In this article we’ll explore what’s most likely to be included and how it could impact your business and personal finances.
Since taking on the role the Chancellor has reassured the country that Labour’s manifesto commitments still stand; there will be no rises to the headlines rates of income tax, VAT or National Insurance. Beyond this there have also been a number of things confirmed ahead of the announcement.
Whilst the current triple lock will stay in place for now, Andy Burnham confirmed at the Labour Party conference that should Labour win the next election there will be changes to the triple lock. The funds raised from these changes have been earmarked to help drive improvements in social care. Despite this not being a change for next week’s Budget it’s worth considering when making retirement plans beyond the next election.
The budget is expected to confirm a rise in next year’s state pension – most likely at around 3.9% (in-line with average earnings growth.)
Inheritance Tax relief
With the nil-rate band remaining frozen at £325,000 since 2009, speculation is turning to the future of Business Property Relief and Agricultural Property Relief, both of which could face further restrictions. Those with succession or estate plans that rely on these reliefs should consider how any changes might affect them.
Wealth Tax
There has been some talk about a 2% annual levy on assets over £10m, however this is likely to come up against some opposition from the Cabinet, so whilst worth noting is not something to worry about yet!
Pensions – tax-free lump sum
As yet there has been no indication that there will be any change to the ability to take 25% of your pension as a tax-free lump sum (with a cap of £268,275) but it’s worth considering that there may be some adjustments.
Capital Gains Tax
One of the key areas under discussion is Capital Gains Tax (CGT), with the possibility of rates being brought closer to income tax levels – potentially even reaching 40% for higher-rate taxpayers, compared with the current rates of 18% and 24%. This could have significant implications for business owners considering a sale, as well as individuals with unrealised gains on investments or property. While talk of major CGT changes has eased as Budget Day approaches, nothing should be taken for granted. If you’re already in the process of completing a transaction, it may be sensible to explore whether it can be finalised before the Budget, (while bearing in mind that any decision should be based on your individual circumstances rather than rumours alone!)
Property measures
If you hold property through a corporate structure it’s worth noting that it potential changes to The Annual Tax on Enveloped Dwellings (ATED) and Stamp Duty Land Tax rules for commercial property have also been mentioned.
Fiscal Drag
With income tax threshold frozen until 2031 more people will be pulled into higher rate tax bands through pay-rises and without the Government making any change to the headline rate.
You could:
Whilst it’s impossible to forecast exactly what will be included in the Budget it’s important to know your own numbers to help understand how any changes might effect you and how you might respond following the announcement on Wednesday 28th October.
If you need help making sense of the changes we’ll be sending all of our clients a summary of the key changes on Thursday 29th October.
Our friendly and helpful approach to accountancy, ensures that you understand and are in tune with your finances. Our committed team will communicate with you every step of the way so that you understand the position of your financial affairs – get in touch today.
