The Budget on 30th October is now less than a month away. Those attendees of the Labour Party Conference in Liverpool were alert for additional hints on measures which might be brought forward, but sadly, they were disappointed.
Perhaps the only pointers were a slight shift from doom and gloom to a little ‘light at the end of the tunnel’ for the UK economy. As the Prime Minister and Chancellor both refused to reverse their decision to abolish the Winter Fuel Allowance payable now only to the poorest pensioners, they were more careful in their use of language as to the country’s prospects.
The ’black hole’ of £22bn in the nation’s finances claimed to have been inherited from the previous government still needs to be managed. The expectation of painful choices in taxation and public spending were repeated and the changes promised, the Conference was told, would take time to be delivered.
Budget predictions are starting to surface
Since the Conference, developments have surfaced in the media indicating the direction in which the Budget might be heading.
We have learned that the Chancellor may re-write the fiscal borrowing rules in order to boost capital expenditure, seen as a prerequisite to economic growth.
A further debate is now taking place as to the revenue–generating potential of Labour’s proposals to bring forward the timing of the non-domicile taxation rules. There is evidence that the prospective tax-take may not be as much as expected. In addition, the flight-risk of very wealthy individuals may be economically counter-productive if the changes go ahead as planned.
A possible rethink may also be taking place as regards Capital Gains Tax (CGT). Ideas on likely changes to this tax, one of the few not ruled out for increases during the Labour Party’s election campaign, are abound. From alignment with Income Tax rates to the abolition of the annual exemption (now only £3000) and the taxation of gains on death, there has been plenty of lively debate.
If CGT is one targeted by the Chancellor we may see a rise in the number of buy-to-let residential properties being acquired by individuals through a limited company. However, a word of caution for clients – it’s recommended that commercial or personal financial decisions are not made on the basis of tax consequences alone, not least where they are made on speculation as to future tax rules.
It is worth pointing out that planned changes to existing tax legislation, particularly where reliefs are being withdrawn, bring in what is known as ‘anti-forestalling’ regulations. These negate the time window in which qualifying transactions can take place between the announcement at Budget and their introduction date.
Our Budget predictions
Although the Budget content is still, at the moment, shrouded in mystery we may see over the next few weeks a slow drip of hints and even early announcements of some of the proposed measures. This has become a common feature of Treasury and political messaging over many years and we can expect the same for Autumn Budget 2024.
In the absence of such leaks, with the already announced non-dom changes and VAT on school fees, we believe the focus on the day will still be around:
- An increase to the CGT rate, possibly to bring it in line with the Income Tax rate;
- A raid on Pensions tax – possible reduction of the tax relief for contributions to a flat rate of around 33% and/or a change to the tax-free withdrawal amount;
- Possible Fuel Duty tax increase;
- Changes to Inheritance Tax to reduce some of the existing exemptions and reliefs
- Reducing the Stamp Duty exemption for first time buyers.
For a detailed look at the Budget measures on 30th October, keep a lookout for PayStream’s Budget report and reaction. We will be explaining all the announcements, how they affect the ordinary taxpayer, business owner, contractors and the labour supply industry generally.
