What should we expect in the Budget on 30 October?

Tax rises are a dead cert, we all know that, but what else can we look forward to?

I think budget forecasting is very much like weather forecasting, incredibly hard to do and often the result is not what you’d expected! That hasn’t stopped me having a go and by assimilating press articles, expert commentary, and rumour I’ve summarised my opinion of what we might expect to be announced by the Chancellor of the Exchequer, Rachel Reeves in her first Budget on 30 October.

Tax rises are a dead cert, we all know that. There is a £22bn funding deficit a number that’s better known than the names of the Beatles as it’s been in the press constantly for the last couple of months. Everyone now knows that the Chancellor needs to collect funds to plug that gap. So, the big question is ‘where the money will come from?’

Capital gains tax

The press suggests this could rise in line with income tax which would give taxpayers a rate of up to 45%, but we speculate that this could be scaremongering to accelerate transactions to aid cash collection. The biggest take in CGT cash wise in recent years was when it was rumoured that the Entrepreneur’s Relief 10% rate was being scrapped, so everyone did their transactions and sold out before the budget only to find it wasn’t totally scrapped.

There is also talk about further changes to the Private Residence Relief bringing in a cap on the gain you make on your family home tax free.

Inheritance tax

Another one that has people scared. Could Business Property Relief (BPR) be cut or removed? What about Agricultural Property Relief (APR)?

I think there could be changes for sure, maybe APR will be tightened to stop it being exploited. It would be clever thinking if the government cut or scrapped BPR to bring more people into the scope of inheritance tax though only impacting a small number, only to then increase the threshold and win back voters before the re-election, but I’m wondering if the Government are actually smart enough to have thought that far ahead? It seems they’re not that great at planning.

Pensions

Tax relief on pensions is likely to get hit by the Chancellor’s mallet. A reduction in the relief on contributions from the higher rates of tax to a flat rate of 30% is speculated and would collect cash for their coffers.

Inheritance tax relief on pensions is also thought to be under the hammer, which again would bring more people into the scope of IHT.

They could bring back a lifetime allowance and exempt those in the public sector so as to not upset the doctors again, but this seems less likely as they need to encourage us to plan for the future.

They may also hit employer’s by limiting the NICs exemption on pension contributions so that those above £10,000 per employee per annum of above 20% of the employee’s earnings perhaps might be charged to employer’s national insurance.

Income tax

Whilst the Chancellor cannot specifically raise income tax as that would be against the manifesto, she could look at removing reliefs, such as reducing the ISA threshold for tax free savings to aid cash collection on savings.

R&D tax credits

Whilst nothing has been speculated to change on this tax relief at present, it has been a favourite for change over the last couple of years in an attempt to tackle exploitation of the relief and we could therefore see further announcements.

This is one of the most eagerly awaited Budgets in years. We will have a summary of the announcements available on our website the day after the budget and will be commenting on the changes.

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