BUDGET
Chancellor Rachel Reeves has announced that this year’s Autumn Statement will take place on Wednesday, October 30, we will be waiting with baited breath for the announcement as we anticipate a major shake up to our current taxes. The Prime Minister has warned of a “painful” Autumn Budget laying the groundwork for tax hikes.
As the Chancellor updates Parliament about the government’s tax and spending plans for the year ahead, we will learn what’s going to happen to things like fuel duty, income tax, and even the cost of a pint.
Starmer has already stated that the country needs to accept “short-term pain for long-term good” but committed to previous promises not to hike National Insurance, income tax and VAT, as well as protecting the State Pension triple lock,
The Autumn Statement is still some time away, but we have highlighted some predicted changes to watch out for. The following taxes are expected to be hot topics on Budget day.
Capital Gains Tax
It is highly likely that Labour will raise the capital gains tax levy paid on profits from selling assets, such as second properties or shares outside ISAs.
Critics point out that the current rates are significantly lower than those of income tax and tend to favour the wealthier individuals. The starting rate for Capital Gains Tax is 10% (or 18% for residential property) on profits exceeding £3,000. For higher earners, the rate stands at 20% (or 24% for residential property). There is speculation that Capital Gains Tax might be aligned more closely with income tax rates, potentially raising the top rate from 20% to as much as 45%.
Inheritance Tax
One of the biggest potential changes not yet ruled out by ministers would be to Inheritance Tax. The 40% tax is currently applicable only to estates valued over £325,000.
This threshold increases to £500,000 if a home is passed on to a child or grandchild, allowing couples to leave up to £1 million worth of property without incurring tax. No tax is paid if the estate is valued below £325,000, or if anything above this is left to a spouse, civil partner or charity.
Ms Reeves may increase the 40% rate of inheritance tax, or she could aim to limit some of the relief on certain inherited assets such as agricultural land and pension savings.
Higher savings taxes
Currently, there are no restrictions on the amount savers can deposit into their tax-free Individual Savings Accounts (ISA) over their lifetime, beyond the annual limit of £20,000. Reeves may introduce a lifetime cap of £100,000 on deposits which could generate £1billion annually.
Business rates
With the High Street declining, Labour has pledged to reform the current system, promising to “level the playing field between high street and online retailers”. Earlier this month, Sainsbury’s chief executive Simon Roberts criticised the business rates tax system, declaring it is “no longer fit for purpose”. He cautioned that the proposed increases could lead to thousands of high street closures and job losses. The chief of the UK’s second-largest supermarket chain also backed calls for a 20% reduction in business rates for retail companies.
Labour has vowed to revamp the current business rates system. The party claims that their proposed reforms will be balanced in budgetary terms, ensuring any tax decreases are counterbalanced by increases elsewhere.
NI, VAT and Income Tax
During his election campaign, Keir Starmer commited to retaining current levels of National Insurance, VAT, and Income Tax. However, whenever Mr Starmer talks about preserving these three taxes, his assurances are often coupled with cautionary notes about imminent “difficult decisions” or “tough choices”.
Private pension changes
In the midst of uproar following a cut to the winter fuel allowance, Shadow Chancellor Ms Reeves might also weigh up the benefit of changes affecting private pensions which could spark additional controversy.
Two-child benefit cap
To date, Labour has resisted reversing the controversial two-child benefit limit, introduced during Conservative austerity measures and widely criticised for exacerbating child poverty. The Prime Minister has defended his decision not to reverse the policy as a tough one, but the state of the nation’s finances simply doesn’t permit it.