At the time it seemed a sensible idea to allow changes in tax to be legislated before the start of the new tax year. In practice, it did not go to plan: Hammond himself presented a Budget the following March and then a series of political, and other, disruptions caused Budget timing to go off the rails. In 2022, there was no formal Budget – the Liz Truss meltdown was badged as ‘The Growth Plan’, although the media confused matters by calling it a mini-Budget.
In 2024, the latest resident of 11 Downing Street, Rachel Reeves, has reverted to an Autumn cycle for Budgets, with her premiere due on Wednesday 30 October. There was also a Budget in March of this year (from Jeremy Hunt), but whereas that offered pre-election cuts to national insurance, Ms Reeves’ offering looks set to be the classic post-election tax-raising Budget. When she presented her ‘Spending Inheritance’ review in late July, she warned, “I have to tell the House [the] Budget will involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax.’ The message was reiterated by the Prime Minister in a press conference speech in late August.
Those difficult decisions are somewhat constrained by the Labour party’s manifesto, which promised no increases to the rates of income tax, national insurance, VAT and corporation tax. However, that does not mean that any changes to those taxes are off-limits. For example, she could follow her predecessors and decide to freeze bands and allowances for a further couple of years. She might, as one think tank has proposed, maintain VAT rates, but slash the VAT threshold from £90,000 to £30,000.
The manifesto made no comment on the future of the main capital taxes – capital gains tax and inheritance tax – both could be in the Chancellor’s line of fire. More lucrative would be the reform of tax relief on pension contributions.
If you are suddenly thinking that early autumn is now the time for pre-Budget tax planning, you are right.
Tax treatment varies according to individual circumstances and is subject to change.
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