Our tax system favours those who already own substantial assets over those who earn a living through work - Yorkshire Post Letters

From: Sarah Dennehy, Totnes.

Someone with £1bn in assets earning a modest 5 per cent annual return sees their wealth grow by £50m a year - £1m/week. If they don’t sell those assets, they pay no Capital Gains Tax (or any other tax) on those gains.

If they need cash, they can borrow against their assets instead of selling them, avoiding CGT. They can even borrow to buy more assets. Wealth can therefore compound for decades with little or no tax on gains.

On death, unrealised capital gains are generally wiped out for Capital Gains Tax purposes because beneficiaries inherit assets at their market value, although Inheritance Tax may still apply. This well-known tax planning strategy is often described as ‘buy, borrow, die’.

Meanwhile, people who earn their income from work pay Income Tax of 20 per cent, 40 per cent or 45 per cent, while Capital Gains Tax on sold assets is generally charged at only 18 per cent or 24 per cent.

Aligning CGT with Income Tax rates would be fairer, but would still leave the ‘buy, borrow, die’ loophole untouched. Our tax system favours those who already own substantial assets over those who earn a living through work. Closing this loophole, aligning CGT more closely with Income Tax, and introducing a modest wealth tax would create a fairer system and ensure the wealthiest contribute more to the infrastructure and public services which enable their wealth.

Gary Stevenson, Gabriel Zucman and many other economists have argued for years that our tax system favours wealth over work. Gary’s recent Channel 4 documentary has brought that debate into millions of homes. If Andy Burnham wants Labour to win the next election, he should pay attention and not repeat Keir Starmer’s rejection.

If this is not addressed living standards will continue to fall for ordinary people.