TTR Barnes

Chancellor John Healey will deliver his first Budget on 28^th October against a difficult backdrop, with pressure on public finances, higher borrowing costs and a government promising both fiscal discipline and growth across the UK.

The message from the recent Labour conference was clear. The Chancellor intends to meet the government’s fiscal rules and rebuild resilience in the public finances, while Andy Burnham used his first conference as Prime Minister to set out a broader agenda spanning housing, pensions, social care and devolution.

What remains much less clear is where the money will come from.

Labour has maintained its commitment not to increase the main rates of Income Tax, employee National Insurance or VAT. Together, those restrictions remove some of the Chancellor’s biggest revenue-raising levers. The result is likely to be continued scrutiny of other parts of the tax system, from capital and property to reliefs, business rates and tax compliance.

None of that means businesses or individuals should make significant financial decisions based on speculation. But with less than a week until the Budget, there are several areas worth watching.

Capital Gains Tax: could there be further change?

Capital Gains Tax (CGT) is likely to remain prominent in the pre-Budget debate.

The main CGT rate was increased from 20% to 24% in October 2024 and the annual exempt amount is currently £3,000. Attention has nevertheless returned to the difference between the taxation of earned income and gains from assets.

Suggestions have ranged from further changes to rates to reform of reliefs and the treatment of assets on death. None has been announced by the government and there is an important economic argument on the other side: increasing headline rates does not necessarily produce a corresponding increase in revenue if taxpayers defer disposals or change their behaviour. Investment industry leaders have also warned that further increases could work against the government’s aim of encouraging investment.

Inheritance Tax: more change or time for existing reforms to bed in?

Inheritance Tax has already undergone significant reform.

Changes to Agricultural Property Relief and Business Property Relief took effect from 6^th April 2026. A new £2.5 million allowance applies to the combined value of qualifying agricultural and business property receiving 100% relief, with 50% relief applying above that level. Unused allowance can be transferred between spouses and civil partners.

Another major change is already approaching. From 6^th April 2027, most unused pension funds and pension death benefits will form part of an estate for IHT purposes. This is no longer a Budget proposal: it has been legislated for through Finance Act 2026. HMRC estimates that around 10,500 estates with inheritable pension wealth will become liable for IHT where they would not previously have been, while around 38,500 could pay more.

Further IHT reform is possible, but after substantial recent changes it should not be treated as inevitable.

Property taxation remains firmly in focus

Property is another area where confirmed reform and Budget speculation risk becoming blurred.

The High Value Council Tax Surcharge is already planned for England from April 2028. Under the current proposals, owners of residential properties valued at £2 million or more would pay the surcharge in addition to normal Council Tax. A government consultation on its detailed design closed earlier this year.

There has been discussion about whether that £2 million threshold could change, but no reduction has been confirmed by government.

More fundamental reform has also entered the political debate. Andy Burnham has previously supported land value taxation, although introducing an entirely new property tax system would be a major undertaking. There is currently no confirmed proposal to replace Council Tax or Stamp Duty at this Budget.

The more useful question may therefore be whether October brings incremental property tax changes or further detail on reforms already announced, rather than wholesale replacement of the existing system.

Income Tax: rates may be protected, but thresholds matter too

A commitment not to increase Income Tax rates does not mean personal tax bills cannot rise.

The Personal Allowance remains £12,570 and the higher-rate threshold £50,270, with the government having legislated to maintain the current thresholds until April 2031. As earnings rise while thresholds remain static, more income becomes taxable and more people move into higher tax bands: the effect commonly described as fiscal drag.

Changing that policy would be expensive for the Treasury. With the Chancellor emphasising fiscal discipline, any move to unfreeze thresholds would therefore need to be considered alongside the cost to the Exchequer and how that revenue would be replaced.

For taxpayers, this makes thresholds every bit as important to watch as headline rates.

Corporation Tax: stability looks more likely

For businesses, the headline Corporation Tax rate appears one of the less likely areas for major change.

The government’s Corporate Tax Roadmap commits to capping the main rate at 25% for the duration of Parliament, maintaining the small-profits rate and marginal relief at existing rates and thresholds, and retaining permanent full expensing and the £1 million Annual Investment Allowance.

Businesses making long-term investment decisions have repeatedly asked for greater certainty in the tax system. However, a stable headline Corporation Tax rate does not rule out changes elsewhere in business taxation. Sector-specific taxes and levies remain part of the wider debate, while changes to reliefs, reporting and compliance can alter the effective tax burden without changing the headline rate.

Business rates: further reform to come?

Business rates is one area where further announcements are expected.

The government has already announced additional support for pubs, social clubs and live music venues in England from April 2027. Wider reform has also been promised, with particular attention on high streets and Small Business Rates Relief.

That leaves an obvious question for October: how far will the Chancellor extend reform beyond the sectors that have already received targeted support?

Retail, hospitality and leisure businesses in particular will be watching closely. Business rates are only one element of their cost base, but after increases in employment and operating costs, further changes could materially affect investment and location decisions.

Savings and pensions: don’t wait for the Budget to understand changes already coming

Some of the most significant changes facing individuals have already been announced.

From 6^th April 2027, the annual cash ISA subscription limit for people under 65 will fall to £12,000, while the overall ISA framework will continue to allow greater investment through other ISA types. The reforms also include anti-avoidance provisions affecting cash held within non-cash ISAs and money market funds.

At the same time, the forthcoming inclusion of most unused pension wealth within estates for IHT purposes changes an assumption that has underpinned estate planning for many families.

Neither should be presented as something the Chancellor might announce in October. They are existing changes for which affected taxpayers should already be preparing.

First-time buyers: more detail expected

Housing was one of the clearer announcements from Labour conference.

The government has announced Your First Home, a new equity-loan scheme for first-time buyers purchasing qualifying new-build properties in England. The proposal is expected to allow a deposit of 2.5%, supported by a government-backed equity loan of up to 20%, initially interest-free. Household income and local property-price caps will apply, with the detail expected at the Budget.

For buyers, the eventual detail will matter as much as the headline. Eligibility, the length of the interest-free period, future charges and the treatment of the government’s equity stake will all be important when assessing the long-term cost.

Devolution could be one of the Budget’s bigger stories

Tax speculation can obscure another potentially significant feature of this Budget: devolution.

The Treasury has explicitly described 28^th October as a Budget intended to move “power and money out of Westminster” and support growth across the country.

The government has already committed to sharing a proportion of Income Tax revenues with England’s regional mayors from April 2028, with important design details expected in a fiscal devolution roadmap alongside the Budget.

For businesses, this could ultimately matter through regional investment, skills, transport and economic-development spending rather than through an immediate change to their tax bill.

Tax compliance and HMRC: an important part of the revenue picture

Not every revenue-raising measure requires a new tax.

HMRC’s continuing investment in digital systems, data and targeted compliance means closing the tax gap remains an important part of the government’s fiscal strategy. Businesses should therefore expect tax governance, record keeping and the quality of information supplied to HMRC to remain under scrutiny.

Making Tax Digital is also continuing to expand, alongside consultations on other aspects of tax administration and reporting.

For businesses, particularly owner-managed companies, the practical implication is straightforward: good tax governance and accurate, timely records are becoming more important, not less.

If there was one overriding message from the Labour conference, it was that this is unlikely to be a Budget built around a large giveaway.

Healey repeatedly emphasised debt, borrowing costs and fiscal discipline. Burnham, meanwhile, set out longer-term ambitions including changes to the State Pension triple lock after 2030 to help support his proposed National Care Service. Those announcements matter for the future direction of policy, but they should not automatically be read as measures that will take effect from this Budget.

The Chancellor therefore faces a difficult equation on 28^th October: protect the government’s commitments on the main rates of Income Tax, employee National Insurance and VAT, maintain confidence in the public finances and still find room for growth, investment and the new government’s priorities.

That makes changes around the edges of the tax system potentially more significant.

All information correct at time of going to print/live and on the best knowledge and understanding of the author at the time. This article is for general information only and does not constitute financial advice or recommendations for individual circumstances. No responsibility is taken for any actions taken on the base of the information within this article. For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.