The SIX taxes Labour may hike in ‘painful’ Autumn Budget revealed

Sir Keir Starmer and Rachel Reeves could impose a series of tax hikes on Britons over the coming months from inheritance to pensions and capital gains to savings.

The Prime Minister has warned the country that the looming Budget would be ‘painful’, urging people to accept ‘short-term pain’ for ‘long-term good’.

But Labour’s leader and Chancellor have been accused of plotting a tax raid on the middle class as Sir Keir said those with ‘broadest shoulders’ should bear the brunt.

He claims tough decisions are required after discovering an unexpected £22billion ‘black hole’ in the public finances following the General Election.

However, Sir Keir has been accused of ‘breaking his promise’ after insisting on the campaign trail that he would not increase levies on working people.

Here, MailOnline looks at five taxes the Government could raise in the Budget:

CAPITAL GAINS TAX

Capital gains tax is charged on the profit made from financial assets such as shares or buy-to-let properties, with rates set at between 10 and 28 per cent.

Chancellor Rachel Reeves could use the Autumn Budget to bring capital gains tax in line with income tax rates, which would hike the upper band to 45 per cent.

The gain made is taxed, rather than the amount of money received, and it must be paid on a series of ‘chargeable assets’. The Government currently defines these as:

• most personal possessions worth £6,000 or more, apart from your car
• property that’s not your main home
• your main home if you’ve let it out, used it for business or it’s very large
• any shares that are not in an ISA or PEP
• business assets

However it is thought that the scope could be widened by Labour to impose capital gains tax on profits from financial assets when someone dies, which are currently exempt.

An increase in the rate of tax or a reduction in the current £3,000 tax-free allowance would hurt various people from second homeowners and landlords, to business owners and shareholders.

INHERITANCE TAX 

Inheritance tax is paid on the estate – including the property, money and possessions – of someone who has died.

Current rules mean there is normally no inheritance tax to pay if either the value of your estate is below the £325,000 threshold; or you leave everything above this mark to your spouse, civil partner, a charity or a community amateur sports club.

The £325,000 threshold has been frozen since 2009 – and the standard tax rate is 40 per cent, which is only charged on the part of the estate above the threshold.

But the Government could tinker with the rules and potentially look at an inheritance tax raid on pensions, which are currently used by people to pass on their wealth without having to give HMRC a cut.

If the Chancellor makes retirement funds part of someone’s estate and therefore subject to inheritance tax on death, this would drag more people into the bracket.

As it stands, homeowners wanting to avoid inheritance tax can pass on £500,000 – or £1million if they are a couple – as long as they leave their home to their children.

However, Labour could also cut or reduce this exemption, and therefore again make more people pay inheritance tax.

On a visit to Paisley in Renfrewshire this morning, Ms Reeves repeatedly refused to rule out a hike in inheritance tax and capital gains tax at her first Budget.

‘I’m not going to write a Budget two months ahead of delivering it,’ she told broadcasters. ‘We’re going to have to make difficult decisions in a range of areas. 

‘On spending, on welfare and tax we’re going to have to make a series of difficult decisions. But I’ll set out that detail in the right and proper way on October 30 at that Budget.’

PENSION TAX

Pensions are expected to be a priority area for Labour in the budget, with rumours over a raid on pension tax relief that high earners receive on contributions.

The main targets are expected to be people earning between £50,271 and £125,140, who currently get 55 per cent of all tax relief paid out on contributions.

As it stands, someone paying into their pension gets tax relief on this payment at their income tax rate – with a basic rate taxpayer getting 20 per cent tax relief.

A higher rate taxpayer gets 40 per cent and an additional rate taxpayer 45 per cent – but the Government could switch this to a flat rate of 30 per cent for all.

The Chancellor could also reduce the annual allowance that can be paid into your pension each year to receive tax relief, which is currently £60,000.

A further possibility raised by one think tank is that the Treasury could set a £100,000 cap on the amount you can take out of your pension tax-free.

And another option is increasing the state pension age, which is due to increase to 68 by 2028. The year could be brought forward to save money quickly.

SAVINGS TAX

Another potential target is Individual Savings Accounts (ISAs) which allow people to save up to £20,000 a year in shares or cash, which are tax-free for gains and withdrawals.

While the annual amount you can save is not expected to be varied, there are suggestions that the Government could impose a lifetime cap.

The Resolution Foundation think tank previously said this could be set at £100,000, suggesting the current setup mainly benefits those with high disposable income.

A further area that could be varied is the personal savings allowance, which allows people to earn a certain amount in normal savings accounts without paying tax.

This is currently set at £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers, with no allowance for additional-rate taxpayers.

The personal savings allowance currently covers interest earned from bank accounts, savings accounts, building societies, credit union accounts, corporate bonds, government bonds and gilts – but this list could also be re-examined.

COUNCIL TAX

Council tax bands are currently based on 1991 property values in England – despite these prices rising eightfold in some areas since – and 2003 values in Wales.

Shortly before the election, Labour was accused of secretly plotting a raid on council tax after Darren Jones was recorded saying the current system was ‘very out of date’.

Mr Jones – now Chief Secretary to the Treasury, but in the shadow position at the time of the recording – said he understood the ‘frustration’ of not making richer people pay more.

Just a few weeks earlier, Labour’s Jonathan Ashworth had insisted that Labour was ‘not changing council tax banding’.

But Sir Keir Starmer has not yet ruled out a potential council tax reform, amid claims that a ‘proportional’ council tax system could be considered.

This would see bands replaced by flat percentage such as 0.5 per cent of a property’s value, which would be varied each year to reflect changing values.

The Institute for Fiscal Studies think tank believes such a change would hike council tax by an average of £1,230 for more than four million households in England.

FUEL DUTY

The 5p cut to fuel duty introduced by then Chancellor Rishi Sunak more than two years ago expires in March next year. This could be left to expire rather than extended.

Before the cut was brought in, fuel level had been frozen at 57.95p since March 2011. VAT is charged at 20 per cent on top of the total price.

Ms Reeves may also look at allowing the Fuel Duty Escalator to rise, which has been frozen for 14 years.

Howard Cox, founder of campaign group FairFuelUK, said: ‘I have credible intelligence that the Treasury has virtually settled… on increasing fuel duty by 10p a litre.

‘I predict the net outcome from the October Budget is that the UK’s 37million drivers are set to be fleeced on a scale not seen since 1997 to 2010 when Labour increased fuel duty by a staggering 46 per cent.’

Meanwhile RAC head of policy Simon Williams said Ms Reeves has ‘no option but to put fuel duty back up to 58p a litre in October’s Budget’.

He went on: ‘She knows the 5p discount is losing the Treasury £2billion a year. She also knows drivers were overcharged by a staggering £1.6billion last year according to the Competition and Markets Authority’s recent report.

‘We’d normally be against any increase in duty, but we’ve long been saying drivers haven’t been benefiting from the current discount due to much higher-than-average retailer margins.’