Rishi Sunak has saved more than £300,000 in tax thanks to a cut he voted for in 2016, according to an analysis of his tax records.
The prime minister has paid just over £1m in tax over the past three years, most of which was accrued on the gains he has made on his US-based investment portfolio. But that figure would have been £308,167 higher had the top rate of capital gains tax (CGT) not been cut by the Conservative government in 2016.
The figures highlight the disparities between Britain’s income tax rates and its relatively low rates of CGT. The prime minister’s overall tax rate for the last three years was 22%, roughly equivalent to what a nurse would pay in income tax.
Dan Neidle, the founder of Tax Policy Associates, said: “This is about whether it is fair for people holding investments to pay about half the rate of people getting income through their salary. It is hard to see how it can be.”
Britain’s CGT rates were aligned with income tax rates until 1998, when Gordon Brown slashed them as chancellor. His successor Alistair Darling put them back up 10 years later, however, introducing a top rate of 28%.
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In 2016, the Tory government cut that top rate back down to 20%, arguing it would encourage business investment. Sunak, then the new MP for Richmond, argued several times in the debate that followed that the cut was an important pro-business step – without saying whether he might benefit from it.
Sunak said in parliament in 2016: “I am confident that reducing capital gains tax rates – together with a brand new 10% rate for long-term investments in private businesses – will unlock millions in much-needed funding. From speaking with investors this past week, it is clear that those policies have cut through and generated a fresh wave of enthusiasm for investing in British companies.”
Sunak himself incurred the capital gains tax on investments made in the US, Downing Street has confirmed.
A No 10 source said: “The tax return shows that a considerable amount of capital gains tax is being paid.”
Sunak’s tax affairs came to prominence last summer, when it emerged his wife, Akshata Murty, had saved millions on her UK tax bill by claiming non-dom status while her husband was chancellor. Murty gave up her non-dom status last year.
The prime minister had promised for months to release his tax returns, eventually deciding to release a three-page summary of them on Wednesday, in the middle of the testimony by the former PM Boris Johnson to a parliamentary committee investigating Partygate.
The timing of the release triggered accusations that the prime minister was shying away from scrutiny. The fact that the vast majority of his earnings came in the form of capital gains has refocused attention on CGT policy.
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The Labour leader, Keir Starmer, said on Thursday: “I do think there’s a wider point about choices here. The choices they’ve made on tax and the tax system are obvious. They always go after working people; just look at the last 12 months.”
Starmer also announced he would give up the unique tax perk he received as director of public prosecutions if Labour won the next election.
Starmer was given a bespoke pension that would have meant he did not have to pay tax on contributions above the lifetime tax-free limit, under an arrangement that had also been made for DPPs before him. Labour has promised to restore the lifetime limit after it was scrapped at last week’s budget, but the Labour leader was accused of hypocrisy after his own pension arrangements were revealed.
On Thursday, Starmer confirmed he would give up the carve-out if he became prime minister. He said: “When we reverse that change the government put in place last week I will be included within that, whatever changes are needed within legislation or anything else.
“I’m very happy to be – and will be – in the same position as everybody else in this country.”
Tom McPhail, a pensions expert at financial consultancy the Lang Cat, estimated Starmer’s decision could end up costing him tens of thousands of pounds more in tax payments until his retirement.
