30 October Budget: what it could mean for you

Here is a summary of those tax pledges and some possible changes in store on Budget Day, 30th October 2024, to help you see what it could mean for you.
 

A manifesto summary

Income Tax: Maintain current thresholds until 2028
Corporation Tax:  No changes
Capital Gains Tax: Revisions to the taxation of carried interest for private equity
Inheritance Tax: To end the use of offshore trusts to avoid inheritance tax
Indirect Taxes: Introduce VAT on private school fees
Employment Taxes: Enhance employee rights
Levies and windfall Taxes: Increase Energy profits levy for oil and gas
Net-zero: Reintroduce the ban on the sale of new internal combustion engine (ICE) cars from 2030 and encourage use of Electric Vehicles.

Business Taxes

Direct Taxes
The Labour manifesto did not propose an increase in corporation tax, nor did it suggest an end to the full expensing rules for capital allowances. However, it did pledge to maintain the £1 million Annual Investment Allowance. Additionally, it promised to introduce a business tax roadmap within six months of taking office, aimed at providing businesses with greater certainty for investment decisions. 

Business rates
A proposed replacement to create a fairer system with the ‘giant online retailers.’ A consultation process can be expected on this.  

Business investment
The manifesto included intentions to boost investment in UK R&D. There has been no mention of changing the current R&D reliefs for corporate investment.

Regarding broader business investment, the Labour Party made several pledges aimed at promoting growth and wealth creation. These include proposals for a state-owned energy company, GB Energy, to drive investment in the net-zero transition, and the establishment of a UK wealth fund, seeded with £1.5 billion in annual government funding, to stimulate investment in targeted sectors. Additionally, Labour proposed an industrial strategy and a ten-year infrastructure strategy.

Levies and windfall taxes
The existing Energy Profits Levy (Oil and Gas) and Electricity Generators Levy windfall taxes are due to expire on 31 March 2029. The Labour party has pledged to extend these until the end of the next parliament, raise the rate by 3% and remove reinvestment reliefs.

Indirect tax
Labour have said they will introduce VAT on private school fees and remove business rate relief. There could be anti-forestalling legislation introduced to cover pre-payment of private school fees. 

Pledges made also included the introduction of a UK Carbon Border Adjustment Mechanism (CBAM), similar to the current EU CBAM, for imports by 2027.

Enforcement
Labour pledge to provide HMRC with 5,000 more staff, expected to work on reducing the UK tax gap. This could result in increased compliance enforcement. 

Planning
Labour has pledged to remove red tape to speed up development and give priority to development by updating national planning policy.

Stability
To further promote stability, Labour has committed to holding one fiscal event per year.

Employment taxes

The Labour manifesto did not propose any changes to auto-enrolment obligations for employers or employers’ National Insurance Contributions (NIC). However, they pledged to remove the age bands currently in place for the National Minimum Wage, to give a single rate for all workers and to ensure that this rate is a “genuine living wage”. 

Employee Rights
Labour’s pledge is to make work pay by banning zero-hour contracts and ending fire and rehire. Their intention is to improve workers terms and conditions and ensure protections at work are fit for the world today. They pledge to take action to reduce the gender pay gap.

Training
Labour have said they would reduce the long-term dependence on overseas workers in sectors such as health, construction and social care by introducing workforce and training plans. Additionally, this may include measures to ban employers and recruitment agencies from hiring overseas if they breach employment laws, and a requirement to advertise jobs to UK residents for a specified period before offering them to foreign workers.

Labour have pledged to replace the current apprenticeship levy with a "flexible Growth and Skills Levy”, with Skills England consulting on which courses would be eligible.

Personal Taxes

Tax bands and allowances
Labour has promised not to raise income tax rates, but they have also made no proposals to adjust tax bands. As wages rise, more people will gradually move into higher tax brackets. With plans to freeze current thresholds until 2028, the UK's overall tax revenue will increase.

National Insurance Contributions
Labour pledged not to increase NIC for individuals.

Capital Gains Tax
Labour intends to "close the loophole" that allows private equity carried interest to be taxed at 28%, as it is currently treated as a capital gain. The future tax rate for carried interest is yet to be confirmed. However, it has been reported that capital treatment may still apply when a fund manager puts their own capital at risk, similar to practices in other countries. A consultation on when carried interest should be taxed as income is possible this year.

Other Capital Gains tax measures were not mentioned in the Labour manifesto, but they have ruled out CGT on the sale of primary residences. Reports suggest a potential increase in CGT rates to raise tax revenue if needed. Any such changes would likely be subject to consultation.

Inheritance Tax
There was no other reference to IHT in the Labour manifesto, other than the proposals on offshore trusts. However, reports suggest options include changing the rules for Business Relief, Agricultural relief, and lifetime gifts to raise revenue. 

It would be likely that Labour would present any reform options to the Office for Budget Responsibility for analysis before announcing any proposals along with a consultation period. 

Pensions
During the election campaign the plan to re-introduce the lifetime allowance charge was dropped. Previous campaigns have included reducing tax relief on pension contributions for higher earners. 

Stamp Duty Land Tax
Labour's intentions are to add 1% to the SDLT surcharge applied when overseas nationals buy UK residential property. This would increase the surcharge to 3%.  

Non-dom status
The Labour manifesto confirms that it plans to abolish the ‘non-dom loophole’ originally proposed by the Conservative government, although there are no specific proposals for a replacement regime.

Labour have stated that they support many aspects of the original proposals but would ensure that all foreign assets within trusts would be liable to UK IHT. 

Net-Zero Tax measures

Labour has proposed a range of R&D and investment mechanisms aimed at helping to decarbonise the UK economy. They have committed to reinstating the original phase-out date of 2030 on the sale of internal combustion engine cars and speed up the rollout of electric vehicle charging points.

What’s next?

The government has announced that an Autumn Budget will be held on 30 October 2024. In the meantime, if you would like to discuss any of the specific tax proposals above, please get in touch with our friendly and trusted team of experts on 01380 723692 or email us.