Chancellor Rachel Reeves has already burdened the nation with billions of pounds in taxes, and it seems the bills are set to continue. As she gears up for the Autumn Budget, experts predict that UK citizens will face billions in additional costs.
In 2024, a series of changes added to the tax paid by millions across a range of areas. However, most experts believe this was just the beginning, with more tax increases expected in the 2025 budget, scheduled for November 26.
Marianna Hunt, a finance expert from Fidelity International, has identified eight areas that could be targeted. However, she cautions against making hasty financial decisions based on speculation, warning this could prove costly.
Inheritance tax
So far, speculation about IHT changes has centred on gifting allowances, but it’s now suggested that the government is considering implementing a lifetime cap on the amount you can pass on inheritance tax-free. Currently, you can pass on an effectively unlimited amount without paying the tax through gifts, provided the recipient lives seven years after receiving the gift, reports the Express.
This could now change with a lifetime cap on the value of gifts. Marianna says: “If the government imposed a £100,000 lifetime cap on the value of gifts that someone can pass on before they die, assuming you hit the £100,000 limit by using up gifting allowances and then gifted another £200,000, then your heirs would pay 40% IHT on the £200,000, so £80,000.
“If the cap was £200,000 and you gifted £300,000 in total (using up the full allowance), then your heirs would pay 40% IHT on £100,000, so £40,000. If a punitive cap of just £50,000 was introduced then, in this situation, the heirs would pay IHT of £100,000 on gifts totalling £300,000.”
ISAs
At present, you can put away up to £20,000 annually in either a cash ISA or stocks and shares ISA, or divide it between both options. Yet earlier this year, policymakers were considering restricting the cash portion to push more people towards investing.
Whilst this is currently on hold, it’s believed to be merely a temporary pause. Rachel Reeves might use the Autumn Budget as a chance to bring these plans back.
Property taxes
There’s also widespread conjecture that the chancellor might use the Autumn budget to restructure property taxes. This could potentially see stamp duty and council tax being scrapped in favour of a fresh annual levy on properties valued above a particular threshold, according to Marianna.
She cautioned: “Such changes would disproportionately hit those in places such as London and the South East, where property values are particularly high.”
Alternatively another way to raise additonal money from property taxes would be to introduce new, higher council tax bands.
“It has been suggested that capital gains tax (CGT) could be introduced on people’s main homes if they sell for more than a set amount. Currently, CGT is only applied when you sell an additional property, not your main home. Again, for the moment, this is pure speculation,” said the expert.
Income tax
Throughout its election campaign, Labour promised not to increase the three main taxes – income tax, employees’ National Insurance contributions, and VAT.
However, it could proceed with a “stealth rise” by extending the freeze on income tax thresholds which forces more people into paying tax at either the basic or higher rate.
The government is scheduled to end the freeze on income tax and National Insurance thresholds in 2028 – but this decision could be overturned to fill the gap in public finances.
Marianna explained: “According to The National Institute of Economic and Social Research (NIESR), extending the freeze beyond 2028 could raise an additional £8.2 billion in tax revenue.”
Capital gains tax
Capital gains tax (CGT) is the levy you pay when disposing of an asset at a profit. At present, selling your primary residence or investments within an ISA does not result in a CGT bill.
Nevertheless, it’s believed the government will likely explore methods to boost CGT revenues, potentially through cutting the existing tax-free allowances or raising rates. At present, basic rate taxpayers face CGT of 18% whilst higher rate taxpayers are charged 24%.
Dividend tax
Marianne explained: “The amount you can receive tax-free in dividend payments has been gradually reducing for several years. The tax-free dividend allowance has been cut back from £2,000 back in April 2023 to just £500 today. But that’s not to say the government couldn’t reduce this further. Dividends received within an ISA should remain tax free.”
A wealth tax
Certain voices within the Labour party have been advocating for a fresh tax on Britain’s wealthiest citizens, the expert noted.
She explained: “This could, for example, take the form of an annual levy on individuals with assets above a set threshold, say £5 or £10 million. However, there is not consensus among the party on whether this is a good idea and critics have suggested it could encourage wealthy people to leave the UK entirely.”
Pensions
A broad range of potential pension targets have been subject to speculation. These range from restricting salary sacrifice schemes and modifications to pensions tax relief.
