Here's more commentary on what to possibly expect from the UK government on 30 October in its Autumn Budget.

In the approach of the 30 October Autumn Budget, the following article comes from Majid Hussain, partner and head of private client at the accountancy firm  haysmacintyre. The usual editorial disclaimers apply to views of guest contributors. The editors are pleased to share this content and add to debate. Email tom.burroughes@wealthbriefing.com

With hindsight, one suspects that the new Labour government would have preferred not to have to wait over 100 days between winning the election in July and delivering its first budget. The long delay, though arguably unavoidable, has resulted in a huge amount of debate about what Labour should do on 30 October and some apparent u-turns from within the government, but as yet no concrete information. That has had the unintended consequence of at times making the government seem as though it is still waiting for the starting gun to fire.

That unwanted aura, combined with the historic significance accompanying the first Labour budget in a generation and the reported £22 billion ($28.5 billion) blackhole in the UK’s public finances, has perhaps encouraged the Chancellor to take drastic action. But Rachel Reeves might be better served by prioritising effective and manageable change, rather than risking change for the sake of change – the results of which may prove to be quite different than expected.

A sharp rise in CGT and a sharp fall in CGT receipts?
In many areas, it may well prove to be the case that less is more when it comes to reform. For instance, there have been suggestions that CGT could rise in line with income tax, which would represent a very significant increase indeed when compared with current levels. That might bring an increase in CGT receipts in the short term, but it is far from guaranteed. After all, in the event of higher taxes, it would be a very natural response for asset owners to simply refrain from selling until the tax environment is more favourable.

A greater risk still is that the sharp increase in CGT discourages entrepreneurship. After all, one might fairly interpret the lower CGT rates as a fair reward for those who sell their business after having put their capital at risk over the course of their careers and, quite often, taken a lower salary than would otherwise have been available to them. But if there are no tax advantages for taking that risk, it would not be a surprise if the number of people who are willing to take it decline, resulting in potentially serious damage for our economy down the line.

The pensions question?
The effect of reducing pension tax efficiencies could similarly have unintended consequences. Limiting tax relief on pension contributions and the amount of tax-free cash that can be withdrawn may well discourage retirement saving, especially for lower- and middle-income savers who rely on these tax advantages to build up their pension pots. In the absence of these savings' advantages, these savers may be pushed to take riskier approaches to building up their pensions, which one suspects is not what the Chancellor has in mind.

A more practical approach would be to reform pension schemes by targeting greater flexibility. A campaign to encourage greater awareness of the vagaries of retirement planning through improved financial education may impose higher short-term costs for a smaller return in tax receipts, but the long-term benefits, which would likely include addressing the inequalities in pension outcomes across different demographic groups as well as increasing financial literacy in the round, would surely make this a worthwhile investment.

Encouraging signs for non-doms
One positive is that the Chancellor and her advisors do appear to have listened to the concerns raised regarding the proposed abolition of the non-domiciled regime. Whilst we are still anticipating Reeves introducing changes to this particular part of the UK tax system, these are not expected to be as wide-ranging as had initially been proposed in the Labour manifesto. In particular, noises emanating from the Treasury suggest that the proposed inheritance tax raid on non-doms has been shelved.

The threat of an instantaneous wholesale flight of non-doms was always wide of the mark given the complexity involved in becoming non-UK tax resident, but the change in tack is still very welcome. It is notable, for instance, that a number of other jurisdictions appear to be hard at work implementing changes to attract UK non-doms to their shores, and it appears that a number of non-doms have made plans to leave the UK should the non-dom regime be abolished.

Such departures, which still cannot be ruled out, would not only have cut a swathe through the hoped-for revenues that higher taxes on these individuals would have raised, but also would have risked losing the wider economic benefits that they bring to the UK, for instance through their consumer spending and residential purchases. That value is evidenced by the aforementioned efforts made by other jurisdictions to create more attractive regimes.

The best route forward
There is no doubt that the Chancellor has difficult decisions to make. The state of public finances is in poor repair, and although there has been some positive recent news – including the IMF’s upgrade to the UK’s growth forecast – public sector borrowing in September was higher than official forecasts expected, potentially further limiting Reeves’ room for manoeuvre.

Taxpayers, as a result, should be preparing for a changed landscape come 31 October. Even with the budget now looming large on the horizon, it is not too late for individuals, businesses and, of course their tax advisors, to take steps to prepare. This should help to ensure that they are in the best position to weather the impact of the tax increases that Reeves’ is expected to announce come 30 October.

It is to be hoped that these changes are less extreme than some pre-budget reporting suggests, though that might be more hope than expectation. In the meantime, all that those who are not working on the budget can do is scrutinise the information that is available to ensure that they are in the best possible position to respond to the Chancellor’s announcements on 30 October.