Summer speculation over Autumn Budget in full flow

It may still be summer and no date has yet been set, but speculation over what will be announced in the Autumn Budget is in full flow. Uncertainty over the public finances, with borrowing costs rising and the economy stuttering, is breeding news stories about potential tax-raising measures on a daily basis. Here we look at the latest reports of what the Autumn Budget may hold.

Waiting game

We are still waiting for a date for this year’s Autumn Budget, although November is looking increasingly likely as Chancellor Rachel Reeves is expected to give the Office for Budget Responsibility (OBR) ten weeks’ notice to prepare its forecast.

Once that date has been announced, those ten weeks are likely to be packed with rumours, opinions and lobbying over which areas the Chancellor will target.

Borrowing costs jump

The Chancellor will need to raise revenue as research has shown a £50 billion black hole in public finances. This will only be made worse by the UK’s borrowing costs jumping to their highest level since the 1990s.

This presents a major challenge for Ms Reeves, with the cost of financing UK government debt to increasing to over £100 billion a year or almost 10% of the annual budget.

Landlords face National Insurance expansion

The Treasury is considering targeting landlords with an expansion of National Insurance contributions (NICs), according to newspaper reports.

The proposals would see rental income included in NICs. Currently, earnings from property, savings and pensions are largely exempt from NICs. However, widening NICs, which usually applied employee earnings at a rate of 8%, to include rental income could reportedly end up raising about £2 billion.

Taxing the pension lump sum

Other newspaper reports suggest that the Chancellor is looking at proposals to raise £2 billion by lowering the limit on how much people are allowed to take out of their pension without paying tax.

Currently, pensioners can take out a quarter of their pension pot tax-free, with a cap of £268,000.

However, this idea is already running into criticism from the industry, with experts saying it would punish people who have been responsibly saving through their working lives.

Unfreezing fuel duty

During last year’s Budget, Ms Reeves extended the long-standing freeze on fuel duty, which has been in place since 2011. A 5 pence per litre cut was also introduced in 2022, which is currently set to end next March.

According to the latest government figures, the estimated cost of the freeze for this tax year exceeds £3 billion.

However, the OBR noted in October that lifting the freeze in 2026 would push inflation higher due to increased prices at the pump.

Inheritance Tax tightening

Inheritance Tax (IHT) is charged at 40% on estates above £325,000, with extra allowances for passing on a home to direct descendants.

However, the Chancellor may look to tighten up the rules around lifetime gift. Currently lifetime gifts sit outside the IHT net as long the donor lives for another seven years after making the gift with tapered relief kicking in after three years.

Hoping for an upturn

One of the reasons why Ms Reeves may be holding fire on revealing the date for the Autumn Budget is the hope that the data may improve with the changing of the seasons.

However, the experience of the past year has shown Labour that data is just as likely to get worse as it is to improve. Besides most forecasters, including the OBR, often get things wrong, so there is a degree of uncertainty around the numbers.

All of which means that the Autumn Budget speculation will continue until Ms Reeves stands up in Parliament to reveal her decisions.

The Autumn Budget

When the Chancellor delivers the Autumn Budget to Parliament, Mercia’s tax experts will be watching and will provide detailed analysis of the day’s announcements.

Whatever changes are made we will help you keep your clients up to date.