With the UK government poised to announce its Autumn Statement on November 26, financial experts are warning of a series of tax increases that could reshape fiscal planning for individuals and investors alike. While the Chancellor Rachel Reeves has pledged not to raise headline taxes such as VAT, income tax, or National Insurance, subtle yet effective measures are anticipated to boost government revenues without overtly breaking manifesto promises. One such strategy is the ongoing freeze on income tax thresholds and personal allowances, which are set to remain at current levels until April 2028. This freeze effectively nudges more taxpayers into higher income brackets as wage inflation persists, a mechanism sometimes referred to as "tax by stealth."

Beyond income tax, attention is turning to capital gains tax (CGT), where several significant changes are on the horizon. Industry voices, such as Paul Barham of Forvis Mazars and Gerard Boon of Boon Brokers, suggest the government may tighten CGT rules to capture more revenue, including increasing exit charges on unrealised gains when individuals or companies cease UK residency. This move would mirror existing rules on trusts and business assets and seeks to prevent tax avoidance by asset holders relocating abroad.

In line with these warnings, the government has already set out plans to raise CGT rates for disposals of assets other than residential properties. Starting from October 30, 2024, basic rate taxpayers will see CGT rise from 10% to 18%, and higher rate taxpayers from 20% to 24%. Trustees and personal representatives will also face a hike from 20% to 24%. Moreover, relief schemes like Business Asset Disposal Relief and Investors’ Relief are scheduled for phased tax rate increases, climbing to 18% by April 2026. These escalations aim to align CGT closer with the existing rates on residential property disposals, reinforcing a broader government push toward fairer taxation while striving to maintain the UK’s competitive stance amongst G7 economies.

The potential repercussions of these tax changes extend into the housing market as well. Given that CGT currently applies primarily to second homes and buy-to-let properties, prospective alterations could diminish exemptions or bring rates closer to income tax levels, significantly affecting landlords and property investors. This ripple effect raises concerns about rental market stability and broader property prices, potentially challenging those seeking both homes and secure investments.

Furthermore, the possibility of introducing an annual property tax based on property values looms, which could replace the existing stamp duty land tax system. While designed to provide local authorities with more predictable funding, this shift might disproportionately impact higher-value homeowners, including retirees. Research cited by Boon highlights that 75% of respondents view such a tax as particularly burdensome to these groups, underlining the social implications of policy shifts in the housing sector.

Interestingly, amid these prospects, the Conservative Party's conference proposal to abolish stamp duty on primary residences adds a layer of political complexity. Analysts expect Labour to feel political pressure to present a similar policy in the forthcoming Autumn Statement, suggesting a competitive tax policy landscape influenced by the upcoming general election.

In this context, financial experts emphasise the importance for households and investors alike to review their portfolios and tax liabilities proactively. Securing professional advice and planning ahead may be crucial in mitigating the impact of these impending tax adjustments, especially given their potential scale and the breadth of areas affected.

The Autumn Statement and accompanying detailed tax legislation documents provide a comprehensive overview of the government's fiscal approach for the coming years, framing it as a balancing act between promoting economic growth, ensuring fair taxation, and managing public spending without alarming voters with overt tax hikes.

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Source: Noah Wire Services