By Martin Adams, Partner and Head of Tax, and Tim Lynch, Partner and Head of Private Client, Ballards
Ahead of the Autumn Budget on October 28, Ballards tax partners Martin Adams and Tim Lynch look beyond the headlines at where the pressure may fall, and what it could mean for business owners and families.
Martin Adams on the bigger picture
At roughly 12.30pm on October 28, the Chancellor of the Exchequer John Healey will rise to present his inaugural Budget. We expect a well-trodden narrative: pledges on growth and fairness, sober warnings about tough fiscal choices, and almost certainly a closing 'rabbit out of the hat' to grab the headlines.
The speech provides the overview; the supporting material determines the tax outcome. In a world increasingly driven by headlines, it is easy to focus on the speech announcements, but it is the supporting detail that determines who pays the tax, how much they pay and when the change takes effect.
The Chancellor is materially constrained by the government's commitment not to increase the main rates of income tax, employee National Insurance or VAT. Together, these taxes account for just under 60% of total government receipts.
The main areas of speculation for tax policy change are familiar, and recurring: further changes to capital gains tax, restrictions to inheritance tax or pension reliefs, property-related measures, sector-specific levies and an extension of stealth taxes through frozen thresholds.
It has become increasingly common for significant tax changes to take effect from Budget Day itself, particularly in relation to capital gains tax. We always urge caution with respect to undertaking transactions only for tax reasons. Having said this, if a transaction is happening anyway, we typically advise that completing the transaction prior to the Budget provides certainty of your position.
The areas attracting the greatest speculation all have something in common: they affect the points at which businesses, assets and wealth change hands.
Tim Lynch on what it could mean for you
The shift towards taxing wealth is already underway. The question is how much further it has to run. Most of the wealth tax measures currently under discussion can be distilled into four moments: selling, gifting, pensions and death.
Selling is the most obvious. Capital gains tax rates rose to 18% and 24% in October 2024, while Business Asset Disposal Relief now offers only a fraction of the benefit previously available under Entrepreneurs' Relief.
Death is the moment I would watch most closely. Assets are currently rebased for capital gains tax on death, meaning gains built up over a lifetime are effectively wiped out. If that relief were removed, the same wealth could face inheritance tax on death and capital gains tax when later sold.
Pensions are already changing. From April 2027, most unused pension funds will count towards an estate for inheritance tax purposes.
Giving is also under scrutiny, with the inheritance tax system having long encouraged lifetime gifting through the seven-year rule and the exemption for gifts out of surplus income.
None of this calls for panic, and I would caution strongly against rushing into gifts or disposals on the strength of speculation. But there is a good deal that can sensibly be done now. Make sure your will reflects your current wishes and your current assets. Check who you have nominated to receive your pension. If you own a business, know what it is worth and how much of its value would qualify for relief under today's rules.
In my experience, the families and business owners who fare best after a Budget are rarely the ones who guessed the measures correctly. They are the ones who had already done the groundwork, and could respond calmly to whatever the Chancellor decided.
On Budget Day
The Ballards tax team will share its first analysis on Budget Day through the Ballards Knowledge Hub at ballardsllp.com and on LinkedIn. The full Budget preview appears in the Autumn edition of Birmingham Business.
This article is for general information only and does not constitute advice. Professional advice should be taken before making any decisions on the matters discussed.
