Rishi Sunak has been able to save more than £300,000 on his tax bill in recent years because of a cut to the capital gains rate he voted for back in 2016.
The prime minister has raked in more than £4.7m over the past three years and paid £1m in tax, a summary statement published on Thursday revealed.
But his tax bill would have been £308,000 higher if the Tories hadn’t cut the top rate of capital gains tax from 28 per cent to 20 per cent under David Cameron.
At the time of the 2016 tax cut, Mr Sunak told parliament he was confident it would be welcomed by wealthy investors – saying the move had “generated a fresh wave of enthusiasm for investing in British companies”.
Mr Sunak’s huge earnings are “a positive” because wealthy people pay a lot of tax, according to Conservative chairman Greg Hands, saying “we want to have, in this country, wealthy people paying a lot of tax”.
The PM raked in more than £1.9m last year, including £1.6m from capital gains alone. Most of his mammoth income comes from a US-based investment fund outside of his salary at Westminster.
Mr Hands also told Sky News on Thursday that the PM “comes from a relatively modest background” and that his parents “saved up a lot of money” to send him to the private school Winchester.
Asked if Rishi Sunak’s tax return was offputting to voters, Tory peer Lord Hayward told Sky News: “Everybody knows he is a rich man. He married well. He has got a big income but he has disclosed it ... It doesn’t come as a surprise that he is a rich man.”
Mr Sunak – regarded as among the richest ever inhabitants of No 10 – first pledged to publish his tax returns during his unsuccessful campaign to become Tory leader last summer in an attempt to put transparency at the heart of his bid.
A statement from Mr Sunak’s accountants showed that his huge investment income relate to a single US-based investment fund. This is the investment listed as a “blind management arrangement”. He is subject to UK tax on the investment income and gains received from the American fund.
Tax expert Dan Neidle said Mr Sunak had done nothing wrong – but noted how little capital gains are taxed (20 per cent) compared with most people’s income tax (up to 47 per cent).
“Whether that is a fair result, whether the law should be like that is a very good question,” he told Sky News. “And weirdly Mr Sunak – who benefits from that low rate – is also the man who has the power to change it.”
Mr Neidle, founder of Tax Policy Associates, also said the blind trust that Mr Sunak declared on his tax return is “slightly fuzzy” in legal terms.
He added: “I believe it is an arrangement where, to avoid any conflict of interest, Mr Sunak’s assets are managed by someone – I don’t think we know who – and he doesn’t get to see exactly what they are … But I don’t think we have any details on it beyond that.”
Robert Palmer, head of Tax Justice UK, said: “Rishi Sunak’s [overall] tax rate last year was 22 per cent. That’s the same tax rate as a nurse. Time to tax the super-wealthy properly.”
Labour leader Sir Keir Starmer is set to publish his own tax returns on Thursday. He said: “The choices they [the Tories] have made on tax and the tax system are obvious. They always go after working people; just look at the last 12 months.”
Labour’s deputy leader Angela Rayner has said Mr Sunak’s tax summary shows he pays a “far lower tax rate than working people”.
But Labour’s shadow home secretary Yvette Cooper appeared to swerve questions on whether Labour would reform capital gains tax so it is equalised with income tax.
Pressed again on Ms Rayner’s apparent reference to capital gains tax, she said: “Rachel Reeves sets out our tax proposals … as I said, the point that Angela is making is a broader one, about the way in which the Conservatives have always ended up cutting the taxes.”
Mr Starmer also said told reporters that would give up the bespoke pension tax break he enjoyed as director of public prosecutions if he becomes PM.
He was accused of hypocrisy after promising to reverse chancellor Jeremy Hunt’s move to scrap the lifetime pension limit – benefiting the rich – and introduce a bespoke scheme for doctors.
Meanwhile, No 10 said that Mr Sunak would continue to release his tax returns. The PM’s spokesman said: “I believe we will continue to provide an update.” No 10 also said Mr Hunt would release his return once he had completed a full year in post.