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How much Labour's radical tax plans would cost you

Jeremy Corbyn and a pound coin (illustration)
Jeremy Corbyn's radical manifesto includes £83bn of tax rises for individuals and businesses

High earners will pay almost £10,000 more in tax each year under Jeremy Corbyn's plans to increase rates on income tax.

The Labour leader has launched his "radical" manifesto, setting out the party's plans which included £83bn of tax rises for individuals and businesses.

Of particular interest to the hard-working middle-classes will be the reduction of the thresholds for high-rate and higher-rate income tax.

Calculations carried out by accountants RSM for Telegraph Money reveal that the highest earners would pay £9,750 a year more under Labour's plans.

Also in Mr Corbyn's crosshairs are ordinary investors and second-home owners, who would face increases to dividend taxes and additional surcharges on council tax.

Here is Telegraph Money's round-up of what it all means for you.

Income tax

Under Labour's plans, the 45pc rate of tax would become payable at £80,000 rather than the current level of £150,000, and there would be a new 50pc rate for those earning more than £125,000.

In real terms, this means that someone earning £85,000 would pay £250 more in tax per year – roughly £21 a month. 

Someone earning £100,000 a year would pay £1,000 more each year. Someone earning £130,000, and so becoming liable to pay the new 50pc rate, would pay an additional £2,750 of tax (making their total income tax bill £47,250).

The highest earners making £250,000 a year would pay £9,750 more annually.

Inheritance tax

Those who harbour dreams of passing on their hard-earned wealth to their children will be concerned about Mr Corbyn's promise to roll back the Tory Government's "cuts" to inheritance tax (IHT).

While not strictly a tax cut, George Osborne's Treasury did introduce an additional allowance (rising to £175,000 per person in April) on family homes passed on to descendants.

This would be thrown out by a Labour government.

Currently, a married couple can make use of each other's property allowances and personal allowances of £350,000, meaning they can pass on a £1m estate tax-free. Including property, this sum is not at all uncommon for those living in the South East.

The same couple would be forced to pay £140,000 in tax under Labour's plans.

Investment taxes

Investors who rely on dividends for income, many of whom will be pensioners, would also be in Mr Corbyn's firing line.

Currently, each individual has a £2,000 dividend-tax allowance, after which dividends paid from stocks are taxed at rates of 7.5pc, 32.5pc and 38.1pc, depending on the taxpayer's marginal rate.

As well as slashing the tax-free allowance in half, Labour's plans would see investors pay tax on their dividends in line with their marginal rate – so basic-rate payers would pay 20pc, high-rate payers 40pc and so on.

Assuming a yield of 5pc, someone with £20,000 in stocks could expect to make £1,000 in dividends over the year.

Those who solely invest through Isas or self-invested personal pensions would be unaffected, unless the rules on those accounts were changed – something which Labour has not proposed.

Second-home owners

Second-home owners also have reason to be wary.

Labour wants to introduce an annual levy equivalent to 200pc of the current council tax bill. This would not apply to buy-to-lets.

In North Norfolk – the area outside of London with the highest concentration of holiday homes – a second-home property that sits in the middle council tax band would face an extra annual charge of £2,724, bringing their total council tax bill to £4,086.

Capital gains tax would also be brought in line with income tax and its exemption cut from £12,000 to £1,000 a year. This would cost both holiday-home owners and landlords when they come to sell.