The upcoming October 2024 Budget by Rachel Reeves is anticipated to introduce key tax changes.
These adjustments are deemed essential for ensuring fiscal stability and supporting economic growth.
A potential rise in employers’ national insurance contributions (NICs) is one of the most noteworthy measures being considered. While Labour has ruled out increasing NICs for employees, they have not isolated employers from this possibility.
Jonathan Reynolds has hinted at raising employers’ NICs as it could bolster Treasury revenues without directly affecting workers. However, resistance from businesses experiencing rising costs is likely.
Examining capital gains tax (CGT) positions it as a target for realignment with income tax rates. The focus could be on elevating CGT rates or broadening the asset range subject to taxation.
Basic-rate taxpayers are currently taxed at 10%, and higher-rate taxpayers at 20%. Modifying these rates could discourage investment in tech and start-ups, a critical consideration for industry stakeholders.
Changes to the non-domiciled tax status, which allows exemption of foreign-earned income, are possible.
Altering this status requires careful consideration to maintain the UK’s attractiveness to high-net-worth individuals.
Any shifts could deter these individuals from investing in the UK, potentially affecting the economy negatively.
While a general rise in income tax rates is unlikely, lowering thresholds where tax bands apply might be on the table. This would mean more people fall into higher brackets, effectively raising their tax burden.
IFS cites that lowering the personal allowance or basic-rate limit by 10% could yield significant annual revenue for the government. Such adjustments, though impactful, might be perceived negatively by middle-income earners.
Reeves is anticipated to retain the current tax relief on pensions, responding to concerns from public sector workers. Preserving tax relief aligns with protecting public sector interests and averting backlash.
Changes could have significant implications for voters dependent on public sector pensions, making this a contentious area.
Shifting focus to inheritance tax (IHT), where only a minor percentage of estates are currently liable, Reeves might pursue removing exemptions for businesses and agricultural assets.
The potential removal of these exemptions could enhance revenue but also face opposition from sectors reliant on inherited assets.
Fuel duty adjustments are under consideration, potentially ending the long-standing freeze since 2011.
Increases could yield substantial additional revenue, aligning with Labour’s green policy objectives.
Expectations for the October 2024 Budget highlight a focus on strategic changes to invigorate the UK economy.
These measures are aimed at stabilising financial structures while enhancing investment prospects.