October budget to be ‘painful’

The Prime Minister, Sir Keir Starmer, speaking at Downing Street recently, has said that the budget in October will be ‘painful’ and the government would be making ‘big asks’ of the country.

He said that the country would need to be prepared to ‘accept short-term pain for long-term good’ and 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 Kier reiterating that national insurance, VAT and income tax would not go up.

What could change?

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

• Focus on tax thresholds: By freezing thresholds – the amount of money at which any tax starts to be paid – the government collects more tax as more people are caught by higher rates of tax as their wages rise. Income tax thresholds are already frozen until 2028 and this could be extended.
• Increases in capital gains tax – Capital gains tax rates are lower than income tax rates, so the government may look to increase these.
• 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.
• Raise inheritance tax – The government could raise the rate of inheritance tax or remove some of the reliefs that are available.

Whilst many people will be understandably concerned about the changes the Budget may bring, there’s little that can be done in advance of the announcements. 

As always, we’ll be listening very closely to the Chancellor’s speech on the 30^th October and reading the small print as soon as it’s available and will update you on all the changes as soon as we’re able to do so.