Johnston Carmichael’s tax experts have advised businesses on the tax changes they must consider as the Chancellor seeks to balance the books at the Autumn Budget on October 28.
Businesses should expect the Budget to raise tax, even though the government has ruled out the obvious ways of doing it, according to David Ward, partner and tax business line head at the firm.
Labour’s 2024 manifesto pledged not to increase the basic, higher or additional rates of income tax, National Insurance or VAT, and the government has committed to keeping the main rate of corporation tax at 25% for this Parliament. Fiscal rules also require day-to-day spending to be funded from tax and debt to fall as a share of GDP.
David said: “The headline rates are off the table, but the fiscal rules haven’t gone away. With growth weak and borrowing costs high, the revenue will have to come from less obvious places, and businesses should be planning for that now.”
Advising that capital gains tax looks “safe” after the Chancellor effectively ruled out an increase in media reports, David commented: “Changes to how existing reliefs work, including inheritance tax and pension tax relief, are much more likely than changes to headline rates. One to watch is the capital gains tax uplift on death. If that were abolished, beneficiaries would pay capital gains tax on a lifetime of growth, potentially on top of inheritance tax.”
David Ward, partner and tax business line head
Employers must also pay attention to changes that could affect National Insurance and tax bands, he cautioned: “Salary sacrifice for pension contributions is still one to watch, even after last year’s changes, and any further restriction would raise National Insurance costs for employers and employees alike. With personal tax thresholds likely to stay frozen, every pay rise risks pulling employees into a higher band, which makes pay decisions harder.”
With the main corporation tax rate fixed, Johnston Carmichael’s tax team expects any business tax changes to come through reliefs, incentives and sector-specific taxes. Banks could face increases to the bank surcharge or bank levy.
David said: “The key question for North Sea operators is what replaces the Energy Profits Levy. They will want detail on the transition and, above all, how much long-term certainty the new levy offers.”
A further freeze to fuel duty, or a delay to scheduled increases, would limit pressure on businesses with significant transport, distribution or logistics costs. The Treasury is already collecting more revenue from fuel because the VAT take rises with the pump price.
The firm also expects more investment in HMRC, new compliance powers and fresh anti-avoidance rules, meaning more reporting and closer scrutiny for businesses. Online marketplaces could be made responsible for collecting VAT from some business sellers on their platforms.
David added: “For businesses, the priority remains greater certainty and a tax system that supports investment, innovation and economic growth. Recent Budgets have brought a significant volume and pace of change, often increasing complexity and administrative burdens. There are several targeted reforms that could encourage investment and make the UK tax system more effective.
“Whatever the Chancellor announces, businesses that understand their current tax position and where they could be affected will be better placed to respond.’
Johnston Carmichael’s specialists have suggested four reforms that could encourage investment and make the UK tax system more effective: improving the R&D intensity calculation, strengthening support for the UK video games sector, encouraging reinvestment in UK businesses and introducing targeted employment tax reliefs.