Autumn Budget: CGT Rises as Anticipated, Other Policies Changed in Attempt to Fill the “Black Hole,” £40 Billion Expected to be Raised

In the Autumn Statement delivered by Chancellor of the Exchequer Rachel Reeves today, the UK government delivered on an expectation for an increase in taxes. The Chancellor is the first female to deliver a budget in the UK’s history.

In total, the government anticipates about £40 billion in new revenue to fill what has been described as a “black hole.” While blaming the previous Tory government for the UK’s woes, the Chancellor promised to publish a “line by line” outline of the shortfall inherited. While claiming the country’s finances are broken, the Chancellor said the public services are busted, too. Reeves promised to restore “stability to our public finances” while rebuilding public services—a tall task for anyone to accomplish.

The Chancellor declared an end to “short-termism,” promising that “this Budget will permanently increase the economy’s supply capacity.”

As for investment in the UK economy, the Chancellor said they are committing £70 billion through the National Wealth Fund while touting the recent investment summit that saw commitments of around £63 billion. Reeves stated that the UK lags behind all other G7 countries when considering business investment as a share of the economy.

Promises were made not to increase VAT, National Insurance tax, and income taxes. So, where will the new revenue be discovered ? An increase in Employers’ National Insurance Contributions is one segment of increased money.

“We will increase the rate of Employers’ National Insurance by 1.2 percentage points, to 15%, from April 2025.   And we will reduce the Secondary Threshold – the level at which employers start paying national insurance on each employee’s salary – from £9,100 per year to £5,000.”

This is predicted to generate £25 billion per year.

As expected, the Capital Gains Tax (CGT) will be increased.

“… the lower rate of Capital Gains Tax from 10% to 18%, and the Higher Rate from 20% to 24% … while maintaining the rates of capital gains tax on residential property at 18% and 24%, too.”

The Chancellor cushioned the increase by stating the UK will still have the lowest CGT of any European G-7 country.

The government will keep the lifetime limit for Business Asset Disposal Relief at £1 million, a move that is described as encouraging entrepreneurs but an amount that may deter the innovation sector.

The tax subsidies for early-stage private ventures that encourage risk capital, the Enterprise Investment Scheme (EIS), and Venture Capital Trust schemes (VCT) have already been extended to 2035.

Interestingly, the Chancellor announced a 50% relief on inheritance tax for shares on the Alternative Investment Market (AIM) and “other similar markets.” This is said to set the effective rate at 20%.

The rate of corporate taxes will be held at 25% “for the duration of this Parliament.

As widely anticipated, the Non-Dom tax exemption is going away as the government looks for other paths to raise funds.

While much was shared about public finances, there were no mentions of the key financial services industry—vital to the UK economy—or the innovation sector of Fintech.

The government announced:

“[The] Budget will restore economic stability and begin a decade of national renewal, providing a boost to public investment by over £100 billion over the next five years across roads, rail, schools, and hospitals whilst keeping debt on a downward path.”

Following the Autumn Statement, the Chancellor said she would not rule out future tax increases in a sitdown with Sky News. The Chancellor called the budget a “once in a parliament budget” that would eradicate the mess left by the Tories.

 

 



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