Budget Uncertainty and the Need for Fair, Clear Tax Policy in 2025
As we approach the upcoming Budget on 26th November, the level of uncertainty around tax policy feels higher than at any point in recent memory. Normally, as a Budget draws near, there are at least a few reliable signs indicating which areas may come under scrutiny and where change is likely. This year, that sense of direction is almost entirely missing.
At IN Accountancy, we are frequently asked what we expect to see in the Budget. But with the current landscape as unclear as it is, any attempt to predict specific measures would be little more than guesswork. Instead, we believe this is a good moment to highlight some key areas where meaningful and positive changes could be made — changes that would support not just financial outcomes, but also public confidence in the tax system.
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Inheritance Tax: Thresholds That Reflect Reality
One of the most significant concerns over the past year has been the changes to inheritance tax (IHT). These updates have caused genuine anxiety for individuals, families, business owners and farmers — even those who may not ultimately be affected, but simply do not understand how the rules apply to them.
The Government’s intention appears to be to prevent the misuse of reliefs such as Agricultural Relief and Business Property Relief. The objective is understandable, but the approach has created uncertainty and, in some cases, unnecessary fear.
A more effective and far simpler solution would be to increase the IHT threshold from the current £1 million per person to around £5 million. While £1 million may sound substantial, many small business owners and farmers can easily exceed this valuation in their assets. A higher threshold would protect the vast majority of genuine small enterprises and agricultural families, while still ensuring that reliefs are used appropriately.
Such a measure would be comparatively low cost for the Government yet offer enormous reassurance to those most affected by the recent changes.
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Addressing Distortions in the Income Tax System
Beyond inheritance tax, several long-standing quirks within the tax system continue to distort behaviour, particularly among higher earners and business owners.
The most glaring example is the tapering of the personal allowance once income exceeds £100,000. For every £2 earned above this level, £1 of personal allowance is lost. In practice, this creates an effective 60 percent tax rate on income between £100,000 and £125,000.
This is difficult to justify on grounds of fairness, and it results in individuals artificially managing or restricting their income simply to avoid falling into this punitive band. Removing or redesigning the taper would make the system more transparent and more equitable.
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Revisiting the High Income Child Benefit Charge
Despite adjustments in recent years, the High Income Child Benefit Charge (HICBC) continues to catch people by surprise. It remains complex, poorly understood and often viewed as unfair.
Raising the threshold for the charge — or ideally removing it entirely — would simplify the system and reduce one of the many “wrinkles” that have accumulated over time.
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A Call for a Fairer, More Coherent Tax System
Many of the issues outlined above stem from years of piecemeal fixes introduced to solve isolated problems, without sufficient consideration of how these changes interact with the wider system.
What individuals and businesses want more than anything is a tax framework that feels fair, consistent and predictable. Eliminating the sharp cliff edges and hidden penalties that drive unintended behaviours would be a significant step in that direction.
At IN Accountancy, we believe a comprehensive review of these long-standing distortions is overdue. A clearer, more strategic approach would not only improve public confidence but also support better long-term decision-making for business owners and families alike.
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