There’s going to be “a lot of bad news” in the chancellor’s autumn budget – which the prime minister has said will be “painful”.
Speaking from Downing Street, Sir Keir Starmer said the public will have to “accept short-term pain for long-term good“.
Sky’s economics and data editor Ed Conway heard there was going to be “a lot of bad news” in the fiscal event as the government continues to remind voters about its financial inheritance from the Tories, with borrowing at levels not seen since the pandemic.
Rachel Reeves’s first budget on 30 October will be “quite miserable”, Conway has said – with spending cuts and tax rises both expected.
The latter is something Ms Reeves herself has admitted will be on the cards, though Sir Keir vowed in its election manifesto that income tax, national insurance, and VAT wouldn’t budge – remaking the pledge in August.
With that in mind, Sky News looks at which ones could be targeted.
Inheritance tax
This is one of the taxes most likely to be changed.
Inheritance tax is charged at 40% on the value of an estate above £325,000 when someone dies.
The tax rate could be increased, or the value people have to pay inheritance from could be lowered to raise money.
There are currently several exemptions, including on agricultural land and family businesses, but these could be lifted to include them.
The government could also reduce the number of years allowed when giving away assets before someone dies before inheritance tax kicks in.
A leaked recording from March revealed now chief secretary to the Treasury, Darren Jones, saying inheritance tax could be used to “redistribute wealth” and address “intergenerational equality”.
Capital gains tax
Capital gains is imposed on the profit from the sale of capital assets, including second homes, shares, business assets and most personal possessions worth £6,000 or more, apart from cars.
Currently, people do not have to pay tax on the first £3,000 of profits, or £1,500 for trusts.
The minimum limit could be removed and the tax could be imposed on assets currently exempt.
Like inheritance tax, it is one of the taxes that is being most talked about to be targeted.
Read more:
Rachel Reeves says ‘more difficult decisions to come’
Chancellor says Jeremy Hunt lied about UK’s finances
Keep up with all the latest news from the UK and around the world by following Sky News
Council tax
In the leaked recording from Mr Jones, he said he was frustrated by the “out of date” council tax system and hinted homes worth over £1m may have to pay more.
Former shadow minister Jonathan Ashworth told Sky News during the election campaign that Labour would not change council tax bands.
Council tax is currently set in bands that are based on the 1991 value of homes, which has been branded “absurd” by the Institute for Fiscal Studies (IFS) and “incredibly poorly designed” by the Institute for Government “(IfG).
Gemma Tetlow, chief economist at the IfG, said council tax could be reformed “in a very sensible way… rather than having the banded system you could move to something that is much more proportional tax on land revenue”.
She added: “You could do that sensible structural reform and raise some extra money at the same time.”
Please use Chrome browser for a more accessible video player
Labour ‘rolling the pitch’ for tax hikes
Business rates
Labour are understood to be consulting on changing business rates, which are charged on most non-domestic properties with relief for some including small businesses, retail, hospitality and leisure properties.
A change could be made so they are related to the value of the land instead of the current rateable value, which is an estimate of how much it would cost to rent that property for a year in April 2021.
Pic: iStock
Stamp duty
Stamp duty is paid on the cost of a property over £250,000, with more paid for second homes and by non-UK residents, and relief for first-time buyers.
It currently discourages people from moving home and is part of the reason older people are not moving out of expensive, larger properties.
Labour could change the tax so it is focused on annual land value tax instead of on a transaction – but that could be a hard sell with the party.
