As Budget day looms, there has been much speculation on the potential tax rises Chancellor Rachel Reeves could go ahead with to fill the £22billion black hole in public’s finances.
GB News has provided a round-up of what Britons should be on the look out for, and how this could affect them.
Chancellor Rachel Reeves is set to unveil significant tax changes in her upcoming Budget on October 30. The Labour Government is considering reforms to inheritance tax, national insurance, benefit systems, and capital gains tax, as mentioned in the video above.
These measures aim to address what Labour calls a “black hole” in public finances left by their Conservative predecessors.
Reports suggest Reeves could be looking to raise £40billion, primarily through tax increases and spending cuts
Reeves warned ministers there would be “difficult decisions on spending, welfare, and tax” to come in her Budget this month.
The Budget will be announced on October 30
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What tax changes to look out for in the Budget
Inheritance Tax
Inheritance tax, often viewed as one of Britain’s most unpopular taxes, could see significant reforms. The Government is exploring changes to exemptions and reliefs, rather than directly raising the 40 per cent rate.
Rachael Griffin, tax expert at Quilter, commented: “IHT has been ripe for reform and simplification for years, as it is full of impenetrable and irrelevant details that need to be reviewed. Policymakers should tackle IHT reform seriously instead of using it as a political tool and revenue generator.”
The current £325,000 threshold, frozen until 2028, has drawn more taxpayers into the IHT net. Griffin warned: “If Labour’s reforms are perceived as a hasty tax grab, they are likely to receive significant backlash.”
Potential changes could affect the seven-year gift rule, Business Relief, and Agricultural Relief. The Treasury has not commented on these speculations.
National Insurance
Prime Minister Sir Keir Starmer has not ruled out an increase in employer national insurance contributions. This tax could raise billions for the country’s coffers.
While the Prime Minister has claimed Labour will stand by its promise to not increase taxes on “working people”, it is understood employers will not come under this group’s banner. Employers currently pay 13.8 per cent on employee earnings above £175 per week. Options include raising NI on earnings or introducing NI on employers’ pension contributions.
Neill Insull, a partner at business advisory firm Blick Rothenberg, warned a tax rise “won’t get Britain working” and would be “counterproductive” to Labour’s goal of economic growth.
Seb Maley, chief executive of Qdos, said: “If the cost of hiring rises, businesses will need somehow to shoulder this. It goes without saying that the smallest businesses will be hit the hardest.”
Rebecca Seeley Harris of Re Legal Consulting added: “For small owner-managed businesses a rate rise could be crippling. As a result, many would either choose not to hire anyone or consider using freelance workers.”
Benefit Cuts
The Labour Government is considering £3billion in benefit cuts over the next four years by tightening access to sickness benefits. This plan, originally proposed by the previous Conservative Government, aims to reform work capability rules.
An estimated 400,000 individuals currently on long-term sick leave could be reassessed as needing to prepare for employment by 2028/29. This may affect recipients of Personal Independence Payment (PIP) and other DWP sickness benefits.
A Government spokesperson stated: “We have always said that the Work Capability Assessment is not working and needs to be reformed or replaced alongside a proper plan to support disabled people to work.”
Capital Gains Tax
Capital gains tax rates could see an increase in the upcoming Budget. The Government is considering raising the rate on shares and other assets, currently set at 20 per cent.
Sarah Coles of Hargreaves Lansdown warned: “We don’t want to see an arbitrary upping of the headline capital gains tax rate, which could simply put people off investment, and stop them from selling current assets.”
A five percentage point increase could see higher earners pay £4,250 on a £20,000 return, up from £3,400.
Alastair Black of Abrdn cautioned: “Higher rates may make gifting unpalatable for some, and assets heavy with gains may end up being stockpiled until death rather than gifted.”