No pain, No gain? No thank you!

Sir Keir Starmer, has said that the budget in October will be “painful” and the government would be making “big asks” of the country, in particular to be prepared to “accept short-term pain for long-term good” and in true Labour style, suggested that those with the “broadest shoulders should bear the heavier burden”.

However, no details were given about what the measures would be, other than Sir Keir reiterated that national insurance, VAT and income tax would not go up. If you believe that then what's the big deal? How will Rachel Reeves "top up the country's coffers"?

There are a number of areas of tax that may be increased, and these could include the following:

• Focus on tax thresholds AKA Fiscal Drag: the government collects more tax as more people are caught by higher rates as their wages rise, but thresholds do not. Income tax thresholds are already frozen until 2028 and this could be extended.
• Increases in capital gains tax – CGT rates are lower than income tax rates, and Labour have made no secret that they are looking to increase these some suggesting that they will be aligned with income tax rates This is of course very unpopular with landlords who currently benefit from 18% and 25% rates of tax on their disposals, but in my personal opinion, is unlikely to have a huge impact on the Private Rental Sector (PRS) as landlords will be encouraged to hold on to property to avoid the tax charge, and as a result the government will not collect the level of taxes their rhetoric suggests. It may deter new investors from entering the PRS, but with no apparent strategy for reducing the housing shortage, it is possible that property could become popular again despite the constant tax-attack.
• Reduce pension tax relief – Currently pension savers receive tax relief at the same rate as their income tax. However, there has been speculation that a flat rate of pension tax relief could be brought in and this would raise funds for the government. Another own-goal here perhaps?
• Raise inheritance tax – The government could raise the rate of inheritance tax or remove some of the reliefs that are available. At 40% this is already a strong rate of tax, and the tax-free allowance hasn't been increased from ￡325k since 2009. However, since a small proportion of society are exposed to IHT, this is unlikely to impact votes or create a significant tax-haul.

If you are concerned about how the budget may affect your situation, please feel free to talk to us. We will be monitoring the October 30th budget very closely and will keep you informed via Toni Hunter Ltd .

So what can you do to prepare?

Firstly, I believe that the best policy is to focus on what you can control. Uncertainty and trying to quickly change your plans to accommodate these sorts of changes is rarely good for business.

Secondly, since HMRC started investing in technology, we have seen more and more changes to tax policy being implemented soon after they were announced. It is possible that we wont be given until next April to implement tax planning strategies.

"Forewarned is forearmed" they say, but this could be a simple case of "keep calm and carry on" after all, if you don't focus on creating wealth, you wont have much tax to worry about, but you also wont be able to cope with the increased cost of living, or afford to retire...