A litany of crippling tax rises could be on the playing cards this autumn as Chancellor Rachel Reeves appears to strive to restore the injury of last 12 months’s Budget.
Financial consultants have picked out 11 key tax rises that look to be possible candidates for Labour to use to strive to proper the nation’s financial issues. While it’s extremely unlikely that all 11 tax rises would be applied at the same time, finance firm Bishop Fleming has advised that these 11 financial levers are the most possible that the authorities will flip to this autumn when Rachel Reeves announces her next Autumn Budget in October.
The firm factors to a 70-year high in taxation, and a staggering national debt, compounded by poor choices in the last finances, as the cause rises are needed. It said, as half of spending review response in June: “The national debt is almost 100% of GDP and tax revenues as a share of GDP are nearing 38%, or a 70-year high. With such high debt, the government is paying out around £105bn per year in debt interest. That is about twice the spending on defence.”
Of course this isn’t something Labour prompted to occur in a single 12 months, but the end result of a long-term pattern for the UK’s funds. However, Labour’s October 2024 Budget made issues worse.
It provides: “The October 2024 Budget, with its National Insurance rises, new inheritance tax proposals and large increase in the National Minimum Wage, impacted consumer and business confidence, affecting UK growth prospects and resulting in growth being less than the Chancellor’s own projections (the economy shrank by 0.3% in April). Without growth, the Chancellor’s spending plans are stymied, leading to more tax rises and more borrowing.”
It provides: “The Chancellor’s 2025 three-year spending review is set against £40bn in tax rises and £30bn extra borrowing in last year’s Autumn Budget, continued low economic growth, a rising tax burden and increasing welfare spending. With new spending commitments laid out, including a restored winter fuel allowance, tax rises in this year’s Autumn Budget appear inevitable.”
It provides: “There is an old saying that Chancellors have a shovel for every corner; there is no place or transaction that cannot be taxed. George Osborne was a regular proponent of finding new taxes.
“And if the current Chancellor sticks to her pre-election pledge of no increases in income tax, employee national insurance and VAT, then that shovel has to dig deeper into the pockets of individuals and businesses in more new ways to fund the government’s spending commitments.”
It says a leaked doc from Deputy Prime Minister Angela Rayner included seven concepts which would raise an additional £4bn a 12 months.
Those concepts included:
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reinstating the pensions lifetime allowance
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rising taxes on dividends to stage up with income tax charges and eradicating the dividends allowance
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eradicating inheritance tax from AIM shares
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closing business property stamp responsibility loopholes
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raising the company tax bank surcharge to 5%
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rising the charges of Annual Tax on Enveloped Dwellings (ATED)
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freezing the extra fee income tax threshold beyond 2028
Bishop Fleming also says that council tax, office pension wage sacrifice modifications and a tax threshold freeze as nicely as tax allowance freezes are more doable tax rises, bringing its complete advised tax hike choices to 11.
It added: “We also know that the Chancellor has launched an inquiry into workplace pension schemes to see if money could be released for public investment. This could also include removing the valuable tax/NIC relief under salary sacrifice schemes for pension contributions.
“Also on the horizon are likely large rises in council tax (to pay for the police budget) and further freezes to tax allowances and thresholds.”
Other financial consultants also recommend that taxes will inevitably be raised this autumn.
Niesr, which is impartial of any get together or authorities, says that the authorities may look at VAT, pensions allowances (such as the aforementioned wage sacrifices) and prolonging freezes for Income Tax thresholds, two of which were highlighted by Bishop Fleming as nicely.
It said a 5 share level increase to Income Tax on the primary and greater fee of Income Tax would help plug the gaps. This would take primary to 25% (from its present 20%) and greater to 45%, up from 40% now.
Stephen Millard, a senior economist at NIESR, said: “We think the current budget deficit will be around £40bn, or £41.2bn to be precise. It means if the chancellor wants to maintain a buffer of £9.9bn then she will have to find £51.1bn, either in extra taxes or lower spending or both, annually, by 2029-30.”
Niesr said the holes in the authorities’s finances were partly down to weakening growth over the previous few months, that means a decrease tax take and greater authorities borrowing as a end result, as nicely as the reversal of welfare finances cuts which had been expected to save £5.5bn a 12 months but which have now been considerably diluted.
Any of these rises, if chosen to be put in place, would be in addition to will increase announced last 12 months, such as making use of Inheritance Tax to pensions, which is set to come into place in 2026.
A Treasury spokesperson instructed the BBC: “As set out in the plan for change, the best way to strengthen public finances is by growing the economy – which is our focus.”
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