As Rachel Reeves prepares to deliver her first budget as Chancellor of the Exchequer on 30 October, businesses and individuals are bracing for significant economic shifts. With an apparent £22 billion deficit, Reeves is expected to announce a range of measures aimed at driving growth while maintaining monetary responsibility.
Reeves is favouring real-term growth in public spending through a combination of tax increases and selective borrowing. These policy adjustments will have broad implications for taxpayers, businesses, and many more.
As a leading firm in legal and financial advisory services, Tees offer expert advice and solutions for individuals and companies looking to understand the impact of the proposed measures.
Potential budget highlights
Income tax adjustments
Reeves is likely to adjust income tax thresholds, potentially pushing more earners into higher tax brackets. With the Institute for Fiscal Studies (IFS) estimating that lowering the personal allowance or basic-rate limit by 10% could yield billions, those in higher brackets need to prepare for greater tax liabilities.
Pension tax relief reforms
Significant reforms to pension tax relief could be on the table, with the potential to raise up to £15 billion annually. These changes are expected to affect those benefitting from higher-rate tax relief, potentially making pension contributions more costly for both individuals and employers.
Capital gains tax (CGT) increases
Reeves may also increase CGT rates or broaden the taxable base, potentially aligning it more closely with income tax. While this could generate revenue, it risks impacting investment portfolios.
Inheritance tax (IHT) adjustments
Changes to IHT, particularly around pensions, business assets, and agricultural land, are expected to raise additional revenue. Caps on exemptions and potential reforms to relief on Alternative Investment Market (AIM) shares could have a significant impact on estate planning.
Fuel duty increases and environmental taxation
Ending the freeze on fuel duty could raise £6 billion annually, a move aligned with environmental goals. This may impact businesses with high fuel consumption, particularly in logistics and transport sectors.
Windfall taxes on banks and private equity
The October budget may introduce windfall taxes on banks and higher taxes on private equity profits, targeting the substantial gains these sectors have seen amid rising interest rates.
- Windfall Taxes on Banks - As banks benefit from widened net interest margins, a proposed one-off windfall tax could significantly impact their profitability and lending capacity. While this measure aims to generate revenue for the Treasury, it may lead to reduced lending, particularly affecting small and medium-sized enterprises (SMEs) that rely on bank financing.
- Increased Taxes on Private Equity Profits - Reeves is also expected to align the taxation of carried interest in private equity with income tax rates, currently at 28%. This could discourage investment in higher-risk ventures and shift private equity firms toward lower-return strategies, potentially slowing innovation and start-up funding in the UK.
Revised fiscal rules
Reeves may introduce or revise fiscal rules, creating space for increased investment without destabilising public finances. Businesses looking to benefit from potential growth areas, including green infrastructure and housing, will need strategic advice to take full advantage of these opportunities.
As the UK prepares for Reeves' budget, Tees is ready to assist clients in understanding and responding to the challenges and opportunities presented by these potential measures. Our team of legal and financial experts are equipped to provide tailored advice, helping businesses and individuals alike plan in a changing economic environment.
About Tees
Tees is a leading UK-based legal and financial advisory firm with over 110 years of experience. It offers expert services in a wide range of areas, including tax planning, wealth management, corporate law, and estate planning.
Our team of specialists can help individuals and businesses navigate complex legal and financial matters, ensuring they are well-positioned for the future.
We provide bespoke financial planning, pension advice, wealth management, estate planning, and corporate law services, helping clients adapt to changing regulations, maximise their financial potential, and achieve their long-term goals. Additionally, we can assist businesses in transitioning to greener alternatives, managing the financial impact of increased fuel duties, and capitalising on new government investments.
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