Why Rachel Reeves is coming for YOUR pensions, property and savings: Our experts reveal how the Chancellor is set to raid assets of hard-working Brits in her Budget – and could even introduce these alarming new taxes

It’s now clearer than ever that Rachel Reeves is plotting a tax raid on those who have diligently worked to build wealth.

While the Chancellor has ruled out a specific wealth tax in next month’s Budget, she has strongly hinted that she will look to tax ‘assets’ as opposed to ‘income’.

And that has inevitably spooked anyone with property, pensions, savings and investments.

Speaking at the International Monetary Fund meeting in Washington last week, the Chancellor said: ‘I do think that those with the broadest shoulders should pay their fair share of tax, and I think you can see that through my actions last year at the Budget.

When asked how she would define a wealthy person, Ms Reeves said: ‘Wealth is obviously different from income. So, wealth is not about your annual salary.’

But how exactly could the Chancellor target our wealth? And will she just go after the genuinely rich, or are millions of middle-class savers, pensioners and homeowners in her sights?

Here, with the help of leading tax accountants, we lay out the options available to the Chancellor and how likely they are to be part of a disastrous Budget.

Council tax hikes

Reforming existing property taxes has been one of the most openly discussed ways the Chancellor could tax wealth in the Budget. One reason property taxes are on the agenda is that they are hard to dodge, the experts say.

Chancellor Rachel Reeves may target council tax in her upcoming Budget

Toby Tallon, partner at accountancy firm S&W, says: ‘Any time a Government is needing to reach for a lever to raise more money, property tends to be the one they reach for.’

He adds: ‘You can’t move bricks and mortar out of the country.’

New council tax bands for high-value properties could be on the table and those with more expensive homes could see council tax bills shoot up.

Council tax is charged in bands, from A to H, with most homes graded based on their value in 1991. Local authorities set the specific bills within these bands.

Hiking council tax for expensive properties could be done by adding extra levels on top of the existing highest bands.

Alternatively, think-tank the Institute for Fiscal Studies said an extreme move could be to double council tax bills for the top two existing bands, G and H. This would take the average band G and H bill from £3,800 and £4,560 per year to £7,600 and £9,120, respectively.

Tinkering with just the top end of council tax is seen as a more likely option than revaluing all bands but could pave the way for a full overhaul.

New council tax bands would provide a cash injection for local authorities and lower the need for them to seek more money from the Treasury.

Toby Tallon, partner at accountancy firm S&W, says there will be a ‘very strong temptation’ to tinker with council tax bands as this would give a cash injection to local authorities

For this reason, Mr Tallon says: ‘I think there will be a very strong temptation to do it.’

‘My hunch is the reason it will be one they go for is that council tax bands have not been assessed since 1991 and the system is ripe for reform anyway.’

Robert Salter, a director at accountancy firm Blick Rothenberg, says any council tax reform would be tricky to implement but it could be sold as targeting the rich.

He said: ‘The valuation process for higher-end properties would be time consuming initially and possibly subject to challenges from homeowners. But in ways it would be quite simple to manage from a messaging perspective for the Government, as people basically understand council tax and are, more or less, happy with the system.’

Capital gains tax is charged on profits on assets including shares, funds and second homes when they are sold.

In last year’s Budget, the Chancellor launched a raid on investors by raising CGT, from 10pc to 18pc for basic rate taxpayers, and 20pc to 24pc for higher and additional rate taxpayers.

There is an annual tax-free allowance of £3,000 and gains are added to other income to decide the threshold, meaning those making substantial profits are likely to end up paying the higher rate.

Some campaigners want CGT rates to be made level with income tax rates, at 20pc, 40pc and 45pc, but experts think it is unlikely the Chancellor will have a second bite.

Experts think it is unlikely that Ms Reeves will raise capital gains tax again in her Budget (picture posed by models)

This is because HMRC figures have previously indicated that raising the higher CGT rate by 10 percentage points would lead to a £2billion decrease in the tax take by the end of parliament, due to changes in investor behaviour.

Meanwhile, the capital gains tax-free annual allowance was already slashed from £12,300 to just £3,000 by former Chancellor Jeremy Hunt.

For this reason, Mr Tallon says: ‘If the Government were to use HMRC modelling, I would say it is unlikely they would raise CGT again. I think there’s not much more they could do with CGT in this Budget.’

Capital gains tax at death

The Chancellor could end something known as the CGT uplift in the Budget, however.

This means gains made on the value of any assets in an estate are ‘wiped out’ when they are passed over as an inheritance.

Only inheritance tax (IHT) is charged, if the estate is large enough to incur it.

Removing the CGT uplift would capture some of the profits made by those whose estates are below the inheritance tax threshold. However, it could mean double taxation for those who do fall into the IHT net.

Paul Barham, partner at accountancy firm Forvis Mazars, says: ‘I think it’s possible this is on the Government’s radar, but it would be very difficult to implement.’

Lifetime gifting cap

Inheritance tax was a target in Rachel Reeves’ last Budget. Unspent pension pots will be pulled into the IHT net from April 2027, while entrepreneurs and farmers had their exemptions cut.

Lucy Woodward, a partner at accountancy firm Saffery, says that ending gifts from surplus income ‘could be on the cards’

This has sharpened people’s minds, and more people are gifting during their lifetimes to avoid IHT but there are fears this could now be targeted.

Rules limit what you can give away each year without it becoming liable for inheritance tax. Individuals can give away up to £3,000, as many £250 gifts as they like but only one per recipient, and up to £5,000 for their child’s wedding.

Gifts above these thresholds are allowed but are only fully exempt from IHT if you survive for seven years after making them.

An exemption gaining popularity is making regular gifts out of surplus income, which are fully exempt immediately. To qualify the gift must be made as ‘normal expenditure’ – so made on regular occasion – and leave you able to maintain your usual standard of living.

Lucy Woodward, a partner at accountancy firm Saffery, says speculation of further changes to IHT includes curbs on lifetime gifting rules.

‘Ending gifts out of surplus income could be on the cards,’ she says.

Another way wealth could be taxed is by capping the amount that can be gifted in a lifetime. This is considered unlikely, as it would be very complicated to implement and track.

‘If they were to cap the amount of gifts someone could give in their lifetime at say £200,000 or even £500,000, it could potentially be a revenue raiser,’ says Ms Woodward.

The other lever the Chancellor could pull is extending the seven-year rule on gifting to 10 years, according to Ms Woodward.

Gifts given in the three years before your death are taxed at 40 per cent, while gifts given three to seven years before your death are taxed on a sliding scale known as ‘taper relief’.

Taper relief only applies if the total value of gifts made in the seven years before you die is over the £325,000 tax-free threshold.

Extending the seven-year rule to 10 years would lead more people to fall into the IHT net.

Pension wealth

The pension tax-free lump sum could be a sitting duck in the Budget, experts say.

Pension pots can be accessed at 55 – rising to 57 from April 2028 – and savers can withdraw 25 per cent tax free, up to a maximum of £268,275.

Some fear the Chancellor could curb this tax-free amount.

Ms Woodward says: ‘Pensions are quite captive, as they are reported. It would be easy for the Government to get rid of the pension tax-free lump sum.’

A more likely move would be a lowering of the cap. Rather than allowing 25 per cent of the full pension fund to be taken on a tax-free basis, the Chancellor could say it is only available for a maximum value of £100,000, for example.

This would mean that someone with a total pension of £350,000 would still get their 25 per cent tax-free amount, whilst those with a pension fund value of £500,000 would lose some tax-free cash.

Mr Salter says: ‘There is actually already a restriction on how much can be taken tax-free. However, clearly very few people have pension fund savings of over £1.07million on their retirement, so for 99 per cent of pension savers, the 25 per cent tax-free amount is available fully.’

A wealth ‘exit tax’

Taxpayers in the UK can avoid any ongoing liability to capital taxes on their UK source assets by becoming non-resident in the UK.

This means that the very wealthy can often dodge tax rises by deciding to up sticks and move elsewhere. For example, there has been a rush of multi-millionaires leaving Britain for more favourable tax treatment in Dubai and Italy over the past year.

There are some restrictions. For example, UK property remains liable to CGT at the point of sale and for other assets it is still typically necessary for the taxpayer to stay non-resident in the UK for at least five years if they wish to sell an asset and not be liable to CGT on it.

An exit tax would capture some of the wealth of the rich if they decide to leave.

Other countries, for example the US, Australia, Germany, France, Denmark do have an exit tax when people with capital assets leave the country and become a non-tax resident in that jurisdiction.

Mr Salter says: ‘It is still quite a generous system in the UK compared to many other states.’

Mr Barham adds: ‘‘Other countries have this, where the Government will tax every gain in an asset and it’s certainly something which is possible in the UK.’