On 30th October 2024, Rachel Reeves is scheduled to deliver her first budget statement since becoming Chancellor of the Exchequer.
This will be the first budget statement of the new Labour government, and the Autumn Statement is expected to include numerous measures designed to boost economic growth and stability.
So where are we ahead of the Autumn Statement?
From confirmed changes to VAT, winter fuel payments and non-doms, to widespread rumours about Capital Gains Tax, IHT and fuel duty; there is already a lot to discuss.
In this blog we will look at what we know already, and what else we might expect from the Chancellor next month.
What do we know already?
Tax changes for non-domiciled individuals (non-doms)
The government has proposed to get rid of the UK’s special tax rules for non-domiciled individuals (non-doms) with the aim of replacing them with a new regime based on residency. This was announced in the Spring budget, and the new government have confirmed that they will continue with this system overhaul.
There are many details related to this that have not been released yet, particularly regarding Inheritance Tax. Further detail is expected on this topic in October, including whether any reforms will take effect from April 2025 or later.
VAT on private school fees
The government has already announced and published details on the application of VAT to private school fees for education and vocational training. This change is to take effect from 1 January 2025, with some rules to prevent circumventing of the change by advance payments. Boarding services provided by private schools (or connected persons) will also be taxed at the standard rate of 20%. More details are anticipated in the October statement.
The government has ruled out the raising of VAT rates.
Read more: VAT on Private School fees - (August 2024 update)
Winter fuel payments
The government has announced that forthcoming winter fuel payments will only be available to individuals in receipt of pension credit or other forms of means-tested assistance.
State pension
We already know that the state pension is due to rise by 4% from April 2025 as per the triple lock commitment. The triple lock ensures that the state pension will increase each year by whichever figure is highest of 2.5%, the rate of inflation, or average earnings growth.
Windfall tax on oil and gas companies
The government has already announced plans to raise the windfall tax on profits made in the UK by oil and gas companies. This will effectively raise the energy profits levy from 35% to 38%, and will take place on 1 November 2024.
Taxation of private equity carried interest
The government plans to change how it taxes the capital share of profits that fund executives of managed investment funds receive, known as private carried interest.
Currently, such profits are taxed at 28% if they are considered capital gains. If the government decides to tax capital gains at regular income tax rates, this change will likely also apply to these profits.
Rumours and speculation
Increased rates of Capital Gains Tax
During the 2024 General Election campaigns, The Guardian newspaper reported on a series of 'draft documents and expert analyses' that were circulated among senior officials and shadow ministers within the Labour Party.
One Labour memo reportedly estimated that increasing the Capital Gains Tax rates could generate around £8 billion for the Treasury in the long term. It was not confirmed whether the estimated £8 billion is an annual figure.
The tax, and reliefs available for business owners, have been the subject of significant change in each of the last few decades. Between 1988 and 2008 the tax rates chargeable on capital gains were aligned with income tax rates. While nothing has been confirmed yet, many experts in business, economics, and accounting predict that further Capital Gains Tax reform will likely be a major part of Rachel Reeves’ first budget statement.
Changes to Inheritance Tax
Inheritance Tax (IHT) will also be scrutinised heading into October, whether or not any changes are announced. The aforementioned Guardian report stated that the government wishes to make it more difficult to “gift” money and certain types of assets tax-free.
Proposed changes may include capping agricultural and business relief, a limit of £500,000 per person has been suggested, instead of eliminating it. In some cases, individuals could claim both reliefs, resulting in a total cap of £1 million per person.
This would aim to place more restrictions on what value individuals can pass without incurring tax liabilities. Such a move is likely to be controversial, as it directly impacts inheritance planning strategies that families have long utilised to preserve their wealth for future generations.
Do not be surprised if wider changes to gifts and inheritance tax are being considered.
Fuel duty discount to be scrapped?
The chancellor may look to scrap the 5p per litre discount on fuel duty that Rishi Sunak (who was chancellor at the time) introduced in 2022. This would increase the rate of fuel tax to 58p per litre and raise the average cost of a litre of petrol to 145.61p and diesel to 150.35p.
The RAC favours scrapping the discount because fuel suppliers haven’t been passing it on at the pumps.
In 1993 the principle was established that the duty should rise in line with inflation each year, but these annual increases have been cancelled each year since 1999. The increase could be allowed to happen next Spring.
Changes to pension tax relief
A news report in the Telegraph in July said the Chancellor has been considering a flat 30 per cent rate of pension tax relief, though no official statements have been made.
It reports that the Treasury has wanted to do this for a while, with a detailed plan for a potential change presented to successive Chancellors since all the way back in 2010.
The flat rate options proposed include 20% and 30%. However, a 30% rate is thought to be more politically acceptable.
Other rumours
Rumours are rife ahead of a major budget statement, especially shortly after a General Election and change of government. While nothing has been confirmed, there is plenty of speculation about what other areas Rachel Reeves could review, including:
- Cuts to council tax discounts, including the single-person discount, which reduces council tax bills by 25% for taxpayers who live alone
- A general wealth tax of 1% has been discussed by various parties and think tanks, and may be something the government is considering, but it may be unlikely to be put into practice due to how politically divisive it would be. An academic argument for such a tax can be found here.
The first Autumn Statement of the new Labour government will be delivered on Wednesday, 30th October. We recommend contacting your tax adviser if you have questions or concerns about how rumoured or confirmed measures may affect your tax position.
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Brian Gooch
I work extensively in the corporate owner managed business sector, covering transactional taxes, property taxes including Stamp Duty Land Tax and VAT, and all areas of business tax planning. I have considerable experience in maximising tax efficiency by reviewing business structures and planning corporate reorganisations.
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