August 28th 2024.
As we approach the month of October, Chancellor Rachel Reeves is in the midst of making tough decisions about what will go into the upcoming Budget. With two months left until she takes the stage at the House of Commons to deliver Labour's first Budget in 14 years, there is much anticipation and speculation about what announcements will be made.
The government officials are keeping a tight lid on any information that may hint at the contents of the Budget. This is not surprising, as many decisions have yet to be made and will likely take some time before they are finalized. However, one thing is for certain - the Budget is going to be "painful", as Prime Minister Keir Starmer himself has warned. In a speech given in the garden outside Downing Street just yesterday, he advised the British public to prepare themselves for a rough ride.
With very little information available about the Budget, people have been left to speculate about who will be most affected by this "pain". The government has ruled out certain options, narrowing down the possibilities for what may be announced on October 30th. However, much of the attention has been focused on two particular sources of revenue - inheritance tax and capital gains tax.
During a press conference in Scotland, Reeves was asked about the possibility of an increase in either of these taxes. Refusing to give a definite answer, she stated, "I'm not going to write a Budget two months ahead of delivering it. We're going to have to make difficult decisions in a range of areas." It remains to be seen what the final decisions will be.
For those unfamiliar with capital gains tax, it is a tax that is paid on the profit made from selling certain assets. This includes personal possessions worth £6,000 or more, property that is not one's primary residence, and business assets. It also applies to shares that are not held in an ISA or PEP. However, there are several exemptions and details that can be found on the government website.
According to a recent report by The Telegraph, there has been a surge in sales of property and shares by middle-class clients of wealth managers. This is due to the anticipation of a possible increase in capital gains tax in the upcoming Budget. It has been suggested that the higher rate of 20% may be raised to 45%, bringing it in line with income tax.
Inheritance tax, on the other hand, is a tax that is paid on the property, money, and possessions of someone who has passed away. However, it only affects estates with a value of more than £325,000, and those who leave everything above that threshold to their spouse, civil partner, or certain charities are exempt. As with most taxes, there are various exemptions and details that can be found on the government website. The current standard rate for inheritance tax is 40%, and any changes made in the upcoming Budget may only affect a small portion of the population.
Aside from these two taxes, there has been speculation about potential changes to pension tax breaks. A recent report by the Fabian Society, a left-of-centre think tank, suggested that reducing and redistributing tax relief for pensions could generate at least £10 billion a year. This, along with other possible changes, may be part of Labour's manifesto promise to "not increase taxes on working people". However, the details of this promise are vague, and it remains unclear who exactly is included in the category of "working people" and which taxes fall under this pledge.
With the Budget still two months away, there is much left to be revealed. As the government continues to keep a tight lid on any information, the public is left to ponder and speculate about what October's Budget will bring.
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