Four Autumn Budget tax changes expected this week and what they mean for you

A number of tax changes are expected to be announced this week when Rachel Reeves delivers her first Autumn Budget as chancellor.

Ms Reeves will unveil her plans for taxation and spending in her statement to MPs in the House of Commons on Wednesday (October 30) afternoon.

Despite Labour promising not to raise taxes for "working people" by hiking the rate of income tax or National Insurance that workers pay, there are a number of tax changes expected in Ms Reeves' budget that will impact many people's finances.

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Speaking ahead of the Budget, prime minister Sir Keir Starmer said on Monday that tax rises "will prevent austerity and rebuild public services". However, Labour has come under fire from the Tories, who accused the party of not being "straight with the British people" during the election campaign.

Among the measures expected are an extension to the freeze on income tax thresholds, higher National Insurance contributions for employers and new rules around who pays inheritance tax and how much.

Here are four tax changes the government is reportedly considering, and how they may affect your wallet.

1. Income tax threshold freeze extended

The chancellor has ruled out hiking the rate of income tax working people pay - but she is expected to extend the freeze on income tax thresholds.

Keeping thresholds frozen at the current level, instead of raising them inline with inflation as they previously had been, will see more people pulled into paying the higher rates as their wages go up.

Currently, the basic rate of 20 per cent is paid on income between £12,570 and £50,270, while the higher rate of 40 per cent is paid on earnings between £50,271 and £125,140. The additional rate of 45 per cent is paid on anything above £125,140.

Income tax thresholds were frozen by the previous Conservative government in 2022 and the freeze currently has an expiry date of 2028.

However, Ms Reeves looks set to extend it until the end of the current Parliament. Such a move could raise £7 billion for the government, according to reports by the Financial Times.

Some have criticised the Labour Party for considering the move after last year Ms Reeves blasted the Tories for "picking the pockets of working people" by continuing the freeze.

2. Employer National Insurance contributions hiked

The government also looks set to hike national insurance contributions for employers.

Labour's manifesto pledge to not increase national insurance for working people only applies to the employee element, according to Ms Reeves, which would leave her free to hike the rate that employers pay.

Employers currently pay National Insurance at a rate of 13.8 per cent on employees' earnings above £175 per week. Increasing that rate to 14.8 per cent could raise as much as £8.5 billion a year for the government, according to the Institute for Fiscal Studies (IFS).

However concerns have been raised that a hike in employer contributions could cause problems for small businesses, leaving them less likely to hire new staff due to the higher price of taking new workers on.

Kate Nicholls, chief executive of UK Hospitality, said an NI rise for employers would "particularly hammer sectors like hospitality", while Liberal Democrat deputy leader Daisy Cooper raised concerns that it could send small care providers from "crisis to collapse".

3. Capital gains tax hiked

Another tax change that could be announced is a hike in Capital Gains Tax (CGT), which would target the wealthiest earners.

CGT applies to sales of assets including second homes and shares. It is estimated that only around 350,000 people are subject to the tax.

Reports in The Times suggest CGT on the sale of shares and other assets, which is currently set at 20 per cent, could be increased by "several percentage points". This would raise revenue in the "low billions", according to the newspaper.

The rate of CGT on the sale of second homes - currently set at 24 per cent - is expected to remain the same.

Some businessmen, such as BrewDog founder James Watt, warned the move would prompt entrepreneurs to leave the UK. However, the Institute for Public Policy Research (IPPR) think tank has said that an increase in CGT in the fiscal statement would not stop entrepreneurs from investing in the UK.

4. Changes to inheritance tax

Ms Reeves is expected to announce changes to inheritance tax, although the details remain under wraps at this stage.

Currently, inheritance tax does not affect the vast majority of the public, with only around four per cent of deaths resulting in a charge.

Only people with estates (property, money and possessions) worth more than £325,000 must pay inheritance tax, which has a standard rate of 40 per cent, and it is only charged on the part of the estate that lies above the threshold.

There are several exceptions and allowances, such as higher thresholds for children or grandchildren who have homes left to them and a reduced rate for people who leave 10 per cent of their estate to charity. The government could decide to change some of these rules to raise revenue.

The BBC reports that "multiple changes" to the way the tax works have been considered by ministers.