Speculation around which taxes Chancellor, Rachel Reeves, plans to increase in the Autumn Budget later this month has ramped up after she delivered an ‘unprecedented’ pre-Budget speech warning of a struggling economy.

In the speech, Reeves refused to rule out tax increases, saying she would make the “choices necessary to deliver strong foundations for the economy”, reduce debt, and sustainably fund public services.

The speech has resulted in the already-active rumour mill about tax rises stepping up a gear, with income tax, capital gains tax (CGT), property tax, a wealth or exit tax, and inheritance tax (IHT) all touted as potential targets.

“Rachel Reeves’ speech this morning marks an unusual step, underscoring the challenging position she currently faces,” said Spencer West LLP partner, Hilesh Chavda.

“The Chancellor could be signalling changes to CGT, property taxation, and even the introduction of a wealth tax or exit tax. If so, this could represent a major recalibration of fiscal priorities for many.”

Chavda also pointed to a potential cap on lifetime gifting, with the law firm already seeing an increase in client queries around the topic.

“Whether gifting now is advantageous really depends on how the measures are drafted,” he continued.

“If the rules capture gifts already made, then there’s no benefit to acting immediately. We won't know until the Budget if this comes in and how it will be formulated.

“Ultimately, this could reshape how wealth is passed down to future generations, potentially leading to a reduction in early financial assistance if there isn't an incentive.”

Forvis Mazars head of international private client tax, Paul Barham, noted that, despite all the speculation, the government had limited options in the Autumn Budget, and the inability to cut spending meant tax rises were almost certain.

He argued that tax by stealth was more likely than a large-scale overhaul due to manifesto pledges not to increase VAT, income tax, or national insurance.

“We can expect to see a continued freeze on income tax thresholds, a subtle but effective way to increase revenue as wage inflation pushes more people into higher tax brackets,” Barham said.

“The government may also close tax advantage schemes that have so far avoided attention, such as non-AIM business relief investment schemes.”

Barham added that loophole closing would be in the government’s sights, with potential changes to CGT exit charges on individual assets.

“Designed to prevent people from avoiding tax on asset gains by moving abroad, it could be introduced on unrealised gains when an individual or company ceases to be a UK resident,” he continued.

“Given the exodus in advance of the abolition of the non-dom regime, not having introduced it at the same time will seem like a missed opportunity but it will still have the effect of ensuring gains created in the UK are taxed here.

“Finally, look out for tighter rules around IHT. This could include extending the ‘seven-year clock’ for gifts to become IHT-exempt or capping the total amount of tax-free gifts over a lifetime.

“While the exact details are still unknown, the overall direction is clear: tax rises are coming and will impact financial planning.”

Although Barham believed an increase in income tax was unlikely due to Labour’s manifesto promise, Katten Muchin Rosenman tax partner, Charlotte Sallabank, felt that Reeves’ statement that ‘each of us must do our bit’ made it seem likely that income tax rates would increase.

“There may well also be an increase in the higher and additional rates rather than a reduction in the threshold for these rates, in keeping with her aim that ‘those with the broadest shoulders should pay their fair share of tax’ and there is always the possibility that she will introduce a further rate of tax income tax to tax those that she considers to be the super wealthy,” Sallabank stated.

“However, if she does that, coupled with the potential introduction of employer’s NIC on LLP members’ profit shares, there is likely to be an acceleration in high earners moving to more welcoming tax regimes, such as Dubai and Milan, with the tax yoke being borne by those with slighter shoulders."

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