The UK Autumn Budget set to be announced on 30th October 2024 is highly anticipated, as it will address key economic challenges while setting the tone for fiscal and economic policy moving forward. Chancellor Rachel Reeves is expected to balance growth stimulation with fiscal responsibility, amidst ongoing inflation and public sector pressures.
Key highlights anticipated in the budget include:
Income Tax Thresholds
The freeze on income tax thresholds, which has already been in place, is likely to continue until at least 2028. This measure, while not directly increasing taxes, will mean that as wages rise, more individuals will find themselves in higher tax bands, effectively increasing the government’s tax intake without raising the rates themselves Money To The Masses | NerdWallet: Finance smarter
Capital Gains Tax (CGT) Changes
There are concerns about potential reforms to capital gains tax, particularly aligning it more closely with income tax rates. Currently, the government may be contemplating an increase in CGT to plug the financial deficit, though full alignment is not guaranteed.
Pensions
Possible adjustments to pension-related tax relief could be introduced. The tax-free lump sum that pensioners can withdraw is under review, with some speculation that this amount could be reduced to £100,000. This move could raise significant revenue but might be unpopular among pensioners. Additionally, the idea of introducing a flat tax relief rate on pensions has been discussed, which would benefit lower earners but might reduce the incentive for higher earners to save Capital Economics.
Stamp Duty
The budget may roll back stamp duty thresholds for first-time buyers, despite calls from various sectors to extend current relief. It is expected that the threshold for first-time buyers could be returned to £125,000 by 2025, down from the temporary £250,000 limit.
Fuel Duty
After years of frozen rates, there are speculations that fuel duty might rise by as much as 7p per litre, which could impact consumers at a time of high inflation. This is part of an effort to increase revenue while grappling with the fiscal shortfall.
The overall challenge for Reeves is balancing the need to raise revenue without stifling growth or worsening the cost-of-living crisis. With an expected £18 billion net fiscal loosening over the next few years, the government aims to avoid a return to austerity while still keeping inflation and debt under control.
This budget will set the stage for Labour’s longer-term economic strategy, particularly around investments in growth and public services, while also addressing the immediate financial gap.
