What can we expect from the Autumn Budget?

A budget from a new Chancellor is always an interesting and uncertain prospect. A leading UK tax expert makes his predictions around what measures we could see on October 28.

Paul Robbins, Director of Tax at Croner, says “Prime Minister Andy Burnham has made some headline-grabbing commitments in his first few weeks in office including pledges to remove VAT on domestic electricity bills, cap bus fares at £2, cut business rates for pubs, clubs and musical venues, give metro mayors the power to retain locally raised tax revenue, tackle the social care crisis, shake up education policy, and end rough sleeping.

“And given the new Chancellor’s background, we can expect him to dig deep to find money to fund the armed forces too. All this comes with a hefty price tag.

“The new government insists it will stick to the manifesto promise not to increase taxes on working people, specifically income tax, employees’ National Insurance contributions and VAT. There is less clarity, however, around Rachel Reeves’ previous commitments in the corporation tax roadmap, but the general view is that they would be hard to row back from. So, if these aren’t options, how will Chancellor Healey raise the money needed for the proposed changes?

“Below are my predictions; as always these are educated guesses. Until the Chancellor rises to begin his speech, nobody can actually know what is going to happen. One thing we do know, this is the first time that we will know for sure what the priorities are for this new administration. Businesses will certainly be hoping for some relief.”

Potential Measures Across Levies, VAT, and Property

Health and Social Care Levy

To fund the commitment to sort out social care there may be something like Boris Johnson’s health and social care levy. That would have impact but maybe the government will be more subtle and raise via IHT (1-2% on whole value of all estates ignoring the nil rate band so everyone has to chip in but larger estates pay 41% or 42%?) or via CGT (abolish the tax-free uplift on death or tightening of gift relief).

Either way we think it is likely to reach consultation only because a bit more paving the way is required and Baroness Casey’s review is not due to conclude until April 2027.

The headline rate of VAT

A particularly brash way to tell people you care about tackling inflation and the price paid for goods and services that is easy to implement is to simply reduce the rate of VAT, perhaps to 19% … it generates headlines, and could create a buy-now effect, which is what Burnham wants to boost the economy before the next general election.

Alignment of rates

One idea that may appeal is the equalisation of the CGT rates (currently 18%/24%) with the rates of income tax payable on investment income (currently 20%/40%/45%, increasing to 22%/42%/47% from 6 April 2027), possibly with an indexation allowance - and/or some form of taper relief.

Personal allowance

Although the Prime Minister has indicated he would like to unfreeze the personal allowance, that project appears to have been placed in the too costly pile for the present. Maybe next year!

Property tax

Another regularly rumbling rumour is that the mess that is property taxation will be tackled. This might take the form of a consultation on replacing SDLT and council tax on homes with a new property tax.

Sector Targets and Further Compliance Measures

High-performing sectors

Applying extra taxes to banks and the oil industry is unlikely to play badly with Labour Party members and the strong recent results in those sectors may be just too tempting. Another option might be business rates being rebalanced onto warehouses/distribution centres, so get your Amazon orders in now.

Other possibilities

• An end to capital reduction demergers and various other changes as discussed in the recent HMRC distributions ConDoc.

• Making it a criminal offence to make reckless untrue statements or declarations in tax returns etc.

• Exempting UK headquartered groups from UK CFC rules if they are within Pillar Two.

• Extending an online marketplace’s responsibility for collecting and remitting VAT to include domestic sellers.

• Further gambling or remote gaming duties on operators - taxing what some consider a vice is politically easier.

• Potentially some moves towards merging NICs with income tax.