Tax rises are expected to dominate John Healey’s first Budget on 28 October, as rising borrowing costs and inflation squeeze the public finances.
Labour has pledged not to increase the main rates of income tax, national insurance (NI) and VAT, limiting the Chancellor’s options for raising revenue.
Meanwhile, Conservative shadow Chancellor Andrew Griffith has said if he were in Healy’s position, there would be a tax cut at every Budget.
We asked experts where they would start when it came to tax cuts in this Budget – and what they would avoid.
A rethink of property taxes
Carl Emmerson, a partner at London Economics, wants Healey to set out a long-term plan for tax reform, starting with property.
Council tax in England is still based on property values from 1991, while stamp duty land tax (SDLT) – a tax paid when you purchase a home – “penalises people for moving home [and] is one of our worst taxes”, according to Emmerson.
Stamp duty applies to residential properties over £250,000, or £300,000 for first-time buyers on properties up to £500,000. Standard rates scale from 2 per cent to 12 per cent plus an extra 5 per cent surcharge for additional homes or second properties.
Experts have long called for a change to the current system.
Emmerson said: “The structure of council tax is regressive in that if your home is worth twice as much you don’t pay twice as much; a better tax would be closer to a fixed proportion of contemporaneous property value. SDLT should just be abolished.”
He continued: “The taxation of landlords is far too harsh in some ways and too generous in others.
“SDLT is particularly harsh for this group. There is a higher rate of stamp duty on second and subsequent homes, and landlords should be taxed on their profits net of any interest costs, just like any other business – presently they cannot deduct their financing costs.
“Having reformed those elements there would be a case for considering levying something like employee NI contributions on rental income.”
Cutting national insurance
Financial advisor David Stirling said he would target employers’ NI – a tax paid by employers on wages they pay employees – arguing that reducing employment costs could encourage recruitment and investment.
For the current tax year, employers are charged a 15 per cent NI rate on all employee earnings above the secondary threshold of £5,000 per year. This rate was increased by former chancellor Rachel Reeves in 2024. It was a 1.2 percentage point increase from the previous rate of 13.8 per cent.
Stirling said: “If the Chancellor had room for a tax cut, I’d be honing in on employers’ NI. For many businesses, the decision to hire isn’t just about whether they need another employee, it’s whether they can justify all the costs that come with them.
“Reducing those costs would make it easier to take on staff, encourage investment and give businesses a little more confident to grow.”
However, this would come at significant cost to the Treasury. While it could provide a meaningful boost to growth, the lost revenue would have to be found elsewhere through borrowing, spending restraint or higher taxes in other areas.
Cliff-edges need to go
Robert Salter, of Blick Rothenberg, wants to see the back of tax cliff edgesRobert Salter, tax director at Blick Rothenberg, wants the Government to reform thresholds that can leave people with little financial reward for earning more. While not technically a tax cut in the traditional sense, this would help people keep more of their money, so functions similarly.
Universal credit eligibility generally ends when household savings exceed £16,000, while the high income child benefit charge – a UK tax charge introduced to claw back child benefit payments from households where the highest earner has an income above a specific threshold – starts when the highest-earning partner’s adjusted net income exceeds £60,000, with the benefit fully withdrawn at £80,000.
Salter said: “These, and other cliff-edges, in the tax system create negative behaviours, such as encouraging people to work less, and realistically undermine attempts to grow UK PLC. Plus, creating effective tax rates which are ‘artificially high’ is basically just unfair.”
Inheritance tax reform
Andrew Broome, a partner at accountancy firm HaysMac, believes there is a case for replacing inheritance tax (IHT) with a different way of taxing wealth passed on at death.
The standard IHT rate in the UK is 40 per cent, which is only charged on the part of an estate that exceeds the tax-free thresholds.
No tax is paid on the first £325,000 of an estate, the nil-rate band. This rises to £500,000 if a main home is left to direct descendants.
Married couples and civil partners can pass assets to each other entirely tax-free. They can also combine their unused allowances to leave up to £1m tax-free.
Inheritance tax has been a hot topic over the last few years, according to Andrew BroomeBroome said: “There is certainly an argument to consider abolishing IHT, and instead taxing unrealised gains on death.
“This would add simplicity and allow families to plan based on their circumstances rather than make decisions driven by IHT legislation.”
Taxing unrealised gains on death means levying CGT on the increase in value of an asset, such as stocks, property or investments, that occurred during a person’s life before it is sold, triggered specifically at the moment they pass away.
Broome did say this is unlikely to happen, but said: “Even so, there are arguably aspects not particularly logical with our current IHT system which might prove to be easier measures to change without a system rethink, such as the CGT uplift on death or an extension of the seven-year taper for a potentially exempt transfer.”
A potentially exempt transfer is an outright gift from one individual to another in the UK.
If the donor lives for seven full years after making the gift, it becomes completely tax-free and falls outside the taxable estate, regardless of its value. But if the donor dies within seven years, the gift is pulled back into the estate for IHT calculations and may become taxable.
If the donor dies between three and seven years after making the gift, taper relief reduces the IHT rate charged on the excess value of the gift above the nil-rate band.
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