Speculated changes – Autumn Budget 30th October

The Chancellor has indicated that the government will raise taxes in October’s Budget, citing a £22bn ‘hole’ in public finances as the reason. When asked about potential tax increases in the Budget, Rachel Reeves replied: “I think that we will have to increase taxes”. She reaffirmed Labour’s manifesto promise not to increase income tax, National Insurance or VAT but did not exclude the possibility of changes to inheritance tax, capital gains tax or pension taxes. We have briefly looked at each of the taxes, which may change below:-

Capital Gains Tax
Having ruled out increases to some other taxes, Capital Gains Tax (CGT) might appear like an obvious place for the Government to make changes and generate more tax revenue. The most radical option is equalising CGT rates with Income Tax – which would represent a huge tax increase for clients’ disposing of Capital Assets.

Inheritance Tax
Inheritance tax is paid by a small proportion of the population, the Chancellor could set her sights on raising money through IHT. At 40% it’s already one of the highest tax rates, so it’s unlikely we’d see a headline rate increase. However, there is speculation that more Revenue could be brought in by cutting allowances or whittling away certain reliefs to increase the amount some estates pay.

A couple leaving their main residence to their children could potentially shelter a £1m estate from inheritance tax, thanks to both the nil-rate band and the residence-nil-rate band – but either of these could be cut. Another option is looking at reliefs given to businesses or to the gifting of assets.

Pension Taxes
Rachel Reeves is expected to consider a proposal for a flat 30% rate of pension tax relief. This change would mean that higher rate payers would face a 10% tax charge on their retirement contributions for the first time.

Going Forward
If you are considering making family gifts, such as, disposing /gifting of any capital assets or making pension contributions, we suggest that you speak with your contact at JRW Hogg & Thorburn. It is possibly worth considering bringing the above planning opportunities forward, prior to Autumn budget of 30 October 2024.

Please do not hesitate to speak with your usual contact at JRW Hogg & Thorburn for further information.

From JRW Hogg & Thorburn Partner, Kenneth Adamson