Autumn Budget 2024: Brits brace tax raid in Rachel Reeves’ gloomy Halloween Budget – with fags, booze & benefits at risk

How investors might fare in the Budget

Experts suggest the Chancellor could target the income people receive from dividends by increasing capital gains tax rates.

Capital gains tax is charged on the profit you make when you sell something that has increased in value.

Currently basic-rate taxpayers pay 10% on most assets and 18% on residential property.

Meanwhile, higher-rate taxpayers pay 20% and 24% respectively.

But Myron Jobson suggests that the government might raise these rates or align them more closely with income tax rates.

“This could result in higher tax bills for investors when they sell assets at a profit,” he said.

“Our calculations show that CGT liability for investors across the income spectrum could double, at best, if CGT rates are aligned with income tax.”

How pensioners might fare in the Budget

Labour has committed to not increasing the income tax, National Insurance and VAT rates.

However, millions of pensioners will be dragged into higher tax bands or forced to pay tax on their state pension for the first time.

The state pension is set to rise by around £460 next year, which could tip thousands of pensioners over into a higher tax band due to fiscal drag.

A pensioner who is entitled to the full state pension would receive around £11,962 a year if the state pension rises as expected.

If they had a small private pension paying just £609 a year or more they could be forced to pay tax on their income.

Former pensions minister Baroness Ros Altmann warns that many pensioners will also need to complete a tax return for the first time.

“Many pensioners have never before paid tax themselves or filled in a tax return,” she said.

“Pensioners who are on the new state pension (i.e. the younger pensioners) should get a form from HMRC to let them know how and when to pay the tax they owe.

“But older pensioners will not hear from HMRC and, if they don’t know they need to pay the tax, or how to do so, they could end up racking up fines and penalties”

The Government has also confirmed that the £2 bus fare cap for single journeys will be hiked to £3 until the end of 2025.

The existing cap was introduced by the previous Conservative government to help with the cost of living and was set to expire on December 31, 2024.

The change would mean that someone using the bus every weekday would be forced to spend an extra £40 a month on the transport.

How working people might fare in the Budget

The Chancellor is said to be considering freezing income tax thresholds for several more years in a bid to raise an estimated £7billion.

Tax thresholds were frozen in 2022 by the previous Conservative government but are due to rise again from 2028.

As worker’s wages rise in line with inflation this could drag thousands of people into higher tax brackets through a concept called fiscal drag.

Freezing tax thresholds increases people's taxable income without putting up tax rates.

This gives the government additional revenue.

The amount of income you do not have to pay tax on is set at £12,570.

The basic rate of income tax is 20% on between £12,571 to £50,270.

Meanwhile, the higher rate is 40% between £50,271 to £125,150 and the additional rate is 45% on over £125,140.

It comes as the Labour government previously promised to not raise taxes for working people.

Ministers have been asked to spell out who will be exempt from this possible rise.

In a speech today in Birmingham, Kier Starmer, said the working people of this country know "exactly who they are".

The PM added he would "protect the payslips of working people" who were "the golden thread" of the government's agenda.

Myron Jobson, senior personal finance analyst at Interactive Investor, said this is a “sneaky tax grab” which is set to hit those in the lowest income brackets the hardest.

“Should the Chancellor choose to freeze income tax thresholds beyond the current 2028 deadline, the implications for Britons could be profound,” he said.

“The gradual erosion of disposable income through higher effective tax rates is a subtle but significant burden on households.”

How drivers might fare in the Budget

There has been no mention of an extension to the temporary 5p fuel duty cut, which is set to expire in March next year.

Fuel duty is currently set at 52.9p per litre of petrol and diesel after a 5p cut in early 2022 to compensate for rising oil prices caused by Russia’s invasion of Ukraine.

Forecasters have predicted that fuel duty may rise by 7p in the budget, which would force the average driver to spend £175 more a year on petrol or diesel fuel.

Meanwhile, in April next year there is a chance that an annual rise in fuel duty will push up prices again.

“Taken together they could make filling up at the pumps horribly painful,” warns Sarah Coles, head of personal finance at Hargreaves Lansdown.

The Sun has backed drivers as part of the Keep It Down campaign with FairFuelUK, with rates of fuel duty not rising since the start of 2011.

But speculation is mounting Rachel Reeves will reverse the 5p cut and reinstate an inflationary increase next week. 

This could add £3.85 to the cost of filling up an average family car.

How renters might fare in the Budget

Rachel Reeves is set to slash the “Right to Buy” discount, which is given to those who want to purchase their council house.

The Government said it will protect council housing “existing stock”, which will mean thousands more homes remain available to rent.

Some have argued this is an attack on the aspiration of owning your own home.

Currently the maximum discount you can get through Right to Buy is £102,400 across England.

In London boroughs this climbs to £136,400. It increases each year in April in line with inflation.

The level of discount you can get depends on:

• How long you’ve been a tenant with a public sector landlord
• The type of property you are buying
• The value of your home

You get a 35% discount on a house if you’ve been a public sector tenant for between three and five years.

After five years the discount increases 1% for every extra year you’ve been a public sector tenant, up to a maximum of 70%.

How the self-employed might fare in the Budget

The Chancellor is considering increasing national insurance on employers’ pension contributions but self-employed people could be spared the change.

Employers currently pay national insurance for most workers earning more than £9,100 a year.

The amount they pay is equivalent to 13.8% of the employees earnings above this figure.

The Chancellor is considering upping this rate in a move which is predicted to raise £15.4 billion.

While it won't affect employees directly, businesses and bosses have warned that it could mean they reduce or stop hiring staff, or that pay rises are pared back, having a knock-on effect on working people.

But self-employed people will be spared the change as they have a different national insurance system.

Self-employed workers pay Class 4 contributions, which are 6% on profits of £12,570 up to £50,270.

Above this threshold they pay 2%.

The different system could mean they are better off than company employees in the Budget.

How home buyers could fare in the Budget

Home buyers are also set to benefit from the Budget as the Government has confirmed that it will deliver more affordable housing.

On Saturday it announced that it will build up to 5,000 new affordable social homes.

There will be a £500million top up for the Affordable Homes Programme, which will bring the total amount of funding to more than £5 billion.

The Chancellor has also confirmed a new “five-year social housing rent settlement” allowing it to invest in tens of thousands of new homes.

David Hollingworth, mortgage broker at L&C, said: “This scheme will hopefully make things easier for first-time buyers in the future but it will take time for those properties to become a reality.”

But the Government has not yet confirmed whether it plans to extend the current stamp duty thresholds.

If it fails to do so it could negatively impact first-time buyers.

Stamp duty land tax is due if you buy a property or a piece of land which is worth more than a certain price in England and Northern Ireland.

In 2022 the rate at which people need to pay it was increased from £125,000 to £250,000 for those taking a second step on the ladder.

Meanwhile, for first-time buyers it rose from £300,000 to £450,000.

A discounted rate on purchases of up to £625,000 was also brought in.

But these thresholds are set to expire on March 31, 2025, at which point they’ll return to the previous levels.

If the higher thresholds are not extended then it could mean first-time buyers are forced to pay tax bills which are £15,00 higher than before.

David Hollingworth added: “If you’re closing in on being able to start a realistic property search, you are likely to be disheartened to see the additional relief for stamp duty disappear and may have hoped for an extension or for it to be made permanent.

“If that doesn’t happen then it could add another slug of costs if you’re not able to make the deadline at the end of March.”

How carers might fare in the Budget

An extra 60,000 people will be able to claim government support as the Chancellor is expected to make a key change to Carer’s Allowance this week.

Rachel Reeves is tipped to raise the limit people can earn before they are no longer eligible for carers allowance from £151 to £181 a week, The Sun first revealed.

The £30 increase would be the largest uplift in the threshold since the benefit was introduced in 1976.

Carer’s Allowance is worth £81.90 a week and is paid to people who look after a severely disabled child or adult.

It is set to rise by 4.1% next year, which could mean that carers receive £85.18 a week, £3.28 more than they currently do.

The move has been welcomed by charities.

Helen Walker, chief executive of Carers UK said: "It's been heartbreaking and frustrating to hear carers having to choose between paid work and Carer's Allowance simply because of a rise in the National Living Wage - something that is supposed to benefit low paid workers, not put them out of work. We're delighted that this is being addressed." 

What is the Budget?

THE Budget is big news and where you'll often hear announcements about taxes. But what exactly is it?

The Budget is when the Government outlines its plans for the economy including taxation and spending.

The Chancellor of the Exchequer delivers a speech in the House of Commons and announces plans for things like tax hikes, cuts and changes to Universal Credit and the minimum wage.

At the same time, the Office for Budget Responsibility (OBR) publishes an independent analysis of the UK economy.

Usually, the Budget is a once-a-year event and usually takes place in the Autumn, with a smaller update known as the Spring Statement.

But there have been exceptions in recent years when there have been more updates, or the announcements have taken place at different times, for example during the pandemic or when there is a General Election.

On the day of the Budget, usually a Wednesday, the Chancellor is photographed outside No 11 Downing Street with the red box.

They then head to the House of Commons to deliver her speech, at around 12.30 following Prime Minister's Questions (PMQs).

Changes announced in the Budget are sometimes implemented the same day, while others may not have a set date.

For example, a change to tobacco duty usually happens on the same day, pushing up the price of cigarettes.

Some tax changes are set to come in at the start of a new tax year, which is April 6.

Other changes may need to pass through Parliament before coming into law.

Likely Budget winners and losers

Carers and homebuyers could be among the winners in the Budget this week - while drivers and pensioners could be the worst hit.

The Prime Minister has said the Budget will be for “working people” but has also warned that it will be a “long, difficult path”.

There will also likely be confirmation of how much benefits and the state pension will rise this year.

Several policy changes have already been confirmed though, including a rise in the cost of bus fares and increase in the amount of affordable housing.

The exact details of what else will be announced have not yet been confirmed, but several plans have been mooted.

Cost of Government creeping higher

Government bonds, or gilts, are seen as the telltale sign of global investors’ opinion on the health of the UK economy and its leadership.

They also shape investors’ views on whether a Budget has been a success or failure.

Gilts are issued by the Government as parcels of debt that pay out a return — or coupon — to investors over a fixed term, such as five, 10 or 30 years.

The yield reflects the amount of interest paid, and increases when the price of a bond falls to reward the investor for the risk of holding a cheaper asset.