There is unlikely to be much to celebrate when Rachel Reeves delivers her first Budget on the 30^th of October.

Speculation is rife regarding the likely targets for tax increases. We have listed a few of the more persistent predictions below. But note, these are just predictions and there will no doubt be “surprises” when the Budget details are released.

Personal Taxes and Pensions

Labour has pledged not to increase the main rates of Income Tax, National Insurance (NI), or VAT, but other forms of personal taxation may be impacted. Pensions, in particular, are expected to be a focus. For example:

• There are discussions around reducing the tax-free pension lump sum from its current level (£268,275) to a lower amount, which could raise around £2 billion annually​.
• Flat-rate pension tax relief, replacing the current marginal rate system, may be introduced, which could save the government around £5 billion, but it would negatively affect higher earners​.
• Employer pension contributions could also face National Insurance charges, which may lead to employers offering less generous pension schemes​.

Capital Gains Tax (CGT) and Inheritance Tax (IHT)

CGT rates could be increased, with some speculation suggesting they may be aligned with Income Tax rates, raising the top rate from 20% to as much as 45%. This would significantly impact higher earners and business owners. Another option is introducing a "double death tax," where assets are taxed both via CGT upon death and subsequently through IHT​.

Regarding IHT, Labour might increase the tax rate above the current 40% or reduce the £325,000 nil-rate band. Pension pots, currently excluded from IHT, could also be brought into the fold​. .

Business Taxes

While Labour has ruled out large hikes in business taxes, some changes are expected. For example:

• National Insurance Contributions (NICs): A rise in employer NICs from 13.8% to 14.8% is a possibility, potentially raising £8–9 billion for the Treasury.
• Carried Interest and Energy Profits Levy: Reforms to the taxation of carried interest, particularly affecting private equity, and an extension to the Energy Profits Levy are likely to be part of the Budget​.

Other Measures

• Fuel Duty: For the first time in 13 years, fuel duty may be increased, partly as a move to promote the adoption of electric vehicles​.
• VAT on Private Schools: Labour has committed to imposing VAT on private school fees starting in January 2025, a measure that could generate additional revenue but has sparked debate​.

Overall, the October 2024 Budget is shaping up to include "painful" decisions as Labour looks to tackle the fiscal deficit, with changes focused on wealth and asset taxes, pensions, and potentially significant tweaks to business taxation policies.

Most personal pensions set a minimum age at which you can start withdrawing money, typically not before age 55. Some pension benefits can be taken tax-free. Generally, you can withdraw 25% of your pension pot as a tax-free lump sum, with a maximum of £268,275. If you have protected allowances, the amount you can take tax-free, as well as your overall tax-free limit, may be higher.

After making a tax-free withdrawal, you usually have up to 6 months to decide how to take the remaining 75% of your pension fund which will typically be taxed. The options for withdrawing the rest of your pension include:

• Taking all or part of it as cash.
• Purchasing an annuity for a guaranteed lifetime income.
• Investing it for a flexible, adjustable income (known as 'flexi-access drawdown').

It’s important to understand the tax implications of receiving pension income. Aside from the tax-free benefits, pension income is considered earned income and subject to Income Tax under the standard rules. Income tax is also due on the State Pension, employment or self-employment earnings, and any other taxable income.

Employees with more than one job may be eligible to defer or delay paying Class 1 National Insurance in certain situations. This deferment can be considered if any of the following apply:

• You pay Class 1 National Insurance to more than one employer.
• You earn £967 or more per week from one job over the tax year.
• You earn £1,209 or more per week from two jobs combined over the tax year.

This deferral may allow for reduced NIC deductions of 2% on weekly earnings between £242 and £967 in one of your jobs, instead of the standard 8% rate.

At the end of the tax year, HMRC will review your National Insurance contributions and notify you if you owe NIC arrears.

Most self-employed individuals are also required to pay Class 4 NICs. While it was previously possible to defer these contributions, that option is no longer available. However, you may be able to claim a refund for past tax years.

HMRC has issued a new press release reminding readers of a limited-time opportunity to enhance their State Pension. Currently, there is an opportunity for affected individuals to address gaps in their National Insurance Contributions (NICs) for tax years between April 2006 and April 2018. Originally set to end on 5 April 2023, this deadline has been extended several times and will now close on 5 April 2025. This means there are just under six months left for those who may benefit from this extension to act.

Usually, HMRC allows voluntary NIC contributions for the previous six tax years, with the deadline being 5 April each year. You can check your State Pension forecast and any gaps in your NICs by using the "Check Your State Pension" service on GOV.UK: https://www.gov.uk/check-state-pension. Since launching the service in April 2024, HMRC reports that over 10,000 payments totalling £12.5 million have been made through the digital service to help people boost their State Pension.

You might consider making voluntary NICs if:

• You are close to State Pension age and do not have enough qualifying years to get the full State Pension.
• You know you will not be able to get the qualifying years you need to get the full State Pension during the remainder of your working life.
• You are self-employed and do not have to pay Class 2 National Insurance contributions because they have low profits.
• You live outside the UK but want to qualify for some benefits.

If you fall into any of these categories, it may be worthwhile to apply for a State Pension forecast and assess whether making voluntary NICs to fill in any gaps would be beneficial. Keep in mind that not everyone will benefit, as this will depend on factors such as your age and NIC contribution history.

Self-assessment taxpayers typically need to pay their Income Tax liabilities in three instalments each year. The first two payments on account are due by 31 January during the tax year and by the 31 July after the tax year has ended. Each payment on account is based on 50% of the previous year’s net Income Tax liability. Additionally, the third (or balancing) payment is due on 31 January after the tax year ends.

If you expect your income for the following tax year to be lower than the previous year, you can apply to reduce your payments on account. This can be done through HMRC’s online service or by submitting form SA303.

It’s important to note that you do not need to make payments on account if your net Income Tax liability for the previous year is less than £1,000, or if more than 80% of your tax liability was collected at source.

There is no limit on the number of times you can apply to adjust your payments on account. If your liability for 2024-25 is lower than for 2023-24, you can request HMRC to reduce your payments. The deadline to submit a claim to reduce your payments on account for 2024-25 is 31 January 2026.

If your taxable profits have increased, there is no obligation to inform HMRC, but your final balancing payment will usually be higher.