Starmer Warns of Painful October 2024 Budget

Prime Minister, Sir Keir Starmer today issued a profound warning to the British public by saying “I will be honest with you, there is a Budget coming in October and it is going to be painful".

He added “Things will get worse before they get better!“ and “Those with broader shoulders should bear the heavier burden – that’s why we are cracking down on non-doms”.

Firstly, make no mistake, it was the Conservatives that changed the law from 6^th April 2025 in that non-domciles become full tax resident on worldwide income and gains after 4 years having been fully non-resident for the previous 10 years.  During the initial 4 year residency period, non-dom/UK tax resident will not pay taxes on Foreign Income and Gains (FIG regime) and only UK income and gains.  Former Chancellor, Jeremy Hunt claimed that getting rid of the non-dom status would raise £2.7bn a year by 2028/29.

This is a ‘drop in the ocean’ compared to the claims by Labour of a £22bn pa government spending blackhole.  To put this in perspective, inheritance tax receipts for 2023/24 are estimated to be £7.5bn.

Labour has committed not to raise tax rates for working people meaning they will target those with unearned income from property and investments.

3 X New Taxes?

In theory, to raise an extra £22bn the new government will have to introduce a new tax regime that will raise the equivalent of 3 X the total in inheritance tax receipts in 2023/24, that’s a massive 'ask' unless you target 'middle Britain', so it will be ‘middle income Britain’ and not low income households or wealthy non-doms that will deliver this revenue. 

Comment

We have forecast many times on this site what new Chancellor Angela Reeves' options may be on 30 October 2024.  10 ways to raise revenue:

1. Increase capital gains tax rates to normal income tax rates of 20%, 40% and 45%.
2. Increase dividend tax rates.
3. Continue to leave many allowances frozen or reducing.
4. Increase stamp duty rates for properties worth £500,000 or more.
5. Do not reintroduce the higher, 'special stamp duty nil rate bands' due to be withdrawn in March 2025.
6. Increase the Annual Tax on Enveloped Dwellings ATED (wealthy people buying residential property inside corporate structures and trusts).
7. Increase the 10 year periodic tax charge for discretionary trusts.
8. Change pension tax relief to a flat rate of 30% for all rather than allowing higher earners to claim 40% and 45% tax relief.
9. Introduce national insurance contributions (NIC) for investment income rather then earned income only.
10. Introduce a wealth tax (the easiest in our opinion).

We suggest perhaps the fairest (all be it, it will hurt the directors of this firm as landlords) would be to introduce NIC on rental and investment income as there are many landlords and those with investment income that do not pay NIC (as it is not earned income) but still benefit from the NHS etc.