With the Autumn Budget set for release tomorrow, here’s a more detailed look at key areas that may impact UK businesses and individuals:
1. Potential Tax Adjustments
To manage fiscal challenges, Labour has indicated potential increases in taxes on wealth. Capital Gains Tax (CGT) rates may align more closely with income tax, likely affecting higher-income individuals with a top rate of up to 45%. This change, along with tightening Inheritance Tax (IHT) thresholds, would focus on higher-net-worth estates. Additionally, Labour may consult on expanding IHT to more asset types or instituting a lifetime gifting tax to discourage large, untaxed wealth transfers between generations.
2. Business Rate and Tax Reforms
Business rates could see reform, as they have long been a target for Labour’s growth-friendly approach. Labour is considering tweaks that could level the playing field between digital and brick-and-mortar businesses. Additionally, employer National Insurance (NI) on pension contributions may be introduced, especially impacting private-sector benefits while potentially exempting the public sector. Businesses should prepare for possible increases in other employment costs, such as the apprenticeship levy, and potential changes to VAT implementation, like applying it to private school fees.
3. Pension Adjustments for Long-Term Savings
Labour may restrict the tax-free pension lump sum and could even reintroduce limits like the Lifetime Allowance, which was recently scrapped. National Insurance on pension contributions, if implemented, would especially affect private-sector employees and might lead employers to cut future contributions. Discussions include moving to a flat tax relief rate on pension contributions instead of relief at marginal tax rates, which would impact high earners the most.
4. Investment in Growth and Simplification
Labour has also highlighted growth through workforce training, green initiatives, and productivity-focused incentives. There may be expanded innovation tax credits and capital expenditure relief to promote long-term investments. Importantly, a renewed focus on tax simplification and stability could be introduced, with a “business tax roadmap” to help UK businesses better navigate and plan for future tax policies.
5. Boosting Compliance and E-invoicing
As part of its tax administration modernization, the government is considering mandating e-invoicing for businesses and government departments, streamlining compliance and reducing manual filing errors. This digital approach aims to simplify tax processes, benefiting especially small and medium-sized enterprises.
The Autumn Budget is expected to deliver a carefully balanced approach to increase tax revenue while promoting economic stability and business growth. Both individuals and businesses should stay tuned for further insights to adjust their financial planning accordingly.
