What we know so far
Spending cuts
Chancellor Rachel Reeves has already announced that spending cuts worth £13.5 billion will be needed over the next two years. Cancellation and delays to major infrastructure projects are expected as a result.
Main tax rates not rising
Raises to income tax, national insurance (NI) and VAT have been ruled out, however the Government is expected to publish a report on how it aims to target tax avoidance.
Corporation tax to be capped at 25%
The Chancellor has announced that corporation tax will be capped at it’s current 25%, as part of a “tax roadmap for business” to be detailed in the upcoming Budget, with a commitment to cap corporation tax at 25% for the duration of Labour’s Parliament.
Non-dom rules set to become tougher
The Government has already set out its plans to axe the “non-dom” tax regime, unveiling tougher rules than previously announced by the Conversative Government. About 74,000 people in the UK have non-dom status, which allows them to shelter international earnings from UK tax while living in Britain and we will hear more at the Budget on the new rules.
Universal winter fuel payments cut
The Chancellor has also confirmed that she will be ending universal winter fuel payments, which are worth up to £300 a year for all pensioners. This would mean that those who are not receiving pension credits or other means-tested benefits will no longer be eligible for these payments.
Private equity tax raid
The Chancellor has proposed tax increases on private equity fund managers. A consultation on the tax changes, which could raise the levy on carried interest, closed on Friday. Currently, private equity chiefs pay a 28% rate on their profits, rather than the higher level of income tax. City groups are urging the Chancellor to reconsider amid fears it could lead to an exodus of dealmakers from London.
Other announcements
A new independent watchdog, the ‘Office of Value for Money (OVM)’ is to be formed to ensure that all Government spending plans deliver value for money. Also a Covid anti-corruption probe will be launched, designed to recover money lost to Covid-related fraud.
What might we hear?
CGT and IHT changes on the table
Changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT) have not been ruled out and have been the big talking points in the lead up to the Budget.
Reliefs, such as Business Asset Disposal Relief, could also be cut, and this would affect anyone selling their business or shares.
The Government has also confirmed that they intend to end the use of offshore trusts to avoid Inheritance Tax.
You can read further updates from our team on Capital Gain Tax (CGT) and Inheritance Tax (IHT) here.
Pension tax reliefs at risk
The Chancellor is said to be considering lowering higher rate tax relief on pension contributions and introducing a flat rate scheme applying to everyone, no matter their income.
There are also rumours that the 25% tax-free lump sum people can currently take from their pension pots could be reduced or removed from October. This currently allows individuals to withdraw 25% of their pension pot without tax, capped at £268,275.
Council tax discount to be scrapped?
Angela Rayner has refused to rule out scrapping the single person discount for council tax, a move which would affect thousands of widows and would be a further blow to pensioners, who are already set to lose their winter fuel allowance.
Wealth tax rumours
The Chancellor has not ruled out the possibility of significant wealth levies, including a mansion tax. This comes as Unite, Britain’s second largest trade union, is urging the Government to implement a 1% wealth tax on assets exceeding £4m. The union says that this could generate £25bn annually to fund 10% pay rises for public sector workers and address over 100,000 NHS vacancies.
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This is all speculation at this point, and we will find out more in a few weeks’ time.
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Oscar heads our tax department and provides advice on tax structuring, planning and compliance services to entrepreneurs and their businesses.