Two taxes are most likely to be increased according to experts.
Andy Burnham and John Healey could raise taxes in this Budget (Image: Getty)
It’s less than three months until the next Budget – the first under new pairing Prime Minister Andy Burnham and Chancellor John Healey.
And with reports this week that the UK’s debt has increased amid a sudden uptick in borrowing costs, it represents a pivotal moment for financial policy, especially after years of relatively stable and balanced Budgets from predecessor Rachel Reeves.
But with so many spending commitments already made, such as £2 bus fares, a VAT cut on pubs and energy bills and the state pension triple lock staying in place, there could be tax rises on the table.
Michele Tieghi, Financial Expert and Founder of psyfi money, has revealed the actual likelihood of tax rises being put into action.
He analysed Income Tax, National Insurance, VAT, Capital Gains Tax, Inheritance Tax, Wealth Tax, and Savings Tax in order to ensure the British public aren’t blindsided by any changes come the end of October, and have time to act.
Income Tax, National Insurance, and VAT:
Tax rise: Unlikely
“Labour have repeatedly committed not to raise income tax, National Insurance rates, or VAT, so it would be a huge shock for them to do so; for this reason, these remain unlikely.
“However, it’s very likely that Andy Burnham’s government will find ways of getting around this. Freezing thresholds, personal allowances, and reducing allowances for higher earners will allow fiscal drag to become a major source of extra revenue.”
Capital Gains and Inheritance Tax:
Tax Rise: Likely
“Changes to capital gains and Inheritance Tax remain much more of a possibility, with this having been frequently discussed by experts in the past as an easy way to raise revenue.
“For capital gains tax, they could reduce exemptions, increase rates, restrict Business Asset Disposal Relief, and alter reliefs for entrepreneurs.
“Whereas when it comes to Inheritance Tax, Andy Burnham’s government could tighten trust rules, alter gifting exemptions, reduce reliefs, and increase compliance.”
Wealth Tax:
Tax Rise: Unlikely
“A wealth tax has been a hot topic in recent months, but this remains unlikely due to how difficult it would be politically and practically to implement.
“This can be done by taxing income above a certain level of wealth, for example, an annual tax of two per cent on wealth above £10 million.
“However, critics say that it is difficult to implement due to complex administration around how assets are valued, and that the tax itself often brings in less than expected.
“For example, Scotland raised its top income tax rate to 48 per cent for high earners, and recent data has shown this collected £22 million less than expected.
“Not only this, but there are also fears that a wealth tax could drive away potential investors, during a time where young people are finding it difficult to find employment.”
Taxing Savings:
Tax Rise: Unlikely
“There’s also been talk around taxing savings; however, this will be unpopular with many, so it wouldn’t be the top choice for the Labour Government.
“In theory, they could reduce the personal savings allowance, lower starting rates for savings, and increase taxation on investment income, which would hit pensioners, middle-income families, and cautious savers the hardest.”