The new government has announced it will have their first budget on the 30th October and a raft of draft legislation for changes to the tax system has already been issued.
The Chancellor has previously warned the government “will have to increase taxes” to bolster the public finances but has not specified which ones yet.
As a result, there is a lot of speculation over what might happen on Budget day. Here, Andrew Diver, Head of Tax at Beatons, looks at the predictions which might impact you.
Capital Gains Tax changes
Chancellor Rachel Reeves has refused to rule out whether she will increase the rate of Capital Gains Tax in her autumn Budget.
She has ruled out raising VAT, income tax or National Insurance, which has led to growing speculation that a hike in Capital Gains Tax - payable by investors, landlords, self-employed sole traders, partners in business partnerships and company owners - is a serious contender.
Business groups have warned increasing the levy could impact entrepreneurs selling a small business and stunt economic growth.
So what does this mean for you?
Well, if you are considering disposing of an asset (shares or property) which might give rise to a taxable gain in the next couple of years, then you might want to bring forward these plans to secure what may be a better rate of Capital Gains Tax at present.
Impact to other tax areas
While the Chancellor pledged in the election campaign not to raise the rate of income tax, that doesn't preclude extending the current freeze on thresholds.
This was a tactic used by her predecessor to raise taxes on working households, with rising wages at a time of high inflation providing an added stealth tax on earnings.
The previous government already cut dividend tax allowance significantly, going from £5,000 to the current £500. The big question is whether Labour is prepared to change the dividend rate more closely aligning this to the rate paid on other income, although doing so would be incredibly unpopular with investors.
There is, however, speculation over the cost of tax relief on pension contributions for high earners.
This means that, with potential tax rate restrictions on future contributions, ensuring you optimise your current year and earlier year carried forward reliefs in 2024/25 will be more important than ever.
We could also potentially see a change to the amount of pension tax relief savers receive, or to the 25% tax-free cash pensioners can withdraw.
Finally, we get to Inheritance Tax, which may also get a mention.
For example, a government needing to raise revenue could increase the rate of inheritance tax, and the tax-free allowance (known as the nil-rate band) which has been frozen since 2009, is likely to remain frozen. It is likely that some of the reliefs available for inheritance tax will be tightened, for example scrapping gifting allowances or change or reduce the benefit of business relief, agricultural property relief and IHT relief on passing pensions on death.
Another option would be to impose a “double death tax” by removing the rebasing for capital Gains Tax on death. This will mean bereaved families could have to pay capital gains tax on top of inheritance tax when they receive assets after a loved one's death.
Non-dom status
Labour has been clear for a long time that it would launch a crackdown on tax avoidance and loopholes, including abolishing the non-dom status.
Further details were published shortly after Reeves's spending audit, under the new rules new arrivals to the UK will not have to pay tax on any foreign income and gains for their first four years of tax residence, provided they have not been a UK tax resident in any of the 10 consecutive years prior to their arrival. After this point, these earnings will fall within the tax net.
A number of measures are still being consulted on and will be confirmed at the upcoming Budget.
Before making any decisions we recommend you seek professional advice and If you have questions about how any proposed changes could affect your business or tax situation, please do get in touch with us at Beatons, we will be delighted to help you.
Contact: info@beatons.co.uk / 01473659777.