The first Budget of the new Government will take place on 30 October 2024.
Ahead of the Budget, Chancellor Rachel Reeves has announced that spending cuts worth £13.5 billion will be required over the next two years, due to the scale of the previous Government’s overspending. According to the Chancellor, there is a £22 billion black hole in the public finances.
The immediate action the Government will take to deal with this issue includes cancellation and delays of major infrastructure projects.
Key takeaways on tax
According to the Chancellor, the first Budget will require “difficult decisions” to meet fiscal rules, including major decisions on spending and tax.
She did rule out raising income tax, national insurance (NI) and VAT. However, a report to close tax loopholes and tax avoidance to recover public finances is intended to be published.
Additionally, changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT) have not been ruled out.
Reliefs, such as Business Asset Disposal Relief, could be cut to bring in more tax, which would affect anyone selling their business or a substantial number of qualifying shares.
Before the election, in the Spring 2024 Budget, the former Chancellor Jeremy Hunt announced the abolition of non-dom status in the UK and the eventual removal of the remittance basis, under a transitional process.
The new Government is set to double down on its plans announcing a “modern scheme” intended only to support people who are “genuinely in the country for a short period.”
The transitional arrangements, due to be in place from April 2025, will not be retained under Labour’s plans and they have confirmed that they intend to end the use of offshore trusts to avoid Inheritance Tax.
This will, they say, ensure “that everyone who makes their home here in the UK pays their taxes here.”
Universal winter fuel payment
During her speech, the Chancellor confirmed that she would be ending universal winter fuel payments, which are currently paid to all pensioners.
She stated that starting this year, individuals who are not receiving pension credits or other means-tested benefits will no longer be eligible for these payments.
Pension tax relief
The Chancellor might consider lowering higher rate tax relief on pension contributions and introducing a flat rate scheme that applies to everyone, regardless of the level of their income.
There are also rumours that the 25 per cent tax-free lump sum people can currently take from their pension pots might be reduced in the future. However, nothing has been revealed yet, but we should know more once the Budget is delivered later this year.
Office of Value for Money (OVM)
The Government will establish the Office of Value for Money, a new watchdog to ensure that all Government spending delivers value for money.
The Chancellor also confirmed to the Commons that a Covid anti-corruption probe will proceed, designed to recover money lost to Covid-related fraud.
If you have any questions following the Chancellor’s speech or would like advice ahead of the Budget, please get in touch.