This year’s Spring Statement saw Chancellor Rachel Reeves eager to increase spending despite Britain’s current state of economic unrest.
The heavy focus on taxation in the Spring Budget makes reforms and additions likely, both through expanding the reach of existing taxes and implementing new ones. Head of Private Wealth Rhea Rughani (TEP) sets out what we know so far.
With the Budget now set for the 26th of November, here are some of the key predictions – and rumours – about the Chancellor’s potential changes.
Broadening the scope of existing taxes
Reeves must stick to a manifesto promise to not increase income taxes, National Insurance, and VAT for working people. So where can she make adjustments, without increases? Some headline-grabbing potential examples of this currently include:
· Lowering the VAT threshold from £90k to £30k to encompass smaller businesses.
· Increasing the 7-year IHT rule to 10 years.
· An extension of the freeze on income tax thresholds beyond the promised 2028.
· An increase in the age threshold for National Insurance liability.
Introducing a National Insurance levy for landlords
The Resolution Foundation think tank have proposed an expansion on the current regulations dictating whether landlords must pay the tax. Their recommendation is that all landlords should pay National Insurance. They have suggested a basic rate of 20%, with an additional 8% if property earnings exceed £50k a year.
Abolition and Replacement of SDLT
SDLT is an unpopular and sometimes prohibitive barrier for property purchases, for first-time buyers as well as those looking to move or downsize. However, simply removing the land tax would result in £11.6bn in lost revenue.
A national property tax on homes over £500k has been mooted as a possible replacement. This tax would be payable on a yearly basis at a 0.54% rate on homes valued between £500k and £1m. Homes above this threshold would be taxed at a higher rate. Concerns have been raised about the loss of the upfront SDLT payments.
Removal of CGT Relief
Another rumour is the removal of CGT relief on more costly homes. In this scenario, individuals would lose the benefit of Private Residential Relief, and no longer benefit from main home exemptions. However, as Kier Starmer ruled out the possibility of implementing CGT on main homes ahead of last year’s election, this is unlikely.
Wealth and Mansion tax
Whilst this idea has been floated around the Labour party, the logistical difficulties and undoubted unpopularity of such a tax makes implementation unlikely. Similarly, a potential mansion tax for properties valued at over £1.5m has been suggested, albeit unconvincingly.
Given the current property market, with terraced houses in London easily surpassing such a threshold, it seems unlikely that such a tax will be implemented.
Pension Reforms
Following research from HMRC, limitations on salary sacrifice, such as removing the national insurance exemption above a £2,000 per year threshold or altogether, appears to be forthcoming.
Another unpopular change would be a reduction or removal of the 25% tax-free pension lump sum. Last year was rife with anticipation of such changes which never came about, so it is unclear whether action will be taken.
Confirmed changes
Whilst changes may seem daunting, it is important to remember that all of this is still mere speculation. Here’s what we do know:
Confirmed changes set to be implemented on 6th April 2026
· Further increasing CGT rates for Business Asset Disposal Relief and Investors Relief from 14% to 18%.
· Reforms to APR and BPR.
· Implementation of Making Tax Digital for Income Tax.
· Subjecting unused pension pots to IHT from 2027, although practical details on this measure as still unclear.
Further Information
We will continue to report on any details and any developments. Following the Budget, we will cover the key announcements and set out our views to equip you with a comprehensive image of how the changes may affect you. If you have any further concerns, please do not hesitate to contact a member of our team to assist you.
What to do now?
– Reviewing estate planning and gifting strategies
– Consider timing of asset disposal
– Explore pension planning
– Stay alert for draft legislation and consultation documents
The information contained in this article is general guidance only. The application and impact of laws can vary widely depending on the specific facts involved. The information in this article is provided with the understanding that the authors and presenters are not giving legal, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional legal, tax or other competent advisers. Before making any decision or taking any action, you should consult a Child & Child professional.