The UK Government is preparing for a closely watched Budget as pressure grows on the public finances. Several tax changes are being considered that could affect households, businesses and wealthy taxpayers, with the Chancellor under pressure to raise revenue.
Income Tax Thresholds Could Stay Frozen
The Government is expected to keep the income tax threshold freeze introduced in 2021. As wages rise, this can push more workers into higher tax bands.
Earners approaching £100,000 could also face higher effective tax rates as the personal allowance is withdrawn.
Pension Pots Could Face Inheritance Tax
The Government is expected to proceed with plans to bring some pension pots into inheritance tax.
The change could bring around 10,500 more estates into the tax system, while around 38,500 families could see their bills rise by an average of £34,000.
Mansion Tax Could Hit More Properties
A proposed mansion tax on properties worth more than £2 million could be expanded.
The original plans would charge between £2,500 and £7,500 a year and affect around 70,000 homes. Lowering the threshold to £1.5 million could bring another 200,000 properties into the scheme.
Changes to council tax and stamp duty are also being discussed.
Capital Gains Tax Faces Further Scrutiny
Capital gains tax currently reaches 24% for higher-rate taxpayers.
Some tax experts have called for capital gains rates to move closer to income tax rates, a change estimated to raise almost £20 billion a year by 2030.
Healey is reportedly considering other changes instead, including removing the capital gains tax uplift applied when assets are inherited.
Farm Tax Rules Could Change
Inheritance tax rules for farms and agricultural assets are also under review. Full agricultural property relief is limited to the first £2.5 million of qualifying assets per person. Amounts above that threshold receive 50% relief and can face an effective inheritance tax rate of up to 20%.
The Government has indicated that it wants further discussions with farmers.
Gambling Tax Could Rise
Machine Games Duty on fruit, slot and quiz machines could rise to 40%. EY estimates that the change could leave the Treasury £124 million worse off, while the Betting and Gaming Council has warned of possible losses of 16,000 jobs and 1,500 betting shops.
Flutter has already announced plans to cut 1,400 jobs following earlier tax increases.
Banks Could Face A Higher Tax Bill
Banks are another possible source of additional revenue.
They currently pay 25% corporation tax, plus a 3% surcharge on profits above £100 million. The TUC is calling for the surcharge to be increased.
Former chancellor Jeremy Hunt has warned that higher bank taxes could lead to lower investment, weaker growth and fewer jobs.
Online Marketplaces Could Collect More VAT
Amazon, eBay and Temu could face tougher VAT collection requirements.
Under reported plans, marketplaces would collect VAT from business sellers with annual turnover above £90,000 and pass it directly to HMRC.
The crackdown could raise up to £1 billion, with the money potentially used to support business rates cuts for high street retailers.
What To Watch In The Budget
The Government is facing pressure to raise revenue while funding commitments linked to social care, housing and defence.
The Budget on October 28 will determine which of the proposed tax changes go ahead, how much they will cost taxpayers and when any new rules will take effect.
