November 14, 2024

The Resolution Foundation has recommended that Rachel Reeves consider significant tax changes in the upcoming Budget, including increases to inheritance and capital gains taxes, to address the rising fiscal challenges faced by the government.

The think tank’s report suggests that scrapping inheritance tax reliefs for agricultural property and business assets could generate £2 billion annually. Additionally, 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, potentially charging 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.

However, the think tank also flagged the need for targeted tax cuts, particularly concerning stamp duty. The threshold for stamp duty on property transactions is set to drop from £250,000 to £125,000 in April 2025, effectively increasing 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, arguing that it could hinder the effective use of the UK’s housing stock.

A Treasury spokesman commented on the recommendations, noting: “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 do that will be taken at the Budget in the round.”

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Think tank urges Labour to consider inheritance and road pricing in budget proposals