Oct 2024
There has been much speculation surrounding new Chancellor Rachel Reeves’ first Labour Budget in office and she has made no secret about the “difficult decisions” that will need to be made. So, what might next week’s Budget speech look like and what are the likely targets?
When will the Budget take place?
Reeves will deliver her plans for the UK’s finances on Wednesday 30th October at 12.30pm UK time and will last for around an hour.
Afterwards, Rishi Sunak, leader of the opposition will give his responses.
What might the Budget speech contain?
Since coming into power at the last General Election, Labour has said it is on a mission to fix the UK’s finances. Reeves said that she had inherited a £22bn black hole from the previous Conservative government that she called “the worst set of circumstances since the second world war”.
However, in recent press statements she has also said that she would need to raise that £22bn just to make public services simply “stand still” - and that she would need to raise more like £40bn to get the economy back on its feet.
There have been a few speculations as to how she might do that:
National Insurance contributions by employers
Labour have already said they plan to do all they can to protect working people, and while it has made promises at the election not to raise VAT, income tax or National Insurance (NI), the Chancellor has not ruled out potential rises in NI contributions for employers.
Currently, employers pay 13.8% NI on their employees’ earnings above £9,100 per year. They also pay Class 1A and 1B NI contributions on expenses and benefits they give to employees at the same rate.
Private pension taxation
Currently, saving into a pension attracts tax relief at the same rate of income tax. i.e. if you are a basic rate taxpayer, then your tax relief is worth 20%. At the moment, this is seen to look favourably on higher income earners, as their tax relief is worth much more at 40% and 45% for the higher and additional rate bands.
Therefore, there is speculation that the Government could introduce a single, flat rate of tax relief that would make the system fairer and help raise much-needed tax revenue.
Capital Gains Tax (CGT)
This is a tax that is paid on the profit of an asset when you sell it - such as a buy-to-let property or when selling a business. What you pay at the moment depends on what it is you are selling: for a property (that isn’t your main residence) the levy is 24% of the profit and for other assets it is 20%.
However, there is talk of raising this in-line with income tax bands, so if you’re a basic rate taxpayer, you would pay CGT at 20% of the profit, higher rate 40%, additional rate 45%.
What has already been announced?
In what is certainly promising to be a jam-packed speech, some of these “tax raids” are in addition to changes that have already been announced including:
- Means tested winter fuel allowances
- VAT in private school fees from 1st January 2025
- Increasing windfall tax on profits made by oil and gas firms in the UK
We will be watching closely to see what proposals are outlined next week. We are here to answer any questions you may have about how any of the new measures might affect you, your family or your business – please contact us for more information.
