The 2024 Autumn Budget is scheduled for 30 October, when Chancellor of the Exchequer Rachel Reeves will set out the new Government’s plans for tax and spending, accompanied by a full fiscal statement from the Office of Budget Responsibility (OBR).
In a speech earlier this month, Prime Minister Keir Starmer warned to expect a Budget that will be “painful” for many, emphasising that those with the “broadest shoulders” will be expected to bear the heaviest burden, after finding what the Government says is a £22 billion “black hole” in the public finances.
Limited opportunities for raising tax revenues
With a key manifesto pledge not to increase “taxes on working people” – including Income Tax, National Insurance Contributions (NICs) and VAT – as well as capping Corporation Tax at its current 25% rate, the potential to raise revenues from the most obvious sources is limited, forcing the Government to look elsewhere.
Income Tax and NIC thresholds will be frozen until 2028, increasing taxes through ‘fiscal drag’ as incomes rise through inflation and more taxpayers are brought into higher tax brackets – and this freeze could be extended further. A restriction on pension tax relief is possible, with either 20% or 30% mooted as a potential cap on the relief on contributions. The private education sector has already been targeted for increased taxation, with VAT due to be applied to private school fees from January 2025.
Further details of the plans to reform the special tax regime for non-domiciled individuals may be announced at the Budget, as the regime is due to take effect from April 2025.
Focus on wealth taxes?
Capital Gains Tax (CGT) has been widely trailed as likely to be targeted for increases, either increasing rates (potentially equalising them with Income Tax rates, though this seems unlikely) and/or restricting reliefs. This could, however, have limited impact, especially if investors choose to hold on to capital assets for longer rather than realising gains at a higher rate. There are also signs of currently planned transactions being accelerated to complete before any new rates take effect.
Given this potential depressive impact on transactions, there may be measures attempting to counteract this for business-focused transactions. These may include an increase in the lifetime limit for Business Asset Disposal Relief and the continued availability of relief for sales to Employee Ownership Trusts, albeit the latter potentially subject to a cap.
Inheritance Tax (IHT) and other wealth taxes could also see increases, albeit as these account for a relatively small proportion of total tax revenues, the impact of such measures is also likely to be limited.
Looking ahead
With few opportunities available for big revenue-raising measures, it seems likely that a series of smaller measures will be announced, which collectively could plug the revenue “black hole” that the Government is facing. As we approach the Budget, you may want to consider tax planning strategies for yourself and your business, and DSG’s tax team is well-equipped to help you to explore these – please don’t hesitate to reach out to your usual contact if you would like to arrange a discussion.
The DSG tax team will also be arranging a post-Budget breakfast event at which we will present our immediate reactions to the announcements. Please look out for an invitation from our mailing list, or alternatively please get in touch and we can send an invitation directly.
liverpool accounting firms
accountants liverpool city centre
accountancy liverpool