Autumn Budget predictions
On Wednesday 30 October, Chancellor Rachel Reeves will announce the Labour government’s first Autumn Budget. There has already been speculation around what this will include, particularly since Reeves’ warning of a £22bn ‘black hole’ in the public finances.
While this is a known ploy of any new government Chancellor (George Osborne did the same in 2010), it has become clear that no spending review had been conducted for three years. As such, estimates that seemed generous when set in 2021 were not covering costs for public sector pay rises, supporting asylum seekers and more. So what is the Autumn Budget likely to hold?
Corporation Tax
Labour has stated that, as promised in its manifesto, there will be no rises in Income Tax, National Insurance, Corporation Tax or VAT. However, there have been suggestions that Capital Gains Tax rates may be aligned with those of Income Tax, meaning CGT will be charged at rates of 20% for standard rate taxpayers, 40% for higher rate taxpayers and 45% for additional rate taxpayers.
Another option for the government is to scrap the rule that allows asset values to be reset for CGT purposes upon death. As such, any assets sold during Probate could still be liable for CGT.
Inheritance Tax
Currently, Inheritance Tax (IHT) is charged at a rate of 40% on any part of an estate that exceeds the Nil Rate threshold of £325,000. This year’s Budget could introduce a cut in this threshold, making many more individuals liable for IHT.
Pension changes
Another avenue the government may explore is reducing higher rate tax relief on pension contributions. Instead, they may introduce a flat rate whatever the saver’s income. Some have speculated that they may reduce the current 25% lump sum that can be taken from a pension pot.
While the triple lock will remain on pensions, guaranteeing annual increases in line with either inflation, earnings or 2.5% (whichever is the highest), it’s possible that a freeze on tax thresholds until 2028 will result in higher tax bills for pensioners over time.
ISA allowances
Currently, there’s a £20,000 tax-free threshold on savings made into an ISA. It’s possible that the government will make cuts to this, or introduce a lifetime cap to discourage saving and encourage short-term spending.
Plans for a British ISA, designed to encourage investment in UK-listed companies, have also reportedly been scrapped.
VAT on private education
The government published documentation in July 2024 stating that VAT on private school fees will start to be charged from January 2025. Any pre-payments (made from 29 July 2024) for the spring term will also be subject to VAT. In addition, they plan to remove the charitable business rates relief for private schools in England.
Taxation of non-doms
Taxation of non-doms is set to change in April 2025, but Labour has added amendments to the existing policy. Previously, non-doms were to be granted a transitional tax reduction of 50% on foreign income and gains in year one. This will not now be introduced. Further announcements regarding the Transfer of Assets Abroad and Settlements legislation are also expected to be made in the Budget.
