With the Autumn Budget due to be announced on October 30th all eyes are looking towards the Prime Minister, Keir Starmer, and Chancellor Rachel Reeves. With the lingering economic challenges that have remained following the pandemic, and the ongoing task of keeping inflation under control, Labour need to strike the subtle balance of generating more tax revenue without undermining economic growth.
But what could this actually mean for people and businesses?
Let’s take a look through our Autumn Budget predictions, featuring insight from our Senior Tax Manager, Adam Truluck.
Key Predictions Ahead Of The Autumn Budget:
Personal Income Tax Adjustments
One of the most likely changes that we are likely to see is an adjustment to income tax thresholds or bands. While Labour has pledged not to raise personal taxes directly, they could effectively introduce “stealth taxes” by tweaking the tax brackets. As inflation pushes wages higher, failing to adjust these thresholds means more taxpayers will be caught in higher bands. This subtle change may provide the government with extra revenue without breaking promises not to increase tax rates outright.
Capital Gains Tax Overhaul
Capital Gains Tax (CGT) is one of the most talked-about areas for potential reform. It’s highly likely that Labour will finally introduce changes after several years of speculation. The expected move? Bringing CGT rates in line with income tax rates, which would mean shifting from the current 10% and 20% brackets to 20%, 40%, and potentially even 45%. This could have significant ramifications for investors, property owners, and high earners and will without doubt become one of the most talked about policy changes if it comes into effect.
Inheritance Tax Changes
Inheritance Tax (IHT) is another area that’s expected to see changes. Rather than a straightforward tax rate increase, Labour may lower the Nil Rate Band, which determines the tax-free allowance on estates. Another likely change is reducing the value at which estates lose their entitlement to the Resident Nil Rate Band. While IHT changes are often positioned as affecting only the wealthiest, rising property prices mean that more and more middle-income families are being caught by this tax.
Windfall Taxes
Energy companies and other sectors that have profited from inflationary conditions may find themselves subject to expanded or new windfall taxes. While previous governments have dabbled with this idea in the past, loopholes have often diluted its effectiveness. Labour is expected to crack down on these loopholes, ensuring that highly profitable sectors contribute a fairer share. With the public sentiment strong against inflation-driven profits, this may be one of the headline measures.
Key Concerns Ahead Of The Autumn Budget:
Rising Tax Burden
One of the major concerns is that the budget will place a heavier tax burden on businesses or high-income individuals to plug the gap in public finances. While this may be seen as a short-term fix, it could stifle spending and slow down economic growth, hurting businesses and workers alike. It’s for this reason that I think Labour have to be so careful with where the take their first budget…If they go too far in the Autumn Budget they could seriously put a spanner in the works for the UK’s economic growth.
Capital Flight and Reduced Investment
Another worry is the potential for capital flight, where individuals or companies quickly sell off assets to avoid hefty tax bills. In sectors like real estate, sudden shifts could flood the market and trigger price crashes. This, combined with reduced investor confidence, could have long-term consequences on the economy. Changes to capital gains tax, and a doubling down on the removal of ‘Non-Dom’ statuses could really fuel this fire.
Tax Avoidance and Loopholes
The introduction of new taxes or the tightening of existing ones in the Autumn Budget could drive aggressive tax planning, where individuals and businesses exploit loopholes to minimize their liabilities. This has been seen in the past with R&D claims, where unscrupulous claims led to HMRC tightening the rules, inadvertently making it harder for legitimate claimants to benefit. With it looking increasingly likely that taxes will be on the up for businesses and individuals alike, the reward for successfully finding these loopholes is only going to get higher.
Increased Complexity of the Tax System
Frequent changes to thresholds, bands, or temporary reliefs could create a more complex tax system, making it harder for individuals and small businesses to comply. Many small businesses already handle their taxes themselves, and increased complexity could lead to more mistakes, resulting in penalties and interest from HMRC. It’s already the case that the tax system can end up being unbelievably complex, so it would become even more difficult to navigate if changes are made in the Autumn Budget without the full consideration of how they actually effect things like thresholds and bands.
Changes We Could See (But Are Unlikely To Happen)
Simplification of the Tax Code
Despite years of calls for reform, the tax code remains frustratingly complex. Simplifying the system in the Autumn Budget would promote better compliance and reduce the administrative burden, particularly for individuals and small businesses. We’ve spent countless hours correcting erroneous tax codes with HMRC, and a simpler system could prevent such issues from arising in the first place.
Progressive Wealth Taxes
Any changes to Inheritance Tax in the Autumn Budget will likely be sold as targeting the rich, but the reality is that rising property prices have pushed many middle-income families into IHT territory. Raising the tax-free allowances to reflect current house prices would be a welcome relief, but it seems unlikely this budget will deliver it. This is likely to mean that upcoming changes to the tax system will inevitably drag more people into paying higher taxes.
Corporate Tax Reform
A comprehensive overhaul of corporate taxation—one that closes loopholes and introduces transparent, fair rules—would be a positive step. However, given the political influence and lobbying power of major industries, substantial reform is unlikely to occur this time around.
“Tough measures are somewhat necessary”
Whilst I acknowledge it will be a difficult and potentially painful Autumn Budget for many, I do believe that tough measures are somewhat necessary to stabilise the economy given the situation we face.
With inflation still a concern and public finances under pressure, it needs to be recognised that adjustments like stealth taxes, capital gains tax hikes, and potential windfall taxes could generate the much needed revenue. However, I am also concerned about the possible negative impacts on economic growth, business confidence, and the complexity of the tax system.
A very delicate balance needs to be put in place and this could go either way. Whilst I would love to be able to say that there should be tax cuts all around in reality this will not get us anywhere and despite the arguments of which government got us here the fact is something needs to be done to get us out of the current economic crisis that we are in.
I just hope that any changes that are brought through the Autumn Budget are done in the correct way and although tough will allow us to build a better future.
You Don’t Have To Navigate This Alone
If you have concerns about how the budget may affect you or your business, or if you’d like to discuss tax planning strategies, don’t hesitate to get in touch with us.
At Nordens, we’re here to help you navigate these potential changes from the Autumn Budget every step of the way. We understand how it can feel like such a lot of information to take in and understand, and that’s why our expert team will be analysing every change in detail and making sure that they’re on hand to provide specialist advice to your business, whenever you need it.
