The “Blackhole Budget”?

On Monday, the Chancellor Rachel Reeves opened her highly anticipated statement by describing the £22bn “hole” in the public finances, revealed by a Treasury audit, which urgently needs to be addressed.  She painted a dire picture of the country’s public finances – worse, it seems, than first anticipated.

The Chancellor subsequently announced that she will hold the Autumn Budget on 30 October 2024, alongside a full fiscal forecast from the Office for Budget Responsibility.  This will be the first opportunity for the Government to set out the full detail on, among other things, their proposed tax reform.  Following the statement, the Chancellor told the News Agents podcast yesterday, “I think that we will have to raise taxes in the Budget…”  

However, in Monday’s speech, the Chancellor maintained her promise not to increase National Insurance, the basic, higher or additional rates of Income Tax or VAT.  Against the backdrop of a serious financial deficit and in light of yesterday’s postscript to the statement, one may wonder if the Chancellor is setting the scene for the introduction of material tax changes in the next tax year, or before, including to taxes which she had previously suggested she would leave alone – capital gains tax (CGT) being one which springs to mind.  Inheritance tax (IHT) has already been in the spotlight, insofar as reform to the “non-dom” regime is concerned - the Treasury somewhat unexpectedly released a policy paper on this subject to coincide with the Chancellor’s speech, together with a technical paper on applying VAT to private school fees and a call for evidence on carried interest - but that does not necessarily mean that wider changes to IHT have been ruled out. 

With the Budget just three months away, the thoughts of many of our clients will naturally turn to the potential changes to CGT and IHT rates, rules and reliefs which may be introduced in order to start to fill the hole in public finances and what, if any, pre-emptive action may be appropriate for them to take in this interim period.  

At Charles Russell Speechlys, the Private Client UK and International teams are following these developments closely and will be providing further updates and commentary, particularly on the “non-dom” reform and potential changes to CGT, in the coming weeks.  With little more given away by Rachel Reeves in her speech, for now it is a case of watch this space.