Rachel Reeves is likely to target five key tax areas in her upcoming Autumn Budget, a finance expert has said.
The Chancellor has warned the first Labour Budget in 14 years will include tax rises and spending cuts to a value of around £40billion, as the Government seeks to avoid a return to austerity.
Sir Keir Starmer has refused to rule out an increase in employers’ national insurance contributions at the Budget but insisted Labour would keep its promise not to raise taxes on “working people”. However, he has repeatedly warned of “tough decisions” to be made when Ms Reeves sets out the plans on Wednesday, October 30.
Russell Brett, director at Matthew Douglas, the Suffolk-based wealth management firm said: “This Budget is shaping up to be a wealth tax in all but name. Property owners and investors need to act quickly if they want to avoid potentially painful tax hikes.”
Mr Brett suggested five key areas likely to see reform, starting with Capital Gains Tax (CGT).
He said: “Speculation is growing that CGT could increase dramatically, with rates for top earners potentially rising from 20 percent to as much as 45 percent. Such a move would create a de facto wealth tax, impacting homeowners and investors alike.”
Another area of concern is Inheritance Tax (IHT), which currently sits at 40 percent for estates over £325,000. Mr Brett noted that this could be a prime target for reform, possibly through rate increases or adjustments to the threshold.
Mr Russell added: “It’s likely we’ll see changes in how intergenerational wealth is taxed, with larger estates potentially facing steeper charges.”
There are also rumours of changes to pension tax relief, a system that currently benefits the UK’s highest earners. Mr Brett said: “Pension tax relief reforms in the Autumn Budget could hit wealthier retirees hardest, slashing higher-rate relief and potentially bringing pensions under inheritance tax – moves that would severely limit the tax-saving benefits many rely on for retirement security.”
That said, Mr Brett noted that “more recent noises” would suggest that changes to pension tax relief are “now becoming less likely.”
Another area of concern is “tax-efficient profit extraction”. Mr Brett explained: “Currently, salary sacrifice schemes allow employees to reduce tax liabilities by contributing to corporate pensions.”
However, extending National Insurance (NI) to pension contributions could see the Government take a larger share from businesses, making this practice more costly for employers.
Mr Brett said: “Tax-efficient profit extraction is under threat as proposed changes could extend National Insurance to pension contributions, making salary sacrifice schemes more expensive for employers and cutting into business profits.”
Lastly, Mr Brett highlighted an expansion of “stealth taxes”, where inflationary pressures and frozen tax thresholds have already drawn more taxpayers into higher brackets.
He noted: “Without intervention, many could find themselves paying significantly more tax despite stagnant wages.”
With these potential reforms on the horizon, Mr Brett suggested taxpayers assess their finances or seek professional advice to see if they will be affected.
He cautioned: “Those who fail to act now may find themselves caught off guard by sudden, overnight changes.”
