Budget announcement set for 30th October 2024

Last week, it was announced that the new Government's first budget will be delivered on Wednesday, October 30th.

The Chancellor, Rachel Reeves, has intimated that something needs to be done to plug the gap in public finances, with tax rises widely reported as being expected.

The Labour Manifesto pledged no increases to the rates of Income Tax, National Insurance Contributions (NICs), or VAT, leaving the media to speculate that the additional funding could come from changes to Inheritance Tax (IHT) and Capital Gains Tax (CGT).

We will have to wait until 30^th October for any changes to be announced, but some areas that could be targeted include the following.

Capital Gains Tax (CGT)

Much has been said about CGT changes in the press, and the main rate could increase. The rates could be increased to align with Income Tax (up to 45%), as applied between 1988 and 2008. However, changes to reliefs could be less political, for example, by removing the uplift in base cost when inheriting an asset.

Inheritance Tax (IHT)

Inheritance Tax (IHT) allowances could be reduced, but an easier target could be reducing the reliefs available. For example, the reliefs for AIM-listed shares or business or agricultural property could be watered down, bringing more assets into a partial or full charge.

Pensions

Currently, a higher or additional rate taxpayer can claim relief for pension contributions paid. This relief could be limited to the basic rate of tax, leading to increased tax charges for higher-rate taxpayers making pension contributions.

Changes that have already been announced

There have already been changes announced, including VAT on school fees (from 1 January 2025, with anti-forestalling measures in the interim) and changes due to come into effect next year relating to non-dom and Furnished Holiday Let (FHL) rules.

Our thoughts and recommendations

Reflecting on the announcements so far, as well as the various comments in the press, the message is clear:

If you are planning on disposing of a capital asset or making a pension contribution (from your company or personally), completing those transactions before 30 October could be wise, if time allows.

Whilst it is perfectly possible that any rate increases are announced to take effect from 6 April 2025, there is precedent for them to be effective from the date they are announced. However, individuals should beware that the tax tail should rarely wag the dog, and bespoke advice should be sought before undertaking any transactions.

Get in touch with your Shorts adviser if you wish to discuss anything further.