The Resolution Foundation has recommended that Rachel Reeves consider significant tax changes in the upcoming Budget. These changes aim to address the rising fiscal challenges faced by the government.
Proposals include increases to inheritance and capital gains taxes and the introduction of road pricing. These measures are intended to boost the Treasury’s revenue and support critical infrastructure funding.
The think tank’s report suggests that scrapping inheritance tax reliefs for agricultural property and business assets could generate £2 billion annually. Aligning capital gains tax rates more closely with those charged on dividends and wages could bring in an estimated £8 billion per year.
These measures aim to boost Treasury coffers as part of broader fiscal reforms under Labour’s leadership.
The Resolution Foundation has also proposed the introduction of road pricing. This would potentially charge drivers 6p per mile plus VAT as a replacement for the dwindling revenue from fuel duty.
With the transition to electric vehicles reducing income from traditional fuel taxes, this measure could help sustain critical infrastructure funding.
The threshold for stamp duty on property transactions is set to drop from £250,000 to £125,000 in April 2025.
This change is expected to increase the tax burden on buyers of a £250,000 home by £6,250. The Foundation criticised this as an economically inefficient way of raising revenue.
A Treasury spokesman commented on the recommendations, noting the fiscal challenges ahead: “Following the spending audit, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare, and tax to fix the foundations of our economy and address the £22 billion hole the Government has inherited.”
Decisions on how to address these fiscal challenges will be taken at the Budget in the round.
The think tank flagged the need for targeted tax cuts, particularly concerning stamp duty.
They argue that the current measures could hinder the effective use of the UK’s housing stock.
In conclusion, the Resolution Foundation’s recommendations highlight the complexity and urgency of the fiscal challenges faced by the government.
By considering measures such as changes to inheritance and capital gains taxes and the introduction of road pricing, Labour could potentially address some of these challenges.
