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During the Autumn Budget on 30 October 2024, Reeves is expected to announce plans to plug a £22 billion ‘black hole’ in the public finances that the Labour government claims has been left by the Conservatives.
Autumn Budget 2024: predictions and rumours
Experts think that tax rises are on the horizon, but Labour’s manifesto promised that it wouldn’t increase income tax, national insurance or VAT.
This leaves ‘wealth’ taxes in the government’s crosshairs, including capital gains tax and inheritance tax. Here are the Autumn Budget predictions and rumours that – if announced – could affect your money.
Support for home buyers
When it comes to home buying, we already know that:
- The 0% stamp duty threshold for first-time buyers is due to go back down to £300,000 from 31 March 2025. Until then the threshold is set at £425,000.
- The same threshold for other movers will also go back down to £125,000 from 31 March 2025. Until then the threshold is set at £250,000.
Some experts have said the government should extend first-time buyer relief beyond March 2025, with the HomeOwners Alliance even calling on the Chancellor to scrap stamp duty completely for people buying a home to live in.
The Chancellor is also facing calls to update the Lifetime ISA, which is designed to help first-time buyers save for a home. Investment platform AJ Bell has suggested that the government ditch the exit penalty when withdrawing money from the account and increase the minimum property limit. Currently, you can only use Lifetime ISA savings on properties up to £450,000.
In the Budget, Reeves may give further details about the permanent mortgage guarantee scheme for first-time buyers promised in Labour’s manifesto. This could see the government guaranteeing mortgages to help encourage mortgage lenders to offer lower-deposit deals.
Council tax
The government is facing calls to reform council tax because in England it’s based on property values from 1991.
Darren Jones, the Labour MP for Bristol North West, has described the council tax system as “out of date”.
The Deputy Prime Minister, Angela Rayner, has said that the government won’t increase council tax, but hasn’t ruled out reducing the single person discount. This is a 25% discount on your council tax bill if you live on your own.
The government may consider updating council tax bands in line with current property values, which could see you pay more or less council tax depending on where you live. For example you may face a higher council tax bill if you live in London, where property values have increased by a lot, relative to other areas.
Scotland, Wales and Northern Ireland have their own council tax regimes.
Fuel duty
The Conservatives introduced a 5p a litre cut to fuel duty in 2022, which the government hasn’t ruled out reversing. This would increase fuel duty on petrol and diesel to 57.95p a litre.
Motoring organisations have conflicting views about hiking fuel duty. The RAC would reluctantly welcome the move, because it believes that drivers aren’t benefiting from the discount, which it says is lining retailers’ pockets instead.
On the other hand, the AA has called for fuel duty to remain frozen, because it claims an increase would fuel inflation and hit the least-well off and most vulnerable the hardest.
Changes to capital gains tax
Previous governments had often been rumoured to be looking at changing capital gains tax (CGT), which you declare when you sell an asset that’s increased in value.
These assets can include second homes, buy-to-let properties, business assets and shares that are outside of a tax-free wrapper such as an Individual Savings Account (ISA).
Reeves has previously said that she doesn’t plan to increase CGT, but that was before the government announced there’s a ‘black hole’ in the country’s coffers.
In 2020, the Office of Tax Simplification (OTS) recommended aligning CGT rates with income tax rates – something the current government is rumoured to be considering.
This could hike current CGT rates considerably given the additional rate of income tax is 45%. However, Haydn Rogan, Partner at law firm Weightmans, told NerdWallet UK that aligning CGT with income tax could stifle economic growth so he thinks a modest increase is more likely.
Other CGT changes Reeves may be looking at include:
- lowering the annual £3,000 tax-exempt allowance, or removing it entirely – the previous government had already drastically reduced it from £12,300, which was in place before April 2023
- changing CGT reliefs, for example reducing the £1 million lifetime limit on Business Asset Disposal Relief, which lets business owners pay less tax when they sell their business
When could changes to CGT be introduced?
Reeves is likely thinking carefully about the timing of changes to CGT.
More often than not, rate changes start in April at the start of the new tax year. Increasing CGT in April 2025 could boost tax revenue in the shorter-term, because people may choose to sell an asset before then to benefit from lower rates.
But a mid-year change to CGT rates has happened before, with then-Chancellor George Osborne announcing an immediate increase in June 2010.
If you think CGT changes will affect you, it’s worth seeking professional advice.
Tweaks to pensions
The Chancellor is likely considering how to raise revenue from pensions in a way that results in the least opposition from voters. Experts are speculating about these options:
- moving to a ‘flat rate’ of pension tax relief that would benefit those on a lower income but be less generous for higher-rate taxpayers
- this could be accompanied by a new tax charge on your employer’s contributions if you’re a higher-rate taxpayer who opts for salary sacrifice
- charging employers’ national insurance on employer contributions to a workplace pension
- reducing the amount of tax-free cash that you can take when you start drawing on your pension
But tweaks like the above could make pensions a less attractive option for saving for retirement. Undersaving into a pension has already been called a “ticking time bomb” by Jamie Jenkins, Director of Policy at pension provider Royal London.
Steven Cameron, Public Affairs Director at Aegon UK, a pension provider, said that the government should complete its promised pension review before reforming pension tax. He believes that tax relief must still encourage you to save for retirement, otherwise auto-enrolment becomes pointless.
Inheritance tax
Inheritance tax was mentioned in Labour’s manifesto, which said that if elected it would “end the use of offshore trusts to avoid inheritance tax”, but what else might the government be planning? Rumours include:
- raising the 40% inheritance tax rate, which could increase revenue without bringing more people into paying the tax
- lowering the £325,000 threshold at which inheritance tax is due, meaning more people would pay the tax
- reducing or even scrapping the residence nil-rate band, which is an additional £175,000 allowance potentially available when a home is left to direct descendants
- capping or scrapping exemptions that mean pensions, businesses and agricultural land aren’t subject to inheritance tax
As far as taxes go, inheritance tax is one of the country’s least-liked, so the government may be wary about making big changes.
Even though only around 4% of estates pay the tax currently, more are due to be caught in its net regardless of what happens in the Autumn Budget. This is down to ‘fiscal drag’, because the £325,000 threshold hasn’t risen since 2009, while the value of estates has been increasing due to inflation.
Autumn Budget 2024: what we already know
Here’s what we already know about the government’s plans for your money.
- You shouldn’t face increased rates of income tax, national insurance or VAT.
- Income tax thresholds will almost certainly remain frozen until 2028, which means more people will be dragged into paying higher taxes as the years go by.
- If you get the state pension, it will continue to go up in line with the ‘triple lock’ each year.
- To be eligible for the Winter Fuel Payment, you have to be a pensioner who gets pension credit or another relevant means-tested benefit.
- The government wants to close tax avoidance ‘loopholes’ – an element of this involves introducing a new tax regime for ‘non-domiciled’ UK residents from April 2025.
» MORE: How Does the King’s Speech Affect Your Money?
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