We know it’s confusing out there right now. Another day, another story of a possible tax hike. It feels like there’s a new story about rising taxes all the time, some even suggesting that you could soon be taxed on what is the most precious asset for most of us: our home. Truth be told, none of us really knows exactly what’s coming next. However, the rumour mill turns again.
The same happened before the October 2024 Budget. However, there were no tax raids on landlords, no removal or restriction of tax relief on pension contributions, and the Individual Savings Account (ISA) limits were not lowered. All these topics were discussed in the press for weeks leading up to the Budget.
Prepare yourself once more! The press and commentators have come to see this as an annual event. Just before the budget, the rumour mill turns again!
We are going to have a budget in the Autumn, the date is now confirmed as 26th November. This is really late !
Some of the latest speculation includes:
- National Insurance for landlords.
- Further tweaks to Inheritance Tax, even though last year’s announcements haven’t yet taken effect.
- Lower ISA limits.
- A new wealth tax, possibly on property.
- Possibly more changes to Capital Gains Tax.
As always, these remain just rumours and speculation. Many of them may never come to fruition. Last year, several so-called ideas didn’t materialise, and the same is likely to happen this year. We recommend that you avoid making any decisions based on media discussions or fear. Please contact us before making any decisions.
From Industrial Revolution to Energy Crisis
Great Britain was once the birthplace of the Industrial Revolution, an era of energy super-production and extraordinary productivity gains that transformed lives. Essentials such as clothing and food became more affordable, and the country cemented its reputation as a global economic powerhouse.
Fast forward to today, and the story is very different. We now face the reverse: a profound energy shortage and an affordability crisis. Real wages have barely grown in 16 years. Earlier this year, the Bank of England admitted that Britain’s ongoing productivity slump is so puzzling that even its own economists “cannot account fully” for it.
But it’s not all gloom and doom. Several institutions, including National Institute of Economic and Social Research expect the UK to grow modestly over the medium term (1.2% -1.3%). This is better than zero growth, as many have feared. But the fact remains that as a country, we are facing a cash flow problem. We are spending more than we collect through taxes.
The Bigger Picture: Growth vs. Taxes
The government expresses a desire for economic growth, which is a common objective. However, it is important to recognise that higher taxation does not lead to sustainable growth. It can do the exact opposite.
Labour has already pledged not to raise taxes on working families, leaving Rachel Reeves with very limited room to manoeuvre. Borrowing more risks spooking the markets but raising new taxes risks slowing growth even further.
Our public services are struggling, so cutting spending here would not be wise. Earlier in the year, there was an attempt to curb welfare spending, but this effort failed.
That leaves investment as the only real lever. Infrastructure projects, particularly in housing, could stimulate growth, create jobs, and ease the affordability crisis. Building more homes, roads, and other infrastructure also helps address rising unemployment, which has become an issue over the last year. Investment is key. It’s a bit like your business; if you want growth, you may have to invest upfront.
However, the big question is where does the government find the money? We have a black hole in the economy, so there is no spare cash. So, unfortunately, we believe the Chancellor will likely raise taxes this autumn. This decision may not be her preference, but it seems there are no other options available.
The interesting question is who she thinks can shoulder the burden of higher taxes. Will it be businesses (which could hinder growth), high earners (many of whom are already leaving), or middle-income earners (who have already been affected by fiscal drag)? These are tough questions to consider.
On the plus side, earlier in the summer, there were announcements to help small business. We are still waiting to hear more about how these actually convert to the real help you may need.
If you or your business needs help, we are here to assist because we are committed to supporting you and your ambitions. Email your normal manager now, or if you are not yet working with us, email enquiries@myersclark.co.uk and tell us a bit about yourself.
Final Thoughts
For the moment, all we can do is wait for the Budget and see how higher taxes might manifest themselves in our daily lives. In the meantime remember:
- Don’t act on rumours: Most will never make it into policy.
- Focus on confirmed changes: Plan only around what’s already legislated. Talk to us.
- Growth is the real solution: Tax rises may plug holes, but only investment and productivity can shift the UK’s economic trajectory.
- Expect the rumour mill to work hard: The Treasury will test ideas publicly before deciding what sticks.
- Stay calm: Knee-jerk financial decisions often do more harm than good. So stay calm in good times and bad.