We’re all doomed: what to expect in next month’s budget

With the next Labour Budget fast approaching, and lots of talk of tax rises in the press, there is a feeling of impending doom among many business owners.

Let’s start with the backdrop: Rachel Reeves said in last year’s Budget that Labour would not be coming back with more tax increases…but has recently said that the world has changed, and we are not immune to that change…whilst also referring to the “big black hole” in public finances.

Increasing income tax would go back on Labour’s election manifesto so is seen as unlikely, but what other changes might be unveiled next month? Here’s a roundup of potential announcements, currently in the press:

Property Taxes

• The replacement of Stamp Duty Land Tax, which is payable when you buy a house, with an annual national property tax on high-value homes, which could apply to homes worth £500k+, and start once a property has been purchased. However, the current 5% second property Stamp Duty Land Tax surcharge, would most likely remain in place;
• The introduction of a “Mansion Tax” which effectively removes the Capital Gains Tax exemption that applies when you sell your own home, to properties worth £1.5m+;
• The introduction of Stamp Duty Land Tax to shares in property companies, which are currently subject to stamp duty on shares at only 0.5%.

National Insurance

• This could be levied on rental profits for the first time;
• The possibility of introducing Employers NIC on partnership profits has also been suggested.

Income Tax

• The current personal allowance and higher rate band thresholds could be further frozen beyond 2028/29 – effectively a stealth tax on inflation, as more and more people are pushed into higher rate tax.

Dividend Tax

• The higher and additional rates of tax on dividends could be increased from their current levels of 33.75% and 39.35% respectively;
• The £500 dividend allowance may be removed.

Capital Gains Tax

• Further increases in CGT rates are widely anticipated, to bring them closer to income tax rates;
• The annual exemption of £3,000 could be further reduced, or removed altogether;
• Changes to the long-standing CGT-free uplift on death have also been rumoured.

Pensions

• Many were expecting the 25% tax-free lump sum to be withdrawn or reduced at last year’s Budget, and some still anticipate changes to be announced next month;
• Employers NIC could be applied to Employer pension contributions.

Inheritance Tax

• A lifetime cap on gifts that are free of Inheritance Tax after 7 years have passed may be introduced;
• The possibility of increasing the 7 year period for potentially exempt transfers to 10 years has also been suggested.

VAT

• The VAT registration may be reduced from the current level of £90,000.