Rachel Reeves plots huge inheritance tax U-turn as thousands flee UK | Personal Finance | Finance

Her decision to scrap the winter fuel allowance for 10million pensioners was meant to show strength and discipline. Instead, it showed she’s weak, muddled and wrong.

Now, in a messy compromise, pensioners will get the full payment, but the better off will see it clawed back through fiddly tax code changes.

And she won’t save any money either, because her original announcement triggered a surge Pension Credit claims.

Now she’s going through the same embarassing process all over again.

Report suggests that she’s about to U-turn on her plans to slap extra taxes on so-called non-doms, wealthy foreign residents living in the UK.

It’s a process the Tories started, but Reeves took a step further, by slapping inheritance tax (IHT) on their worldwide wealth.

I warned at the time – along with a host of financial advisers – that this would backfire by driving wealth makers away.

Reeves pressed on anyway, supported by class war fighting Labour activists, who love nothing more than to bash the rich, whatever the cost.

Who needs the rich anyway? Turns out we do.

Reeves claimed few would leave. Maybe as few as 0.4%. Wrong.

A report by Land of Opportunity found 10% of non-doms have already cleared off, with many more packing their bags.

The Centre for Economics and Business Research calculates that if 25% go, Reeves won’t raise a penny. More, and HMRC will lose more tax than it gains.

Now the Treasury is in a panic, and Reeves is doing another humiliating reverse ferret.

Wealthy non-doms pay tax in the UK on everything they earn and spend here, just like anyone else. What they don’t pay is tax on overseas wealth, unless they bring it into the UK.

In return, they pay an annual fee of £30,000, rising to £60,000 in some cases.

These aren’t just the idle rich. Many are investors, entrepreneurs and business owners. If they leave, jobs, spending, income tax, national insurance, capital gains tax and VAT receipts disappear with them.

Reeves may even lose the inheritance tax they would have paid on their UK assets. Madness!

And ordinary people will have to plug the gap.

Now reports suggest Reeves is preparing to row back again. This is going to be a familiar sight as her naive tax strategy disintegrates.

Slapping IHT on non-doms was projected to raise £200million. It could end up costing HMRC billions.

We’re getting used to this kind of economic illiteracy from Labour – Angela Rayner is an expert at it.

Reeves is in desperate talks with the City to see how she can get out of the mess she’s made.

She may drop the inheritance tax element altogether, to stem the exodus. It’s too late of course. Many have already have gone, never to return.

Others who thought about moving here may have had second thoughts, given the messages Labour has been sending out.

Sadly, Reeves is still pressing ahead with inheritance tax raids on our pensions, farms and family firms, despite the damage it’s doing. That’s because her targets are UK residents. They can’t flee so easily.

Te only way to escape this nonsense is to leave the country. More and more Britons may be tempted to do just that.