A Labour government would aim to raise £2.6bn by the end of the next parliament by “closing the non-dom tax loophole”, according to shadow chancellor Rachel Reeves.
Speaking on Radio 4’s Today programme Reeves said a Labour government would raise just over £1bn in its first year in power by strengthening rules the current government plans to bring in concerning non-doms.
In his Spring Budget, Jeremy Hunt said the government would abolish the non-dom tax status.
Hunt said from April 2025, new arrivals into the UK will not be required to pay any tax on foreign income and gains in the first four years of their UK residency.
After four years, those who continue to live in the UK will pay the same tax as other UK residents.
However, Reeves claimed under the plans, non-doms would still get a 50 per cent discount on foreign income they bring to Britain in the first year.
Additionally, she pointed out the government’s new rules mean non-doms will still be able to avoid paying inheritance tax in Britain if they make the country their home, which she described as “wrong”.
Consequently, Reeves announced a “crackdown” on non-doms to make sure that “every single penny of that money will go into our NHS and into our schools”.
“Today is about asking the wealthiest in our country to pay their fair share of tax to fund our public services,” she added.
Tax dodgers
In addition, the Labour party also announced it would raise funds by “taking on the tax dodgers”, predicting this would raise £5.1bn a year by the end of the next parliament.
Reeves pointed out the gap between the amount of tax owed and what the government collects was £36bn in the financial year ending April 2022, while the number of civil investigations opened by HM Revenue and Customs' fraud unit had fallen by more than half in just five years.
The shadow chancellor said, by clamping down on this gap, a Labour government would be able to raise a net £0.7bn for the financial year ending 2026.
To evidence this, she said even the head of the National Audit Office has recently stated that there is £6bn a year that could be recovered through a concerted effort on tax avoidance.
As a result, Reeves pledged to “take on the tax dodgers” with the rationale “if you make your home and do your business in Britain, then you should pay your taxes here too”.
HMRC
To achieve the crackdown, Reeves stated that up to £555mn of additional funding would be designated for HMRC each year to boost income tax.
This will be done by bolstering the number of compliance officers working out of the tax office by up to 5,000 to increase the number of investigations, tackle fraud, and ensure tax owed is collected.
Additionally, the money will be used to invest in digitisation of the tax office to improve compliance rates and customer services.
