Rachel Reeves to lay out ‘tax road map’ for businesses in UK Budget

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Chancellor Rachel Reeves has promised to produce a “tax road map for business” in next month’s Budget, including Labour’s promise to cap corporation tax at 25 per cent for the rest of the parliament.

Her pledge is intended to show that she wants to provide a stable medium-term investment environment, even as she eyes tax rises that hit business in her October 30 statement.

Treasury officials have not ruled out a possible rise in capital gains tax in the Budget, while private equity bosses and oil and gas companies are also facing higher taxes.

Reeves on Tuesday attempted to reassure bosses that they can look forward to a stable tax landscape once the Budget measures have been enacted. “It is vital the tax system supports growth,” Reeves told MPs.

“At the Budget the government will be outlining a tax road map for business to offer the certainty that encourages investment and gives business the confidence to grow.”

The move delivers on Reeves’s pledge to business executives in February that a Labour government would publish a tax road map within its first six months in office.

Business groups welcomed that promise, with CBI chief executive Rain Newton-Smith, who had pushed for a road map, saying at the time that it was a “bold move that can give businesses the certainty they need to invest over the years and decades to come”.

On Tuesday, Reeves said the tax plan would also include a commitment to cap corporation tax at 25 per cent, and maintain the “full expensing” system of capital allowances for the rest of the parliament.

Allies of the chancellor said the “business tax road map”, promised in Labour’s manifesto, would also set out a plan for other business tax measures such as capital gains tax during this parliament.

Business leaders are already nervous about likely tax rises in the Budget, which Reeves says will be needed to fill a £22bn fiscal “black hole”, and the likely impact on enterprise.

Prime Minister Sir Keir Starmer and other ministers have recently stopped referring to Labour’s manifesto pledge to cap corporation tax at 25 per cent; Reeves’s statement on Tuesday made it clear that this remains intact.

But other business tax rises have not been excluded. Business leaders have warned against a rise in capital gains tax, while private equity bosses have warned of an exodus from the UK as Reeves looks to close a tax loophole used by the sector.

Meanwhile Offshore Energies UK, which represents North Sea operators, has warned that Reeves’s planned increase in the windfall tax on the oil and gas sector could hit investment and result in a loss of £13bn to the UK economy from 2025 to 2029.

Starmer warned last week in a Downing Street speech that his government’s first Budget was “going to be painful”, and that those with the broadest shoulders “should bear the heavier burden”.

In an attempt to present a less gloomy outlook, Reeves will next week deliver a speech on growth and how the government’s fiscal discipline is intended to underpin faster growth rates.

That will be followed on October 14 by a global investment summit in London, which will be a chance for Starmer to engage in some boosterism about Britain before Reeves delivers her tough Budget.

In the meantime there is growing concern among Labour MPs about Reeves’s decision to save £1.4bn by cutting winter fuel payments from all but the poorest pensioners. A number of Labour MPs criticised the move in the House of Commons, but Reeves countered that all pensioners would continue to benefit from the pensions “triple lock”, which she promised to maintain for the whole parliament.

A test of the policy will come when MPs will get a vote on the policy next week, with the prospect of a rebellion by some Labour MPs.

Legislation called “Social Fund Winter Fuel Payment Regulations 2024” was published by the government last week, which will scale back the £300 annual payments to the elderly from mid-September.

The government had been criticised for failing to offer a vote to parliament on the contentious issue.

However there will now be a debate and vote in the Commons next Tuesday after opposition parties tabled a parliamentary motion, known as a “prayer”, to block the regulations.