After a month or so of uncertainty (well, theoretical uncertainty at least), we now have confirmation that Andy Burnham is the new Prime Minister and he has started to form his government.

Now that we have this degree of certainty, there is the inevitable, consequential certainty (well almost!) of tax changes – particularly as Andy Burnham and Sir Keir Starmer quite clearly differ in their political positions.

Rampant speculation of what these tax changes may be, have started and will not stop until the Budget that is likely to take place in October. I have said many times when commenting on potential tax changes in the recent volatile tax climate that whilst acknowledging that we, like many others, are adding to the speculation (in articles such as this), it is our responsibility as prudent chartered tax advisors to provide our clients with the best service and advice. As part of this approach, we obviously want to share our thoughts on the likely tax changes, so that you are adequately informed (with our speculative thoughts forming part of that) to make the right decision for you, your family and business.

We pride ourselves on providing proactive, practical tax advice, especially recognising the immeasurable value in this capability and approach during times of change—be it political, economic, or changes to clients’ personal, family, and business situations.

Below is an overview of my current thoughts as to the potential tax changes and my view of the impact for our clients.

Potential Corporation tax changes

I can’t see any dramatic changes to the corporation tax regime. The tax rate is already higher than many jurisdictions and there is the real concern that increases would make the UK much less competitive to multi-national businesses.

Potential Income tax changes

I can see small increases to income tax rates in general. These may not be significant enough for people to plan for. However, they may form part of the wider considerations when choosing an investment structure, such as the use of limited companies etc.

I think some tinkering is also likely with suggestions of a 10% starter-rate band for lower earners being implemented. There are suggestions of the freeze on the personal allowance and thresholds being removed however, I personally can’t see these being sizeable (maybe just gimmicky), given the impact this would have on the overall tax take for the coming years. There also seems to be rumours of a return to the 50% income tax rate – which I think would be a mistake given previous lessons on the impact on tax take.

Potential Capital gains tax changes

I think that we will see a relatively significant increase to capital gains tax rates from the date of the next Budget. Those considering selling assets that are pregnant with gains in the short-term would be well advised to consider completions of disposals before Budget Day.

In addition, I’m predicting small changes that could have a sizeable impact for some.

I think the capital gains base cost uplift on death will be removed, at least for assets that have qualified for 100% relief (such as Business Property Relief aka Business Relief) for exemption. It is difficult to speculate how this change would be affected but conservatively, those with assets that they have inherited with a high base cost, (in comparison to the deceased’s original base cost) may wish to consider planning to attempt to crystallise the existing high base cost.

I think that the availability of capital gains holdover relief for assets passing into the majority of trusts could be at risk – particularly where the gift (or transfer at an undervalue) into the trust does not give rise to an inheritance tax charge. Those considering inheritance tax planning using lifetime trusts should consider implementing such gifts before Budget Day.

Potential Inheritance tax changes

I don’t predict there being sizeable, sweeping changes to the inheritance tax regime – the cap to 100% Business Property Relief and Agricultural Property Relief, and the upcoming changes to bring unused pension funds on death within the scope of the tax are significant changes in themselves.

Andy Burnham has previously mooted replacing the current inheritance tax regime with a flat levy on all estates – however, this needs proper consideration and surely there is not enough time to plan for such a huge overhaul in the coming months.

However, I can see tweaks being made to Business Property Relief – such as changing the “wholly or mainly” trading test (a more than 50% test) to a more than 80% test. This is something I have been predicting for a while but I can see this new administration taking the opportunity to implement this.

Businesses with investment assets should seek advice from a specialist tax advisor as to their position.

Potential VAT changes

I am of the view that there won’t be any sizeable changes to VAT rates – the current cost of living crisis and concerns over inflation make this extremely difficult.

Of course, there may be some tweaks to rates applied to certain supplies, but I don’t foresee general increases.

One early example is that VAT will be removed from household electricity bills

Many in the hospitality sector are justifiably calling for a decrease in the rates of VAT applied to supplies made by the hospitality sector. Whilst justifiable, I think the cost to the Exchequer will be too prohibitive, even for a focused rate reduction.

However, I can see the new administration taking this opportunity to tackle the thorny issue of the VAT registration threshold and can see it potentially being abolished to remove the current “cliff edge” issue.

Other taxes

Property and land taxation appears to be a theme of much of the speculation – a lowering of the threshold for the previously proposed High Value Council Tax Surcharge to be lowered from the currently proposed £2m to £1.5m.

A new “land tax” has also been speculated however, I can see the above being enough of a change on its own – with wider changes to the taxation of land and property maybe coming in a later Budget.

Given the understandable concerns for small businesses with the current Business Rates regime, you’d have to expect changes here to ease the pressure on this sector. Burnham has been relatively vocal in this regard.

Something to rectify the deeply unpopular previous increases to employer’s NIC rates also looks likely.

By its very nature, all of my comments above are purely speculative and cannot be guaranteed, but they provide an insight into what we are thinking and expecting. We hope this helps you make informed decisions and seek professional advice where appropriate.

We sincerely hope you find our expert insights informative and useful. If you have any questions about how these potential changes could affect you, please get in touch with one of our Chartered Tax Advisors or Tax Specialists. Our team is always happy to discuss your circumstances and provide tailored advice.