From capital gains to NICs: tax changes to look out for in autumn 2024 budget

Labour has two aims in the budget: to make tax rises and spending cuts that close a spending gap in day-to-day Whitehall budgets of about £40bn, and to increase the funds available for investment.

According to government sources, the £40bn includes the £22bn shortfall left behind by the previous Conservative administration and an extra top-up for areas such as schools, hospitals and defence.

Reeves has said there will be "no return to austerity", which suggests most of that gap will need to be filled with tax rises rather than spending cuts.

Investment is expected to be governed by a new budget rule that will allow the Treasury to increase borrowing by up to £53bn, to allow investment in a wide range of infrastructure projects. Here we explore the potential measures.

What tax changes might be in the budget?Capital gains tax (CGT)

Taxable capital gains are concentrated among a small percentage of the population, with the tax levied on the increase in the value of an asset between its purchase and disposal. In 2022–23, only 350,000 individuals – 0.65% of the adult population – realised taxable gains, raising about £15bn a year.

The scope of the tax has increased after the previous government reduced the annual exemption from £12,300 to £6,000 from 6 April 2023 and to £3,000 from 6 April 2024.

For those with gains above the threshold, the levy is 24% from selling additional property, or 20% on profits from assets such as shares, compared with the upper income tax band of 45%. There has been speculation that Reeves will increase both these CGT rates.

National insurance contributions by employers

Employers pay national insurance contributions (NICs) on their workers' earnings at a rate of 13.8%. This could rise to 15.8% if speculation proves correct that Reeves's budget will raise the employers' portion by two percentage points to generate £20bn. An increase of one percentage point would raise an estimated £8.5bn .

Businesses have argued that raising NI for employers will make it harder to hire staff and create jobs. Research shows this can happen, though only over the longer term.

In the meantime, deterring employers from hiring and bidding up wages will please the Bank of England, which might overcome concerns about an overheating labour market to cut interest rates more quickly.

Reeves could also levy employer NICs on pensions contributions. The Resolution Foundation thinktank estimates this could raise £18bn, but because it would also affect public sector employers, they would need to be reimbursed – reducing the net gain to about £12bn.

Income tax and NI thresholds

Thresholds are the income levels at which people start paying NI or income tax, or the higher rates of tax.

Traditionally, they rise in line with inflation, but were frozen by the Conservative government in 2022, a policy known as fiscal drag .

Reeves is expected to extend the five-year freeze until 2029 , meaning even more people will start paying tax and NI as their wages increase, or pay more when they cross higher-rate thresholds.

Inheritance tax

Estates are taxed at 40% above £325,000, or £650,000 if married people combine their allowances. A main residence allowance of £175,000 each takes the combined total to £1m if the asset to be inherited is a main residence. About £8bn a year is raised by inheritance tax, with the levy typically paid on the estates of about 5% of annual deaths.

It is thought changes to a number of exemptions that affect how much inheritance tax people have to pay are being considered, including business and agricultural reliefs.

Pension taxation

People who save in a pension can take out a tax-free lump sum worth 25% of the total. It is not clear if this will continue after the budget. The percentage might be cut or abolished altogether.

A lifetime limit on the amount savers can accumulate tax-free in a pension might also be introduced, after it was abolished by the previous government.

Even more controversially, the government could scrap the current tax relief system , replacing it with a single flat rate. That would leave basic-rate taxpayers with a relief of 20%, but deny higher-rate taxpayers the 40% or 45% rates they currently enjoy.

It would be a surprise if any of these measures make it into the budget programme.

Non-dom tax status

In Jeremy Hunt's March budget, the then chancellor abolished non-dom tax status for an estimated 70,000 people, though he agreed some concessions.

The term "non-dom" describes a UK resident whose "permanent home" – or domicile – for tax purposes is outside the UK. As a result, they do not pay UK tax on money they make elsewhere.

Before the election, Labour said it would end Hunt's concessions, abolishing the tax status altogether, but has since become concerned it will not raise much money because of an exodus by wealthy non-doms.

'Sin' taxes

Ministers are understood to be considering a tax increase worth up to £3bn on the gambling sector , after a report by the centre-left IPPR thinktank suggested the move could help tackle Britain's addiction challenges.

Fuel duty

Fuel duty has not risen in more than a decade. It was frozen between 2011 and 2022, and cut by 5p in March 2022 when Russia's invasion of Ukraine sent pump prices soaring.

While car lobby groups object, some motoring groups argue the cut was never passed on to motorists and the RAC says it could be painlessly reversed. While the default position is that fuel duty will rise in line with inflation, successive chancellors have opted against it and maintained the freeze. Cancelling the scheduled rises would cost £4.8bn, according to the Resolution Foundation.

And what about spending?Government finances

The Office for Budget Responsibility (OBR), the government independent economic forecaster, will release its latest projections for the economy on Wednesday. It is expected to predict lower inflation and lower interest rates this year than it did at the March budget. Lower inflation would lift the pressure of rising prices from public services, and lower interest rates would ease monthly debt payments.

Pressure from the Treasury to credit Reeves with boosting economic growth is expected to fall on closed ears at the OBR, which is likely to say growth will remain low for the next five years, limiting any gains from income and business taxes.

The swings and roundabouts are expected to leave Reeves better off, and give the government more headroom to carry over into future budgets.

Public services

The chancellor said there would be no more austerity and the prime minister said the same. But higher-than-expected pay rises for public sector staff will put pressure on some unprotected departmental budgets and local government spending, such as the plan to raise the bus fare cap in England from £2 to £3 .

A comprehensive spending review (CSR) lasting one year should keep most areas of government protected from inflation before a three-year CSR next spring.

Hospitals are expected to be the biggest beneficiary of any spare cash, with GPs also likely to find they get more.