Labour is just weeks away from unveiling its first Budget since coming to power with early indications there could be some unpleasant surprises in store.
Both Sir Keir Starmer and Chancellor Rachel Reeves have issued warnings ahead of the the big day.
The Prime Minister said in a speech in August that the Budget was “going to be painful” and those with the broadest shoulders “should bear the heavier burden”.
While Ms Reeves indicated last month there would be “difficult decisions” ahead on tax, spending and welfare as she faced a £22bn “black hole” in public finances.
We take a look at what to expect and when.
When is the Autumn Budget?
This year’s Autumn Budget will be announced on Wednesday 30 October.
The Chancellor is expected to begin delivering her speech in the House of Commons at around 12.30pm on the Wednesday and it is likely to last for about an hour.
And it will be an Autumn Budget rather than a Statement.
An Autumn Statement, according to the UK Parliament website, usually takes place in October or November and is an update to the House of Commons on the state of the economy and at times can include some announcements on tax and spending decisions.
It would also include the Government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility (OBR).
However, an Autumn Budget is the main fiscal event of the year where the most significant tax and spending changes are usually included.
Since 2018, Treasury standard practice involves the Chancellor delivering two fiscal statements a year which are usually accompanied by the OBR’s economic and fiscal outlooks.
The Budget would be in the autumn and a shorter, minor statement on the economy would take place in the spring, to avoid having two major fiscal events in a single tax year.
However, in practice this has not always happened due to general elections and the Covid-19 pandemic.
What is Rachel Reeves expected to say?
The Prime Minister and Ms Reeves have already given a few indications at what might be on the financial cards for the year ahead.
VAT will be added to private school fees and winter fuel payments will now be means-tested.
But there is speculation about changes to a number of other taxes and tax relief.
Capital gains tax
After Sir Keir’s “broadest shoulders” comment, it has also been noted that Ms Reeves has not ruled out a change to capital gains tax (CGT).
Labour’s manifesto had promised no increases to income tax, national insurance (NI), VAT and corporation tax but CGT was not included in this.
It is a tax on the profit made from selling assets which have gained in value, such as second homes or investments. Rates depend on how much income tax is paid by the holder.
One possible outcome of the Budget could be aligning CGT with income tax, although this remains just speculation at present.
By choosing this option, it is estimated she could raise more than £16bn a year in revenue.
Tom Minnikin, partner at tax consultancy Forbes Dawson, told i last month an equalisation of CGT with income tax would “have a devastating effect where clients are expecting to pay 10 or 20 per cent CGT if it ends up being 40 or 45 per cent”.
While Nimesh Shah, chief executive of tax advisory firm Blick Rotherberg, said: “We will have to wait and see exactly what the Prime Minister and new Chancellor decide to do – but given the recent statement and fast pace of other changes, such as VAT on private school fees, it seems inevitable now that the tax cost for many investors and entrepreneurs is only going to go up.”
Inheritance tax
Inheritance Tax (IHT) is thought to be another possible target in Ms Reeves’s Budget.
It is a tax on the estate (property, money and possessions) of someone who’s died and is generally paid on estates with a value above £325,000.
The standard rate is 40 per cent and charged on the value of the estate above the threshold.
The Resolution Foundation think-tank said there is a “good case” for abolishing a rule known as the residence nil-rate band, which allows people to avoid paying tax on part or all of the value of their home when it is inherited.
Homeowners can use the residence nil-rate band (RNRB) to shield an £175,000 from tax.
The Foundation wrote: “This is a complex and distortionary relief, first introduced in 2017, and costs around £2bn a year.”
Rowan Morrow-McDade, tax director at Alexander & co chartered accountants, told i last month: “It would generate revenue and make things simpler but it is worth noting that RNRB tapers away for estates over £2m and is fully tapered away for estates over £2.35m.
“So, many high net worth or ultra-high net worth individuals do not receive it in any case.”
Another way the Chancellor may tighten up IHT is by limiting the 100 per cent relief given to agricultural property.
Pension tax relief
Those who pay into private pensions get tax relief on their contributions to boost the amount saved.
Currently savers receive tax relief at the same rate as their income tax but the Government may choose to introduce a single flat rate of relief, which would hit higher earners.
Earlier this summer, it was reported the Chancellor would be urged by Treasury officials to consider introducing a flat 30 per cent rate of tax relief.
And ex-pensions minister Sir Steve Webb said in July: “There is no doubt that the Chancellor will be eyeing up the large price tag attached to providing tax and national insurance relief on pension contributions.”
Fuel duty
Fuel duty for petrol and diesel has been frozen since 2011 at 57.95p per litre.
The Prime Minister was asked at the end of August whether he would rule out raising fuel duty in the next budget.
He said: “We made very clear pledges before the election in relation to tax on working people.
“You’ve all heard it a number of times over in relation to income tax, VAT and national insurance.
“We absolutely stick by that.
“Beyond that, I’m not going to speculate about the Budget.”
The Chancellor may choose just to end the freeze or end it and increase duty.
A former Treasury aide told i in July: “There is a feeling within the Treasury that you should increase fuel duty, because it goes down in real terms – but the politics gets in the way.”
And Simon Williams, RAC’s head of policy, told i this week: “We’ve reached the conclusion the Chancellor has no option but to put fuel duty back up to 58p a litre in October’s Budget.
“We’d normally be against any increase in duty, but we’ve long been saying drivers haven’t been benefitting from the current discount due to much higher-than-average retailer margins.”
Individual savings accounts (ISAs)
ISAs are savings account which come in four types: cash ISA, stocks and shares ISA. innovative finance ISA and a Lifetime ISA.
ISA holders do not pay tax on income or capital gains from investments in an ISA or interest on cash in an ISA.
At the moment, the tax-free limit for ISAs is £20,000 per tax year which can be used for one account or split across multiple accounts.
Some financial expert believe this may be introduced in the Budget, to free up more money for the Treasury, or the amount of money protected within an ISA could be capped.
Andrew Hagger, founder of MoneyComms, told i this month: “These are areas that Rachel Reeves could reduce tax benefits for savers – the question is will she be brave enough to do so and risk a further backlash so soon after cutting the winter fuel allowance for some pensioners?”
