Tax choices ahead

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Chancellor faces 'difficult decision' on taxes Having "revealed" that there is a £22bn hole in the public finances that experts say she created byawarding inflation busting payrises to public sector workers, Chancellor Rachel Reeves has warned of a “difficult decision” on tax in the October Budget. Asked if the Budget will bring higher taxes, The Chancellor told the News Agents podcast: "I think that we will have to increase taxes." While Ms Reeves did not rule out changes to inheritance tax, capital gains tax, or pension reform, she reiterated Labour's manifesto commitment that there will be no increases in income tax, National Insurance or VAT. James Smith, research director at the Resolution Foundation think-tank, said Ms Reeves was facing tough choices on further tax rises or spending cuts in the Budget. He warned that any new tax rises “would add to the £23bn a year in tax increases announced, but not yet implemented, by the previous Government.” Meanwhile, the Government has confirmed that a manifesto pledge to charge 20% VAT on private school fees will begin in January 2025. Officials also confirmed plans to replace non-domiciled tax status with a new residence-based regime from April 2025. Meanwhile, a windfall tax on the profits of energy and gas companies will rise by 3% from November.