The Chancellor has confirmed that the Autumn Budget will take place on 30 October 2024.
This will be the first budget of the recently elected Labour Government and for the new Chancellor and her team. Rachel Reeves has already made a statement to Parliament on 29 July where she cancelled or delayed various infrastructure projects, cancelled universal winter fuel payments for all pensioners and confirmed that the VAT exemption for private school fees would end on 1 January 2025.
The Chancellor was clear then, and since, that she will have to make tough decisions ahead, which will very likely mean increasing some forms of taxation.
So, without the benefit of a crystal ball, what could this mean?
The Chancellor has maintained her pre-election position that she would not increase VAT, National Insurance or Income Tax.
Having been elected on a promise to promote measures to stabilise and grow the economy, she will be conscious of trying to balance raising tax revenues but also minimising measures that may see entrepreneurs and business owners leave the UK, with the associated loss of their tax revenue.
There has been speculation of so-called “wealth-taxes” being considered, but these seem unlikely for the same reason.
Most observers would agree that Capital Gains Tax (CGT) is likely to be one of the main candidates for change. CGT rates, reliefs and thresholds could all see change.
CGT rates are considerably lower than income tax rates for higher earners so an alignment or closing of the gap could be appealing to the Chancellor. This has led some taxpayers to trigger CGT liabilities now, before the Budget, when they expect rates to increase.
Others may delay action and choose to wait for a time when increased CGT rates come down again. A more drastic approach could be becoming non-resident in the UK to realise gains. Some will be weighing up such action and considering the effects of such disruption on their lives against the potential savings in tax.
Typically, capital gains are taxed at lower rates than income tax across Europe to attract and encourage investment. The appealing option of raising CGT revenue weighed against the potential negative impact on economic growth will be a feature of discussions at Number 11 Downing Street.
Inheritance tax is also likely to feature prominently in the Chancellor’s deliberations.
Historically, governments have considered inheritance tax as a politically sensitive area and resisted any more than tinkering. The Chancellor may opt to increase the tax take here by making changes to lifetime gifting allowances and reliefs on both agricultural property and business property.
Such changes could be seen as less blunt than a direct increase of the current 40% inheritance tax rate or the levels at which an estate comes into the scope of paying inheritance tax.
Some commentators have speculated also that the CGT uplift to date of death could also be scrapped leading to some estates paying both inheritance tax on death plus a significant CGT liability at the same time. At present, in simple terms, assets held by the deceased are uplifted to date of death value for CGT, so an estate is not hit by both taxes.
Other targets could include fuel duty increases and changes to pension tax reliefs.
Traditionally 31 October is meant to be the scariest day of the month but for some, Halloween may come in at second place this year.