Just under four weeks to go until the 2024 Budget.  This year more than ever winners will quietly bank their gains, but losers may change their voting intentions.  So what might the Chancellor do in this election year?  Does the Chancellor feel there is sufficient “fiscal headroom” to give much away to voters?  

The big three taxes – income tax, national insurance, VAT – together raise over 60% of the government’s revenues, so radical reform is difficult.  Even limited changes, such shaving percentage points off headline rates, can be expensive.  That said, there are some obvious anomalies that could be attacked, such as the 60% effective income tax rate when the personal allowance is withdrawn, and the exceptionally high marginal rates – sometimes over 100% – that can arise from clawing back child benefit.  And then could we use some of our Brexit freedoms to loosen VAT rules? 

Significant further changes to corporation tax seem unlikely to give much of a “feelgood” factor to voters.  Perhaps last year’s “full expensing” of capital expenditure was generous enough.  Big businesses already have enough to digest, with the implementation of the OECD’s Pillar Two 15% global minimum tax.

Capital gains tax remains at historically low rates, but inheritance tax has become increasingly salient in the last few years amid discussions about reform.  By way of background, IHT is paid by about 4% of estate and raises about £7 billion of the government’s annual revenue of around £1,000 billion.  The headline rate of IHT was fixed at 40% in 1988, when the basic rate of income tax was 25%, and capital gains tax was charged at marginal rates up to 40%. For many years, the nil rate band was increased by inflation annually, but has not changed since being fixed at £325,000 in 2009.  Since then, inflation would have added nearly half again.  So would increasing the nil rate band to say £500,000, or cutting the rate to say 30% or 20%, be possible?  Could that expense be justified, or might some restrictions on reliefs be required to bring us closer to fiscal neutrality? 

Council tax remains horribly broken, but no government has wanted to grasp the nettle of reform for decades, which is why the tax remains based on antiquated or theoretical 1991 valuations.  Any reform will undoubtedly create losers, so this is perhaps something to tackle (yes please!) after an election rather than before.  

Successive budgets have added bells and whistles to stamp duty land tax, and the highest rate with various supplements can be 15% or 17%.  For any transaction tax, that is extraordinary.  It is little wonder that many buyers are tempted to try to fit within the available reliefs, such as those for buying multiple dwellings or “mixed” property.  The constant flow of SDLT relief cases through the tax tribunals – with many taxpayers losing (is the annex a separate dwelling? or does a residential property become “mixed” if sold with the garage used for storage, or the electricity substation, or the railway ventilation shaft?) – suggest there is a problem.  The top rate of SDLT was 4% until 2011.  Towards the start of my legal career, I can just remember stamp duty (as it then was) on land sales increasing from 1% to 2% in 1997.  Can the current very high rates continue to be justified?