Britons could see more money taken out of their pay packets in the coming weeks as new Prime Minister Andy Burnham sets to make changes. The Autumn Budget is coming at the end of the month, and Labour are set to lay out their financial plans for the upcoming year.
It will be new Chancellor John Healey's first Budget amid a background of rapidly increasing borrowing costs and pressure seems to be building, what with the cost of living. This means tax hikes as PM Burnham vows to take steps to reduce the nation's debt.
He said: “We are taking the action needed to get debt down. This will be a Government grounded in fiscal responsibility. It will stick to the fiscal rules, but at the same time, we will help reduce cost-of-living pressure on our constituents, and that’s the approach that we will take.”
Capital Gains Tax and Fuel Duty
At present, the first £3,000 of gains is free, and after that you pay 18% or 24% tax on the profits, depending on whether you're a basic rate or higher rate taxpayer. John Healey has already spoken about bringing CGT tax rates in line with income tax, which could see an increase from 18% to 20% and from 24% all the way to 40%.
Fuel duty was always set to go up again, having been reduced by 5p as a temporary reduction way back in 2022 that just kept getting extended. Former PM Sir Keir Starmer kicked the end of the 5p cut down the road one more time in the summer following the Iran chaos, pushing it back until January 1. As things stand, the fuel duty on petrol WILL begin to increase again from January 1, 2027.
Again, Mr Healey has refused to commit to cutting fuel duty for longer, instead urging people to wait for the Budget. So there is a possibility that the 5p cut could be extended one more time.
Property Tax and Pension Changes
Former Manchester mayor Andy Burnham has been vocal about housing issues for a while, and rumour has it this area will be hit hard. He has previously spoken about the unfairness of the council tax system, which sees some small properties in Manchester pay more than mansions in London. A proportional property tax of 0.48% per annum is one option, which would end the 'postcode lottery' of some councils charging more than others for the same housing.
Previously announced by predecessor Rachel Reeves, we already know pensions will no longer be exempt from Inheritance Tax from April 2027. It means that the value of a workplace pension will start to be included in estate planning, and could tip you over a threshold for Inheritance Tax that you would have previously avoided. The £325,000 threshold (£500,000 including a main residence) would be much easier to exceed once private pensions are added.
State Pension, ISAs, and Income Tax
The state pension is set to exceed the £12,570 tax-free Personal Allowance for the first time next April. But those who have any other income - such as private pension, property income or even other DWP bolt-ons like Second State Pension (SERPs) will not be exempt and will pay tax, and the amount of tax paid will inevitably rise with the triple lock increase.
The new Cash ISA limit of £12,000 was announced by previous Chancellor Rachel Reeves but will now form part of new boy John Healey's first full tax year plans. It means savers aged under 65 will not be allowed to put more than £12,000 into a Cash ISA in a year, and will instead need to put it in stocks and shares ISAs instead or pay tax on the interest.
Income Tax bands have been frozen since 2021 and are due to remain frozen until 2031. If they stay frozen, fiscal drag will mean more and more taxpayers are losing more and more of their earnings to tax as pay rises for inflation move them up the ladder to higher tax brackets, in what is called a 'stealth tax rise'. If the £50,270 bracket was adjusted for inflation since 2021, it would be over £60,000 today. This is expected to continue with the next Budget, though Mr Burnham did promise to 'look at' the situation.
Another stealth tax rise, the allowance hasn't been increased since 2021, which means that more and more people have been pushed into paying tax who would previously have avoided tax (such as state pensioners). Mr Burnham has promised to look at the situation, but stopped short of actually introducing any increases this year, which means that the upcoming Budget is likely to confirm another stealth tax increase. There has since been some hinting from Mr Healey and Mr Burnham that the thresholds could be increased by up to £3,000. However, this is not confirmed.
This also is not confirmed. Some experts have suggested a 50% tax band for Income Tax could be introduced, following suggestions from the PM that he wants to introduce steeper taxation for the UK's wealthiest households. This would replace the current 45% tax band, meaning someone earning £150,000 would pay £1,250 a year more in Income Tax.
