Rich Brits must pay more tax on cash they get from renting out homes, study says

27 June 2023 , 23:01

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The report made clear the tax system has "failed to respond to Britain’s four-decade wealth boom" (Image: Getty Images/iStockphoto)

Rich Brits should have to pay more tax on cash they get from renting out homes or self-employment to make the tax system a "level playing field", a study demands.

A major report calls for a move away from a "simplistic and pernicious cycle of promising tax cuts while delivering tax rises" and instead calls for reform of the tax system.

The Resolution Foundation think tank slammed the Government for "flip-flopping" and "wishing away" problems as it said it needs to figure out a "proper tax strategy" as the UK’s tax take is set to hit £1trillion by 2025-26.

The report said well-advised wealthy people needed to be prevented from using the tax system to reduce their bills as it said "failing to do this has put more pressure on wages".

Having identified the UK's "twin economic challenges" as being raising growth and reducing inequality, the think tank called for “equal treatment” of different income sources”.

Baroness Mone's £20m London home owned by offshore firms linked to tax avoidance

Rich Brits must pay more tax on cash they get from renting out homes, study says

The report slammed the Government for 'flip-flopping' and 'wishing away' problems (AP)

It said tax rates on self-employment and rental income needed to be increased to enable the rate of employer National Insurance Contributions to be cut by 1%.

It also said more equal tax treatment would mean increases in the rates of Capital Gains Tax.

The report made clear the tax system has "failed to respond to Britain’s four-decade wealth boom".

It said one obvious example of this was inheritance tax, which has very high rates for the few people that actually pay it, and "is too easily avoided by the super-wealthy and well-advised".

The review also said tax policy should focus on boosting productivity by reducing barriers to business investment and encouraging dynamism.

It called for a “pro-growth tax priority” which would make it cheaper and easier for firms to grow and move premises, and for people to move jobs and homes.

To do this, policy makers should reduce the transaction costs associated with these activities by cancelling the 2025 stamp duty rise, and halving stamp duty for main homes and non-residential properties, at a total cost of £5 billion, it said.

Adam Corlett, principal economist at the Resolution Foundation, said: “The UK’s taxes have jumped up overall and are more likely to rise further than fall in future, despite the political rhetoric around cuts.

“But this rising quantity of tax revenue has not been matched by a rising quality of tax policy. There is no strategy behind a complicated system that sees some business owners pay no tax on their profits, while some families face marginal tax rates of over 80 per cent.

“Britain’s tax system needs a complete overhaul so that it is focused on helping rather than hindering economic growth, reducing inequality and creating a level playing field. These are basic principles that most taxpayers would expect, but that our current system frequently fails to deliver.”