Chancellor Reeves outlined a package of reforms to improve the UK’s tax system to help fix the foundations of the UK economy.
The Treasury is considering potential increases in capital gains tax, inheritance tax, and other pension-related levies to bolster public finances.
In the 2022-23 tax year, 369,000 individuals paid capital gains tax, with their combined profits totalling £80.6 billion. The tax generated £14.4 billion, a 15% decrease from the previous year, largely due to a drop in property prices.
Rachael Griffin, a tax and financial planning expert at Quilter, suggests that if Labour maintains or tightens current inheritance tax rules, they should also reform gifting laws. She emphasises that while the system is filled with numerous tax reliefs, simplifying it doesn’t have to lead to more people paying inheritance tax. AJ Bell director of public policy Tom Selby told the Mortgage Finance Gazette:
“While the chancellor’s tone may have been more positive today, she left the conference in no doubt that painful decisions are coming in the Budget on 30 October – although the country remains in the dark on where exactly the axe will fall.
Like nature, politics abhors a vacuum, and the lack of clarity has led to inevitable speculation about possible revenue-raising reforms to pension tax relief and tax-free cash, as well as capital gains tax.”
As part of the package of reforms, HMRC will soon launch a consultation on electronic invoicing (e-invoicing) to promote its wider use across UK businesses and government departments.
The introduction of e-invoicing can significantly reduce administrative tasks, improve cash flow, boost productivity, introduce automation, and reduce errors in tax returns – all helping to close the tax gap. The consultation will gather input from businesses on how HMRC can support investment in and encourage e-invoicing uptake.
The Chancellor also announced that Exchequer Secretary to the Treasury James Murray, the minister responsible for the UK’s tax system, has become the Chair of the HMRC Board. This is to help oversee the implementation of his three strategic priorities for HMRC; closing the tax gap, modernising and reforming, and improving customer service.
It was also announced that a new Digital Transformation Roadmap, aimed to be published in Spring 2025, will set out HMRC’s vision to be a digital first organisation underpinned by customer insight. The Roadmap will include measures to ensure digital inclusion and support for customers who cannot yet interact digitally.
There was a further update that new staff are expected to join HMRC’s training programme in November as 200 additional offer letters have been issued as part of the 450 letters already sent. This is part of HMRC’s plans to recruit an additional 5,000 compliance staff to help close the tax gap.
