At the end of this month the Chancellor will unveil the first UK Budget under Labour in almost 15 years and there is a great deal of uncertainty as to what might be in it.
Chancellor Rachel Reeves will present her first budget to the House of Commons on Wednesday, October 30 at around 12.30pm.
With much commentary flying around about the ‘£22billion fiscal black hole’ and the need for ‘difficult decisions’, it’s fair to say many people in the country are concerned at what it might mean for them and the future of the UK economy.
In fact, despite a brief ‘recession’ at the end of last year, the economy grew steadily in the first six months of 2024, but did stall in June and July – however latest figures show there was 0.2% of growth in August.
Interest rates remain at 5% and inflation is at 2.2%, so things are moving in the right direction.
So what will be in the Budget in two weeks’ time? Labour did pledge at the election not to raise VAT, Income Tax or National Insurance, but commentators and analysts are predicting various potential tax increases in other areas.
Capital Gains Tax (CGT) is one being widely tipped to increase. That’s profit made from the sale of assets that have increased in value, such as second homes or investments. It’s a little complicated, but The Guardian has reported Treasury officials are said to be reviewing modelling that would see CGT rise by more than 10% for second-home owners.
Inheritance tax (IHT) is another that may be under consideration. It is currently 40% and is usually paid on the value of a deceased person’s assets above a threshold of £325,000.
There is speculation that threshold may change, or there may be changes to the nil-rate band (RNRB) or an increase or abolishment of the seven year gift rule – ie if assets from an estate are gifted to others, there is no tax to pay on them if death does not occur for seven years.
Pension tax relief is another being mooted. The government could introduce a single flat rate which would make it less generous for higher earners, who can currently get relief at 40 and 45% depending upon their tax status. This is not thought to be likely, but analysts suggest other tax breaks in the pension system could be altered.
It’s possible there may be restrictions on what you can put into ISAs and Pensions too.
We would stress all this is speculation at this point, albeit from industry experts and no-one knows for sure – there have been no useful ‘leaks’ to get people used to the ideas.
So what can you do as a saver or investor? It may well make sense to use your CGT allowance earlier than usual this year, or indeed to make the Pension contributions you were going to make earlier and before any potential changes to the relief system.
If you have not used your full ISA allowance, but had intended to, do it sooner rather than later.
All this may not be necessary, but you’ve lost very little by bringing things forward ahead of time.
But please do speak to us first, or indeed whichever adviser you may be with, to see what your options are.
In the meantime, we shall await Budget Day…
