Autumn Budget Predictions 2024! Key Areas to Watch

With the Autumn Budget approaching, economic commentators and business leaders are speculating on the likely announcements. Labour’s government has consistently reiterated its focus on economic growth, fiscal responsibility, and addressing inequality, all of which will likely influence the upcoming Budget. Here’s what we anticipate:

The Chancellor Rachel Reeves will deliver her first Autumn budget on 30 October 2024.

Revenue-Raising Tax Measures
A key component of Labour’s economic strategy is the introduction of several “revenue-raising” tax policies, many of which have already been consulted on over the summer. Some of these include:

VAT on private school fees: This proposal has been a cornerstone of Labour’s policy, aiming to generate revenue by removing tax breaks for elite educational institutions. In addition, the removal of charitable Business Rates relief for private schools is expected to supplement these changes.

A reform of the non-domicile tax regime: Starting from April 2025, the government plans to replace the current non-dom regime with a residence-based system. The specific details of the new policy design remain in development but are expected to undergo changes based on feedback from consultations.

Changes to the taxation of carried interest: This will likely affect the private equity sector, aiming to bring in additional revenue by adjusting how profits are taxed.

Extension of the Energy Profits Levy: This measure, aimed at ensuring energy companies pay their fair share, is expected to continue under the current administration.

Collectively, these measures are estimated to raise around £8.5 billion by 2028/29, providing a substantial boost to government finances.

Tax Pledges: What Will Not Change
Labour has been firm on certain tax policies, especially those affecting individuals and businesses:

No increase in the basic, higher, or additional rates of income tax, national insurance, or VAT: These commitments have been at the heart of Labour’s promises, even in the face of a £22 billion fiscal shortfall. This suggests that while tax rates won’t rise, the government might still tweak other aspects, like tax thresholds.

For instance, freezing income tax thresholds until 2028 will gradually pull more taxpayers into higher brackets due to fiscal drag, increasing tax revenues without explicitly raising rates. However, given Labour’s broader pledge not to burden “working people,” drastic changes to thresholds at the lower end are unlikely.

Corporation tax: The government has pledged not to raise the headline rate of corporation tax beyond its current 25%. However, this leaves scope to adjust other elements of the system, like allowances and deductions, which could indirectly increase the tax burden for businesses.

Business Tax Roadmap in the Autumn Budget
One of the most anticipated elements of the Autumn Budget is the government’s business tax roadmap, set to be unveiled on 30 October. This roadmap will outline the long-term tax framework for businesses and provide the certainty needed for companies to plan their investments. While details are still sparse, it’s expected to include:

Continuation of full expensing and the Annual Investment Allowance: These tax breaks encourage business investment by allowing companies to deduct the full cost of certain assets from their taxable profits. Labour has pledged to maintain these incentives to stimulate growth.

Corporate tax base reforms: Beyond the headline rate, adjustments to the corporate tax base could feature in the roadmap. For example, clarifications around capital allowances may be introduced to streamline the rules on what qualifies for deductions, particularly for assets used in leasing.

Business rates reform: Labour has signalled an intention to reform the business rates system, aiming to create a level playing field between traditional retailers and online giants. While this is an ambitious goal, there is little clarity on how the government plans to implement such a significant overhaul.

R&D tax credits: While not a central feature of Labour’s manifesto, the government has previously expressed its support for the current R&D tax incentive structure. However, Labour may introduce a sector-specific evaluation of the scheme, starting with life sciences, to ensure it delivers the intended economic benefits.

Balancing Detail with Flexibility
As with past fiscal plans, the Autumn Budget will need to strike a balance between providing enough detail to boost business confidence and leaving enough flexibility to respond to unforeseen economic challenges. This is particularly important given ongoing global uncertainties, from geopolitical tensions to potential market shocks.

The Unknown
Lastly, there remain significant uncertainties. While the Government has already identified £5.5 billion in savings for this year and £8.1 billion for next, this still falls short of addressing the £22 billion fiscal gap. The Chancellor has warned that more “difficult decisions” are to come in the Budget, particularly concerning spending cuts, welfare reforms, and potential tax changes.

The extent to which the Government plans to reform existing taxes or introduce new ones remains speculative. With the Prime Minister’s emphasis on ensuring that “those with the broadest shoulders bear the heavier burden,” and limits on increasing major revenue-raising taxes, attention is turning to taxes that haven’t been ruled out—such as inheritance tax and capital gains tax (CGT)—as possible targets for reform to generate additional revenue.

There is also growing speculation that the Government may consider introducing a flat rate of income tax relief on pension contributions. Currently, higher and additional rate taxpayers benefit the most from pension relief, as it aligns with their marginal tax rates. A flat rate would shift this balance, fitting the narrative of placing more of the burden on wealthier individuals. However, while the concept seems straightforward, such a change could introduce significant complexity, particularly in relation to defined benefit pension schemes. Administrative challenges would also arise, especially where pension relief is facilitated through salary sacrifice arrangements.

In conclusion, the Autumn Budget is shaping up to be one of fiscal restraint and strategic investment. With Labour’s focus on delivering growth while managing the public finances, businesses and individuals alike will be watching closely to see how the government plans to navigate the economic challenges ahead.

Edge Tax are currently engaging lots of clients wanting to act now on areas just as capital gains, and IHT however a few are holding off to hear what happens in the Autumn Budget . If you get to next wedneday and want to act quickly then please contact a member of the team. – SPEAK TO EDGE TAX

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