As the new Labour Government works to fill a £22billion shortfall in the nation’s finances, Britons are bracing for a host of potential tax hikes to help bridge the gap. Prime Minister Sir Keir Starmer warned the upcoming Autumn Budget “will be painful”, before noting that “things will get worse before they get better”.
With many tax targets under speculation, there’s one in particular that Steffan Fielding, tax director at contracting and accountancy firm, Sapphire, said he’d “bet her house on”.
Mr Fielding told Express.co.uk: “Starmer has suggested there is a £22billion black hole in the country’s finances. With further borrowing to plug the gap unlikely, tax rises are inevitable.
“Given Labour has already ruled out rises to Income Tax, National Insurance Contributions and VAT – which accounted for 63 percent of total Government receipts last year – alternative methods of raising revenue will need to be explored.”
Mr Fielding continued by explaining that Mr Starmer’s plan involves placing the responsibility for filling the fiscal gap on “those with the broadest shoulders,” which indicates a likely increase in Capital Gains Tax (CGT) and potentially Inheritance Tax (IHT).
However, he pointed out that while CGT brought in £17.8billion last year, compared to IHT’s £7.2billion, significant adjustments to the rates and allowances of these taxes would be required to make a meaningful impact on the £22billion shortfall.
He added: “Although changes to the headline rate of Corporation Tax are not off the table, they seem less likely. Further increases could make the UK less attractive for businesses compared to other European countries, which would contradict Starmer’s goal of stimulating economic growth.”
Mr Fielding also noted that Stamp Duty Land Tax (SDLT), which generated £16.8billion last year, could be another target for raising revenue. However, he suggested that any changes to SDLT would likely be modest to avoid stalling the housing market.
He further speculated that the reduction in the additional rate of CGT for landlords with multiple properties might be reversed, increasing it from 24 percent back to 28 percent as part of a broader effort to curb buy-to-let investments.
When asked about her most confident prediction, Mr Fielding was clear: “It has been suggested before that CGT rates could be aligned with Income Tax rates. While I don’t think such a drastic change is likely, I do believe it’s highly probable that Capital Gains Tax rates will be increased this October. If there’s one prediction I would bet my house on, it would be this.”
Mr Fielding also weighed in on how potential tax changes could impact the average Brit, emphasising that the question isn’t just about cost but about who will be most affected.
He noted that nearly half of all Capital Gains Tax receipts come from additional rate taxpayers—those earning more than £150,000 a year.
He continued: “More interestingly, half of all CGT receipts come from those living in London and the South East of England. So, if you’re a high earner living in the South East or the capital, you’re more likely to be affected.”
In 2023, more than 41 percent of CGT receipts came from those making gains of £5million or more. Ms Fielding pointed out that if the Government were to raise CGT rates by just five percent, it could cost these taxpayers an additional £250,000.
He concluded with a broader warning that while the focus may be on those with the “broadest shoulders,” the burden could extend to everyone.
He said: “The Prime Minister may well ask us all to share some of the burden. Alcohol and Fuel Duties are good earners for the Government, and I would not be surprised to see rises in both, especially since Fuel Duty has been frozen since 2011. Given Labour’s desire to push a green agenda, we may well see rises to Fuel Duty to raise extra revenue.”
