The upcoming Autumn Budget on October 30th 2024, is likely to be closely watched by individuals, businesses, and financial experts. Given the current economic climate and the need to address public finances, there’s anticipation that the UK Government will introduce significant changes to capital taxes. Its expected that these changes will take place from the 6th April 2025, though some may be implemented immediately.

The Prime Minister, Sir Keir Starmer, stated on 26th August that the October Budget will be “painful” and the government will have to make “big asks” of the public, with them having to “accept short-term pain for long-term good”.

Let’s explore what we might expect to be announced by the new Chancellor, Rachel Reeves:

1. Capital Gains Tax (CGT):

• Potential Increase: CGT is a likely target for change. Experts predict that the rate of CGT could be aligned with higher rates of income tax. If this happens, selling investments, properties, or businesses may become more costly.
• Reliefs Under Scrutiny: Reliefs such as Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) might also be reduced or eliminated. Business owners planning to sell their businesses should be prepared for potential changes.

2. Inheritance Tax (IHT):

• Tightening of Reliefs: Changes to IHT could involve tightening the reliefs available for business and agricultural assets. Passing on wealth without incurring significant tax liabilities may become more challenging.
• Complex Considerations: IHT reforms are inherently complex, especially given the emotional and practical aspects of giving assets away. Individuals with significant assets should stay informed and speak with an Independent Financial Advisor.
• Range of options: The chancellor may look to reintroduce the Lifetime Allowance on total pension savings, impose annual maximums on NIC exemption from employer pension contributions or removing the exemptions on pension funds upon death.

3. VAT Exemptions:

• VAT Increases: The Chancellor has previously ruled out increases to the VAT rate. The expectation is that the standard rate will remain at 20%.
• Review of Exemptions: The Chancellor may review VAT exemptions. Businesses relying on specific exemptions should stay informed about any adjustments.

4. Income Tax:

• Income Tax Increases: The Chancellor has previously ruled out increases to the Income tax rate. The expectation is that the rates will remain unchanged, though a longer fiscal drag may be introduced, extending the current thresholds beyond 2028.
• Income Tax Allowances: The Chancellor has previously ruled out increases to the Income tax allowances. The expectation is that the allowances will remain unchanged, resulting in a real-world increase in tax in line with inflation (fiscal drag).
• High Income Child Benefit Charge: Though no plans have been tabled, further alignment of the High Income Child Benefit Charge may be introduced as well as tapered reliefs for two parents, as previously announced by the Conservative government.  
• Landlord tax rises: It has been suggested that the Chancellor may be looking to charge landlords National Insurance on their rental profits, currently only subject to income tax.
• Dividend Allowances reduced further: The tax-free threshold for dividends was reduced from £2,000 to £1,000 in April 2023, falling further to £500 in April 2024. The chancellor may reduce this further to £250 or scrap it all together.  

5. Business Taxation:

• Making Tax Digital for Corporation Tax: It is expected that the timeline for implementation will be confirmed, with the current timeline of 2026 expected to be extended in line with the multiple delays to Making Tax Digital for Income Tax.
• Corporation Tax rate freeze: The chancellor has previous pledged to freeze the Corporation Tax rate in line with the Conservative government’s plans, which will need to be confirmed in the budget.
• Replacement of Business Tax Rates: The Labour Manifesto promised to replace business rates though it was unclear when that would be completed.
• Windfall Tax and tax on banks bonuses: There is an expectation that the Chancellor will increase the windfall tax on oil and gas companies, alongside introducing tax surcharges on bankers bonuses above a certain level.

6. SME Investment:

• British Business Bank (BBB) reforms: The Chancellor is expected to reform the British Business Bank with the aim of increasing the funding opportunities available to SMEs.

7. Employment and the National Minimum Wage (NMW):

• A genuine living wage: The labour manifesto pledged to increate the National Minimum Wage to make it “a genuine living wage” by including cost of living considerations under the control of the Low Pay Commission (LPC).
• Workers Rights: Proposals to rebalance “one-sided flexibility” include plans to ban “exploitative” zero hours contracts, give workers a right to reasonable notice of changes to shifts and working time with compensation for cancelled shifts, and a right to regular work based on a reference period.
• Employers NI Increase: The Chancellor may be considering an increase of 1% to employers NI bringing the rate to 14.8%

8. Non-Domiciled Individuals (Non-Doms):

• Tightening of Rules: Further details on tightening the non-doms scheme may be announced. Non-doms should be prepared for potential changes in their tax status.

9. Devolution:

• More power to local authorities, mayors and regional bodies: This may be linked with changes to the business rates and help to level the playing field for businesses across the UK.

10. Stamp Duty on Shares:

• Potential Increase: There’s speculation that stamp duty on share transactions (e.g., quoted share dealings in the City of London) could be raised. This would primarily impact investors and those involved in high-frequency trading or large-scale share transactions.

11. Pension Contributions Relief:

• Potential Reduction: Relief for pension contributions might be reduced as well as Employers contribution and NI payable on these. Individuals contributing to pensions should consider the impact on their retirement planning now, alongside businesses making contributions on their employers behalf.  

12. Eliminating late payment of invoices:

• Reporting of payment practices by large companies: Labour have previously pledged to force large companies to report their payment practices in annual reports, aiming to ‘name and shame’ those employing late payment tactics. This should hold them more accountable, with the aim of improving the cashflow of SME’s and businesses that rely on timely payments.

13. Property Taxes:

• Increases to the SDLT supplement charged to overseas nationals: To prevent the sale of new builds to overseas buyers, Labour pledged in its manifesto to increase the SDLT supplement charged to overseas nationals by 1%. Further ultra-high thresholds may be created.
• Council tax band changes and property revaluation: As a revaluation of properties has not been done since 1991, a revaluation exercise could be introduced, alongside tax band changes upon completion.

14. Housing development and delivery:

• Meeting manifesto pledges: After pledging to deliver 1.5 million homes in the next parliament, Labour has discussed recategorizing green belt land as “grey” allowing development outside current city boundaries, appointing new planning officers, removing limitations on local planning authorities and creating a Commission for Infrastructure with clear framework and authority.

15. VAT on private school fees:

• Introduction of VAT on private school fees: A key manifesto pledge, the introduction of VAT on private school fees has been confirmed on the 29th July, effective from the 1st January 2025. It is expected that this will apply to boarding fees, school trips, catering and transport associated with the provision of education. Measures have been taken to prevent parents paying in advance to avoid the extra tax burden, though additional measures may be required to combat schemes such as the Dividend Diversion Scheme (recently ruled by HMRC to be tax avoidance) and other trust planning schemes.
• Recruit 6,500 new teachers: Tax generated from private school fees, will be used to recruit 6,500 new teachers in key subjects to set children up for life, work and the future.  

16. R&D Reforms:

• Significant changes to the policy: Though details are not yet public, the chancellor has proposed significant changes that will look to evaluate the impact of the R&D scheme for particular sectors, likely resulting in specific rates focusing on research and development in areas such as Aerospace, AI, Automotive, Defence, Energy Production and Storage and Life Sciences.
• Tackling abuse of the R&D scheme: With monthly reports of HMRC investigations and rejections of R&D claims, further policies are expected to reduce abuse of the scheme and tackle fraud and abuse.

17. Fuel Duty and Benefit in Kind rate increases:

• Ban of sale of new combustion engine cars by 2030: The new government has recommitted to the planned ban of new combustion engine cars by 2030 and there is an expectation that the freeze on fuel duty will be scrapped, along with the reintroduction of fuel duty escalator to try and drive consumers into going electric, sooner.
• Benefit in kind increases: A sharp increase in the benefit in kind rates for combustion engine company cars is expected soon, to further push the wide scale adoption of electric vehicles. Further reductions to the benefit in kind rates on electric cars are not expected, though this may increase adoption.

18. Winter Fuel Payments reform:

• Return or reform of winter fuel payments for pensioners: The Chancellor scrapped winter fuel payments for all but those on Pension Credit or other means-tested benefits on the 29th July 2024. Following public outcry after this was not mentioned in the Labour Manifesto, there is a growing expectation that a reformed or reworked policy may feature in the budget.  

19. A new wealth tax:

• Introduction of a wealth tax: Though some countries already impose a tax on the ownership of net wealth (types of assets) it may be difficult to introduce as it can have a disproportionate impact on individuals who own valuable homes, but have a low income.

20. Families, energy, transport and housing:

• Expanded childcare: Alongside the £4bn package of free childcare to parents with children under 5 introduced by the previous Chancellor, Jeremy Hunt, further measures will be introduced to increase childcare places, and create additional free breakfast clubs in every primary school.
• Great British Energy: The Labour Manifesto included promises to set up a publicly owned clean power company to cut bills and boost energy security, paid for by planned windfall tax on oil and gas companies.
• Communities Bus Control: Communities are expected to regain control of their bus routes
• First time buyers support: More support will be provided to first time buyers allowing them to get on the housing ladder, including ‘first dibs’ to locals looking to buy, a ‘Freedom to Buy’ mortgage guarantee scheme and a push to make private rental properties greener to eliminate fuel poverty by 2030.

21. Industrial Strategy and Net Zero Targets:

• A formal industrial strategy for the UK: Labour have pledged to update the Industrial Strategy for the UK alongside the budget, to boost productivity by backing businesses to create good jobs and increase the earning power of people throughout the UK. This should give businesses added certainty in investments they make, and will detail strategies for net zero goals, training, funding and security.

22. Private Equity Carried Interest:

• Taxation Changes: The taxation of private equity carried interest could be addressed as the government has already announced its intention to reform. Private equity firms and investors should monitor developments.

23. Economic Impact:

• Balancing Revenue and Fairness: The Chancellor faces the delicate task of balancing revenue needs with fairness. While tax increases can help fill the public finance gap, they must be carefully implemented to avoid stifling economic growth.
• Wealth Distribution: Changes to capital taxes can influence wealth distribution. Striking the right balance ensures that the burden is shared equitably while encouraging investment and entrepreneurship.

24. Labour Government’s Approach:

• Fairness and Revenue: The new Chancellor of the Exchequer, Rachel Reeves, will announce her first Budget. Labour has pledged to make the tax system fairer, but the challenge lies in achieving this while addressing the fiscal deficit. Labour have also pledged to invest £555m in HMRC to raise an estimated £5bn a year in loopholes and avoidance measures.

25. Expert Insights:

• Tax Planning: Seek advice from tax experts to navigate potential changes. Protecting your wealth requires proactive planning.
• Stay Informed: As the Budget approaches, keep an eye on official announcements and expert analyses. The economic impact of tax changes extends beyond individual pockets—it affects investment decisions, business growth, and overall economic health.

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Remember, the Autumn Budget isn’t just about numbers; it shapes the financial landscape for individuals and businesses alike. Stay tuned for further details as the date approaches, and consider seeking professional advice to make informed decisions. 🍂💼📈

If you’d like more specific information or have additional questions, please get in touch and we can connect you with an Independent Financial Advisor (IFA) who can provide you with a personalised breakdown and advise. It is strongly recommended that you do this prior to the budget! 😊

Sources:

1. Preparing for Potential Capital Tax Increases in the Autumn Budget 2024

2. Autumn Budget Announced for 30 October 2024 | Taxoo

3. Tax hikes expected in 30 October Autumn Budget - AccountingWEB

4. Autumn Budget 2024 what to expect / predictions and analysis

5. The Labour Party manifesto