2 Mins
Tough decisions on tax and public spending lie ahead for Rachel Reeves in her first budget. Government borrowing according to figures from the Office for Budget Responsibility (OBR) was higher than anticipated for June at £14.5billion. Taxes or levels of borrowing will have to rise if the Labour government are to maintain spending on public services.
The Chancellor has ruled out raising rates of income tax, VAT or national insurance, the 3 biggest revenue raises. We also know the budget will contain further information about some of labour’s manifesto pledges. This includes the removal of independent school fees from VAT exemption, and a crackdown on tax avoidance and loopholes, including abolishing the non-dom regime.
Speculation surrounding simplifying Inheritance tax reliefs and preferential tax reliefs for pension saving may mean changes to these areas at some point down the line, although due to the complexity of the inheritance tax reliefs in particular it is likely these may wait until the Chancellor has had more time to consider.
Capital gains tax was not mentioned in the labour election manifesto and there has been speculation the Chancellor could align capital gains tax rates with those of income tax rates. However, it is widely considered that the Chancellor may take some time to review the current rates and reliefs. The 10% tax rate for entrepreneurs disposing of shares in their family companies or other forms of business structure is an important relief and we would hope that she would try to preserve and even widen the scope of this relief to encourage business growth.
We will have to wait and see. We are expecting Rachel Reeves to announce the exact date of the Budget before the end of July and although she must wait until the OBR produce forecasts. She indicated that it takes 10 weeks to produce a forecast so it could be as early as the end of September!
Should you have any questions or if you are considering any inheritance tax or capital gains tax structuring please get in touch.
