Chancellor John Healey is set to deliver his inaugural budget next week, with taxation emerging as a significant policy area despite Labour’s election commitment to maintain current rates on income tax, national insurance, and VAT. The upcoming fiscal announcement is expected to address various levies that have drawn recent scrutiny, including inheritance tax, capital gains tax, and property-based charges.
Inheritance tax has become increasingly contentious as revenues have reached record levels. Collections totaled £8.5bn in the 2025-26 tax year, with projections rising to £14.5bn by 2030-31. While only approximately 5% of estates currently pay the tax, rising property values and frozen allowances have expanded its reach beyond traditionally wealthy families. A forthcoming rule change scheduled for April 2027 will bring pension assets into inheritance tax calculations for the first time, potentially affecting tens of thousands of additional estates and increasing average bills by approximately £34,000.
Capital gains tax has emerged as a major revenue source following recent policy modifications. Collections surged nearly 80% year-over-year to reach £24.3bn in 2025-26, driven partly by reductions in the annual tax-free allowance from £12,300 to £3,000. The number of taxpayers subject to the levy increased 45% to an all-time high of 584,000, though the majority of revenue derives from a small proportion of high-earning individuals. Current rates stand at 18% for basic-rate taxpayers and 24% for higher earners following increases implemented during the previous budget, with some Labour figures advocating for alignment with income tax rates.
The government is implementing a high-value property surcharge, colloquially termed the “mansion tax,” beginning April 2028. Properties in England valued at £2m or above will face annual charges ranging from £2,500 to £7,500 depending on valuation, with the Office for Budget Responsibility projecting annual revenue of £400m. The measure is anticipated to affect fewer than 1% of residential properties nationwide.
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