who are higher rate income tax payers. I prefer alignment with income tax rates. If that is unacceptable the rate must be at least 75% of that due on equivalent income.
Second, short-term share-trading should be deemed to be just that i.e. trading, and therefore be subject to income tax in full.
Third, all income from unearned sources should be subject to an investment income surcharge. I suggest that this should be charged at the rate of at least 15% on all unearned income exceeding £2,000 in a year unless the person was retired when rather more finessing would be required.
Unearned income for these purposes would include dividends, interest, rents and equivalent sums.
If income was artificially converted into gains to try to avoid this surcharge then heavy penalty should be due.
This charge is needed because at present the UK tax system is extremely unjust. Those who work for a living do, because of the imposition of national insurance, pay much higher overall rates of tax than those who can live off unearned income. An investment income surcharge would help create a level playing field to correct this anomaly. And, because those paying it would, by definition, have savings it is very unlikely that the additional tax due would have any impact on the overall level of consumption in the UK economy, meaning there would be very few economic downsides at this time.
A wise Chancellor would be announcing these things now now to be introduced from a specific date, without waiting for the start of a new tax year, as would be possible.
But we do not have a wise Chancellor. We would not have a 10% capital gains tax rate if we did.
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Richard,
I suggest that there is a fourth reason for the rise in the FTSE 100 index; currency. The index is measured in GBP but a very large part of the assets and earnings of the 100 quoted entities are denominated in other currencies. The GBP has nosedived so measured in GBP terms the value of these assets and earnings has increased. The reality is that the index has not gone up but the ruler used to measure it has shrunk.
None of which undermines your conclusions which were, are and will be true regardless of what the FTSE index is.
Fair comment
That’s just great Richard.
Having been shafted by Equitable Life I decided to accumulate my retirement savings, being a risk averse cautious accountant, in cash savings with banks and building societies, not in BLT or the stock exchange.
Obviously in retrospect it was not a great move as interest rates have steadily worsened since 2008, now with the prospect of a further base rate reduction to virtually nothing, property has boomed.
So added to that you propose to charge investment income surcharge on my income, which in the absence of any meaningful pension annuities comes from interest on savings.
Like your wealth tax that excludes taxing the value of pension funds, this idea is flawed
It will not get my vote
I am surprised
And am unconcerned
In a period of less than a year you have gone from saying anthing more than £5,000 of ‘unearned’ income would be subject to the surcharge now its £2,000
So?
The scale of the issue has grown
On a slightly different tack, a Tobin tax would also seem to be well overdue. It ibeen considered.
Oops, hit the wrong key. Anyhow, as I was saying, it is being considered:
https://www.theguardian.com/business/economics-blog/2013/jun/10/reports-death-financial-transactions-tax-exaggerated
How about some criminal trials for those at the top of the crooked banks (instead of just the lackies who were rigging Libor etc).
So bankers are now “Too big to jail” – that is the best reason I’ve seen so far for breaking up all these bloated corporate and financial oligopolies.
Funny how this runs as a second rate article even in the Guardian today? Yet another establishment cover up helped along by a willing press, too keen to be distracted by Westminster tittle tattle while the real robber barons get away scot free.
https://www.theguardian.com/business/2016/jul/11/hsbc-us-money-laundering-george-osborne-report
Astonishing, isn’t it
But I can see why
If profits from share trading are taxed as income, would losses be available to set against other income?
HMRC are dead set against share buying and selling being considered a trade for this reason.
Also, of course, the courts have tested this on a number of occasions and always decided an individual buying and selling shares can’t be considered as trading.
Isn’t it amazing that HMG, HMRC and learned judges down the years have all got it wrong!
There is no reason why losses need not be ring fenced
I would do that
So if I make a profit on share trading you want it included in my total income for the year but if I make a loss you want it excluded from my income for the year? What a spiteful little man you are!
No reason not to ring fence losses? How about natural justice? You want it treated as a trade then it should be treated as other trades.
Can you offset your capital losses again your income?
No?
I am proposing the same tax rates on trading
Not the same taxes
You said
– “Second, short-term share-trading should be deemed to be just that i.e. trading, and therefore be subject to income tax in full.”
but now you say
“I am proposing the same tax rates on trading
Not the same taxes”
So in one thread you have gone from saying you want share trading taxed as income to now saying you want it taxed as capital gains but at income tax rates.
Not very consistent are you?
If you’re going to nit pick, no
But then I was writing a blog, not the notes to legislation
“Can you offset your capital losses again your income?
No?”
well, yes you can actually in certain circumstances. As a tax ‘expert’ you ought to know that.
More evidence that you have plenty of opinions on tax but very little knowledge.
Come on – not on share trading you can’t and that is what was being discussed so you know that so you’re making this up, to be very polite
And yes, I could give you chapter and verse on the rest, which I know really quite well