Budget speculation: The tax partner

With Budget speculation running rife please see comment from Bina Gayadien, Tax partner at law firm Spencer West LLP:

“With all the speculation around November’s Autumn Statement, one thing feels certain: tax rises are coming. Whether through direct tax rate increases or more structural reforms to the tax system, the Chancellor will need to find billions from somewhere without breaching labor’s manifesto pledges. A number of possible changes are being suggested but their broad impact means that the Chancellor will need to tread carefully.

One area under review is the tax-free lump sum that can be taken from UK pension pots. Currently, individuals can access up to 25% of their pension savings tax fee from the age of 55, rising to 57 from 6 April 2028. The maximum tax-free amount was capped at £268.275 from 6 April 2024. We may see this cap reduced further, the minimum age at which the lump sum can be taken further increased, or other changes introduced to limit the tax relief on pension withdrawals or contributions. The lifetime and annual allowances already restrict what higher earners can contribute tax free to their pension, and any further limit to tax relief on pensions are not anticipated at this stage, as that would directly impact workers.

Another consideration which has also been suggested,  is the removal of National Insurance Contributions (NICs) savings from salary sacrifice arrangements for pensions. Currently, employer pension contributions made under salary sacrifice are exempt from employer NICs and abolishing the relief would increase employer’s costs.

The Chancellor is also said to be considering applying employer National Insurance Contributions to payments made to members of LLP. These individuals are not employees but considered self-employed and therefore no employer NICs are due. LLP structures, already subject to complex anti – avoidance rules, are commonly used by professionals such as lawyers, fund managers and accountants but also medical practitioners. These measures may not be presented as ’tax increases’ for working people, but there will be a knock-on effect on the net pay and benefits of workers as we have already seen following the increase of employers’ NICs from 6 April 2025.

If Rachel Reeves would be willing to revisit labor’s manifesto pledges on tax, a 1% increase of the basic rate from 20 to 21% would have broad implications and it has been estimated this could potentially raise 8 billion in tax revenue. Such a raise is seen as a big ‘political gamble’ as the economic impact and the response to these changes will be difficult to predict.

Rachel Reeves is running out of options to raise revenue without directly tax increases. The proposals which are being suggested are likely going to impact on workers, employers and professionals across the board. None of the suggested changes would make enough impact to raise sufficient revenue to fill the fiscal gap but almost all come with complex trade-off.”

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