Who, What, when & How will Labour Change tax in the October budget?

UK tax

6 Sept

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The upcoming October 2024 budget under Prime Minister Keir Starmer is set to bring significant financial changes, particularly for wealthy individuals and UK expats. Starmer has pledged not to increase income tax, VAT, or national insurance, or remove the personal residential relief of capital gains tax on your home, but his government has an agenda of change, to ‘invest’.

A government doesn’t have money - they either tax the people’s income or capital or they borrow money and pay back with interest from your rising future tax. The money to invest in change will come from new taxes, taxes that don’t rise because they are new taxes at new rates on new things. 60 years ago in 1964 Labour introduce Capital Gains tax on savings that people accumulate.

Labour’s coming of age will be focusing assets saved, created or inherited in saving, crypto-currencies, investments, property and your business. The claim is they are taxing the wealthy, especially non-domiciled individuals (non-doms), in fact they are taxing any one who has saved for retirment, for a rainy day, for their family, or to build a business over the years. Starmer's strategy includes capital gains tax (CGT) changes, inheritance tax reforms, and increased dividend taxation as potential sources for revenue.

Labour’s commitment to nationalise sectors like railways will require substantial capital, potentially driving the need for higher taxes on property and assets, particularly those held by affluent individuals. The possibility of CGT rates being aligned with income tax rates is being discussed, though this could risk decreasing revenue if investors change their behaviour to avoid these taxes.

With these anticipated shifts, wealthy individuals should act before October, as these changes may impact them retroactively for the current tax year. Historically, the UK government has made such decisions without major retrospective adjustments, but acting preemptively remains a prudent strategy for those with significant assets.

The government is expected to reveal these details in the official October budget, and the effects could ripple into sectors like real estate, capital investment, and pensions, affecting both domestic and international stakeholders.

Key takeaways:

No increase in VAT, income tax, or national insurance.
Targeted tax increases on wealth, CGT, dividends, and inheritance.
Rail nationalisation to be funded through tax hikes on wealthiest asset rich individuals.

These anticipated changes reflect the Labour government’s broader policy agenda of reducing inequality while balancing nationalisation efforts.

Horror Show

Here are some potential tax grabs that could be PR promoted as ‘simplifications’ of the tax system that could be introduced in time for Halloween at the end of October.

Various Capital Gains Tax tax complications could be simplified so capital tax rates of 10%,18%,20% & 24% are aligned to income tax rates 20%, 40%, 45%
They could remove any remaining tax allowances for Dividends, Savings interest and Capital Gains - so only one personal allowance rate of £12,570 applies to income or gains taxes.
Inheritance tax is a Capital Gains tax at 40% with a higher allowance, the long-standing fixed allowance of £325,000 may not be reduced, but Inheritance tax rules could be changed so tax is paid on the first death of a spouse, or additional capital gains tax applied before the Inheritance tax.
Expats in the UK will have their Non-Dom status changed from April 2025 making them liable to worldwide UK Income, Capital & Inheritance Taxes
UK Expats Living and Working Abroad could suffer UK rule changes and have all incomes and gains rising in the UK taxable first, at higher UK tax rates, without tax saving deferral or double taxation allowances.
Pension Funds inheritance rules could be simplified. Some pensions die with you, some can past funds to the family. Pension funds could be charged to Inheritance Tax on death.

ProACT have solutions and guidance for Family & Business to protect your wealth across borders and down generations.

For help and guidance, contact us.

Tax in the UK