What are the potential tax changes expected from the Autumn Budget?

The threat of tax rises comes after the chancellor Rachel Reeves warned of a £22bn black hole in the country’s finances, and she is widely expected to announce significant changes to plug that gap. Which taxes are likely to be increased?

Capital gains tax rises in October Budget This is a highly likely area where there could be significant changes in the Autumn Budget.
Capital gains tax is imposed on the profit made from selling capital assets, such as second homes, shares, business assets, and most personal belongings valued at £6,000 or more, excluding cars.

There are indications that the government could look to increase capital gains tax rates and/or remove reliefs, so we would strongly advise taking prompt as soon as possible ahead of the Autumn Budget.

The announcements could include:

• Increasing the Capital Gains Tax rates
  Capital gains tax rates are currently substantially lower than income tax, and there is speculation that one option being considered is to increase the rates. There is a possibility that these could be raised even as high as income tax rates.
• Removing business relief
  Business Asset Disposal Relief (BADR, and what used to be called Entrepreneurs Relief) is currently available and allows a 10% capital gains tax rate on the sale of certain business assets, up to a maximum of £1m of capital gains in their lifetime. It is commonly claimed by business owners on the sale of shares in their company, allowing them to potentially benefit from a £100,000 tax saving. It is very likely that the availability of it will be limited further (e.g. by decreasing the lifetime limit to say £500,000), but more likely still is that BADR will be scrapped altogether.
• Reducing the annual exempt amount or restricting other reliefs
  There are multiple other options available for the government to change around Capital Gains tax, from reintroduction of indexation, a taper relief, and reducing annual exempt amount, to name a few. Any changes could be implemented as early as the date of the budget - 30 October 2024.

Raise Inheritance Tax (IHT) Another option the Chancellor may be considering is making changes to Inheritance tax. IHT is one of the highest tax rates in the UK, and certainly one of the most unwanted taxes

Changes to this could include the following:

• Increasing inheritance tax (IHT) rates – Currently at 40%.
• Reducing the thresholds at which it is payable.
• Remove or restrict relief on certain inherited assets – such as agricultural land and pension savings, which can both currently be inherited tax-free.
• Removing or restricting Business Property Relief (BPR) and Agricultural Relief – if these reliefs are entirely abolished, there would be no inheritance tax relief available for business or agricultural assets on death.

Reduce pension tax relief The government has included a Pension Schemes Bill in the King’s Speech and a commitment to a “pensions review”.

Some changes that this could include are:

• Reintroducing the Lifetime Allowance (LTA) – this was removed in a previous Budget but could be reintroduced again.
• Reduce the annual allowance - This was recently increased to £60,000 but could be reduced.
• Make changes to the 25% tax-free lump sum you can withdraw from your pension.
• Introduce a flat rate of pension tax relief - rather than making it available at your marginal rate of Income Tax. For example, a flat rate of 30% would boost tax relief for basic-rate taxpayers but reduce the tax relief you’d receive if you are a higher- or additional-rate taxpayer.

There could be other tax changes, but it is all the subject of current speculation.

• Dividend tax rises – increasing the rate of dividend tax or reducing or removing the dividend allowance.
• Employers National insurance – the rate of this could be increased.
• And more… In recent times, there has been an increasing trend for some of the tax changes to take effect from Budget Day itself, rather than the start of the next tax year, giving people a lot less time to prepare for the changes.
  
  With only a few weeks to go until the Autumn Budget, some strategies will require careful planning and adequate time to implement. Please contact us if you wish to explore any of these opportunities in detail, which we recommend doing so as soon as possible.

GET IN TOUCH
With the Budget quickly approaching, we recommend having a conversation if any of the above key actions is something you are considering to ensure that, where possible, you are benefiting from favourable tax rates. 

For more information on how we can help you and your business, please contact us via email or phone and we will be happy to advise on the best solutions for your business.

Please note: This article is provided for information only and was correct as at time of writing (05/09/24). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.