When is the Budget?
The next UK budget announcement is scheduled for 30 October 2024. As this date approaches, taxpayers are anticipating potential changes to tax policies that could affect their tax and financial planning and obligations. With the Labour government recently coming to power, there are widespread expectations of significant shifts, particularly in light of the Prime Minister Keir Starmer’s recent comments about the necessity for “painful” decisions to address a £22bn gap in public finances.
Income Tax
Labour’s manifesto pledged not to increase the Basic, Higher, or Additional rates of income tax during this parliament, and this commitment appears to remain firm. Consequently, individual taxpayers should not expect any immediate changes to their income tax rates. However, with the looming economic challenges, the government’s focus may shift towards other forms of taxation to balance the books.
National Insurance
Similarly, the government has promised not to increase National Insurance (NI) rates. This decision provides some stability for workers, as any increase in NI could have a broad impact on take-home pay, particularly for lower and middle-income earners. Nonetheless, the government’s need to address the deficit could see them exploring other avenues for raising revenue.
Capital Gains Tax
Capital Gains Tax (CGT) is one area where many anticipate change. Although Labour’s manifesto did not specifically mention altering CGT rates, recent statements from Chancellor Reeves suggest that an increase could be on the table. The government might look to align CGT rates more closely with income tax rates, a move that could significantly impact individuals selling assets such as property, shares, or businesses.
For those considering selling assets or making significant financial decisions, this potential increase in CGT rates could have substantial implications. Higher CGT rates would mean paying more tax on any gains made from the sale of investments or property, particularly for higher earners. It would be prudent for taxpayers to consult with financial advisors to explore their options and potentially accelerate planned asset sales before any changes take effect.
Inheritance Tax
Inheritance Tax (IHT) is another area that may be affected in the upcoming budget. Although no specific proposals have been outlined, the government’s commitment to ensuring that “those with the broadest shoulders bear the heavier burden” suggests that changes to IHT could be designed to target wealthier estates. This might include lowering the threshold for taxable estates or increasing the rates of taxation. Such changes would affect how much wealth can transferred tax-free to heirs and could have significant implications for estate planning.
Corporation Tax
Labour has committed to maintaining the Corporation Tax rate at 25% throughout their tenure in office. However, they have not ruled out potential increases in response to international tax developments. This stability could provide some relief to businesses concerned about rising taxes, but the situation could offer further insight into their plans for corporate taxation and business reliefs such as R&D tax credits and the patent box regime.
Other taxes
Aside from the major taxes, Labour’s plans include other tax changes that could have broader implications. For example, they intend to remove the non-domiciled tax status and limit the use of offshore trusts, though the details of how these would be taxed remain unclear. The introduction of VAT on independent school fees at 20% is another notable change, with varying opinions on its potential impact on both the education sector and families.
How can we help?
Navigating the upcoming changes in the tax landscape can be complex and challenging. As the government considers various options to address the financial shortfall, it is essential for taxpayers to stay informed and seek professional advice. If you are considering gifting or selling assets, reviewing your estate plans, or simply want to understand how these potential changes could affect you, our team is here to help. We can provide tailored advice and strategies to ensure that you are well-prepared for whatever changes the new budget may bring. Please get in touch with us to discuss your situation and how we can assist you in making informed decisions.
While the full details of the upcoming budget remain to be seen, there is a clear indication that changes are coming. Preparing ahead of time, understanding potential impacts, and seeking professional guidance are key steps in ensuring that you are ready for whatever lies ahead.