Goldman Sachs has projected that Chancellor Rachel Reeves will implement tax increases of “at least” £15bn to £20bn in the upcoming October Budget, with a likely emphasis on reforming CGT rates, IHT reliefs and pension reliefs.
In a note to investors, Sven Jari Stehn, lead analyst at Goldman Sachs, explained, “We expect that the government will aim to raise at least £15bn to £20bn per year in additional receipts on top of the tax increases announced in the manifesto,”
Goldman Sachs anticipates that the Chancellor will pursue a range of tax-raising measures, stating “We expect that the Chancellor will...consider a series of...tax-raising measures, which could include reforming capital gains tax, scrapping inheritance tax reliefs, and altering tax reliefs on pension contributions.”
Capital gains tax is generally levied at rates ranging from 10% to 24% for asset disposals such as company shareholdings and property. The Institute for Public Policy Research thinktank has recommended that the Chancellor increase this rate to match the 40% income tax level for higher-rate taxpayers.
Researchers at the University of Warwick estimate that equalizing capital gains and income tax rates at 45% could generate up to £16bn annually. However, critics warn that significant tax hikes might drive individuals to exploit loopholes.
Proposed tax reforms have also faced scrutiny for their potential unintended consequences. Officials are reportedly considering a shift to a flat rate of relief on pension contributions, replacing the existing system where relief is based on the saver’s marginal tax rate. Additionally, Reeves may explore reducing the tax-free withdrawal limit for pensioners.
The anticipated tax changes in the upcoming Budget could significantly impact UK business owners. Reforming capital gains tax and altering tax reliefs on pension contributions may lead to higher tax liabilities for individuals and businesses alike. Business owners who rely on capital gains from property sales or investments for retirement would face increased taxes, which would significantly affect their decision making over the future direction of their businesses.
The abolition or curtailment of inheritance tax reliefs would in particular create a far more challenging financial environment for business owners if the 'do nothing' scenario automatically leads to a huge tax bill upon death.
The Treasury has reiterated that “difficult decisions lie ahead” and stressed that tax and spending decisions “will be taken at the Budget in the round.”
How Can Qubic Help?
To navigate these potential changes, Qubic offers tailored tax planning services. Our expertise can help mitigate the impact of higher taxes and leverage current reliefs effectively. The window of opportunity to leverage current tax rates and reliefs is narrowing, and the time to act is now.
We understand that the uncertainty surrounding tax changes can be challenging, and we are here to help you.
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