As Labour prepares to introduce its first Autumn Budget, several key changes are expected that could significantly impact both individuals and businesses. Here's a summary of the anticipated measures:
Capital Gains Tax (CGT)
Labour is likely to implement changes to CGT, the potential options have been hinted at:
- Alignment with Income Tax: There are strong indications that CGT rates could be aligned with income tax, meaning higher earners might face rates of up to 45%.
- Flat rate possibility: A return to a flat CGT rate, possibly around 30%, has been discussed, drawing comparisons to the rates seen between 1965 and 1988.
- Multi-tiered CGT: Another option being considered is the introduction of a tiered CGT system, with lower rates for long-term investments and higher rates for short-term gains, similar to the U.S. approach.
- Reduction in exemptions: Labour may reduce or eliminate exemptions like Private Residence Relief.
Inheritance Tax (IHT)
Changes to IHT are also on the table, some of the rumoured options are:
- Removal of pension fund exemptions: The IHT exemption for left over pension pots on death might be removed.
- Progressive IHT bands: Labour is considering introducing progressive IHT rates that could start at 25% and rise to 50% for the largest estates.
- Business and Agricultural Relief: These reliefs could be reduced or capped, with stricter qualification criteria potentially being introduced, such as removing reliefs for AIM shares and less active farmers.
Pensions
- Potential reintroduction of lifetime allowance: Labour may bring back the Lifetime Allowance for pension savings, albeit in a modified form, potentially with exemptions for public sector pensions.
Business taxation
Labour's stance on business taxes suggests a focus on equity and environmental responsibility:
- Corporation Tax: The current corporation tax rate is likely to remain frozen at 25% for businesses whose profits exceed £250,000
- Windfall tax: The windfall tax on oil and gas companies could be extended. Other utility sectors may have changes imposed also, for example bans on water company dividends until they sort out sewage spills.
- Residential Property Developer Tax: This could see an increase, earmarked for developers to fund a greater share in replacing cladding for tower blocks.
Employment
Labour's employment reforms are expected to enhance worker rights:
- Zero-hour contracts: Action on zero-hour contracts is anticipated, potentially offering day-one rights for employees.
- Apprenticeship Levy: The current levy might be rebranded as a “Growth and Skills Levy” to better reflect Labour's focus on skill development.
ISA cap
There is speculation that ISA allowances might be capped at £100,000, reflecting proposals from think tanks like the Resolution Foundation.
Council Tax reform
Although nothing official has been announced, suggestions from Fairer Share think tank introduce a likelihood that council tax bands may be reevaluated due to them not being changed since 1991. This could lead to higher taxes on larger homes.
VAT on private school fees
Labour may introduce VAT on private school fees, aligning with its broader policy of reducing inequalities in education.
What next?
If you're worried about how the government's Budget may affect you get in touch with us today to see what you may be able to do to mitigate the impact of these changes.