Keir Starmer has all but confirmed significant tax increases in next month’s budget, cautioning that a “painful” budget is necessary after Labour discovered a £22 billion gap in public finances.
In his first major speech as Prime Minister at No.10, Starmer criticized the economic management of past Conservative governments, stating it will take years to fix what he called “14 years of rot.” The stark message aims to prepare the public for tough times ahead, as ministers brace for difficult decisions.
The government has repeatedly refused to rule out increases to capital gains tax, inheritance tax, and pensions, emphasizing the need to “fix the foundations” of the British economy. Starmer noted, “There is a budget coming in October, and it’s going to be painful. We have no other choice given the situation we’re in. Those with the broadest shoulders should bear the heavier burden.”
While Starmer and Chancellor Rachel Reeves have ruled out hikes in income tax, national insurance, and VAT, they have expressed dismay at the scale of the fiscal challenges. Reeves is exploring ways to generate revenue, including raising capital gains tax and inheritance tax, while maintaining tight departmental budgets and revising how public debt is calculated.
In an interview, Reeves alluded to the “difficult decisions” the government might face but stopped short of promising to freeze the levies. Currently, inheritance tax is set at 40% on estates valued over £325,000, while capital gains tax applies to the sale of assets worth more than £3,000. When questioned about potential increases to these taxes, Reeves responded that she is “not going to write a Budget two months in advance,” noting that decisions on taxation would be disclosed on Budget Day.
The uncertainty follows Labour’s election campaign, during which a recording surfaced of Darren Jones, now Chief Secretary to the Treasury, suggesting that inheritance tax could address “inter-generational inequality” by redistributing wealth.
The potential tax changes are causing concern among business owners and wealthy individuals, who fear higher tax liabilities. Entrepreneurs who may sell their businesses could face increased capital gains tax rates, eroding the financial rewards of their hard work.
With tax hikes looming, business owners need to act quickly to implement tax planning strategies before the budget is finalized. Taking proactive steps now can help soften the impact of the expected changes, avoiding the risk of higher tax burdens once the new measures are enacted.
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.
For more information on our tax planning services and to discuss your options with one of our team, simply click the link below:
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