What Could the October Budget Mean for Small Businesses and Entrepreneurs?

With our newsletter launching just before the anticipated fallout from the 28th October budget, a quick search online reveals wildly conflicting predictions about what changes are coming, how significant they'll be, and which sectors will be affected.

Burnham's recent speeches have emphasised that the UK's tax system places a heavier burden on work than on wealth—an imbalance he believes needs correcting. However, he's also recently attempted to reassure wealthy individuals that he won't drive them out of the country through excessive taxation. Unfortunately, this reassurance hasn't resonated well; a recent report indicated that approximately a quarter of a trillion pounds has already left or is leaving the UK over the past two years.

Given this longstanding perspective on wealth combined with manifesto commitments regarding earnings and spending, it's reasonable to expect that assets, land, and capital gains could feature prominently in the budget. This wouldn't represent a dramatic shift, as Reeves' previous budgets have already targeted these areas with new tax rates on property, savings, and dividend income—changes that took effect from April 2026.

Property and Land

While Burnham hasn't explicitly proposed a comprehensive wealth tax, he has consistently advocated for introducing a Land Value Tax, which would impose an annual levy on land values. This idea enjoys cross-party backing as part of a broader property tax reform initiative. Although this new tax appears unlikely to be introduced in this budget, there's equally no indication that stamp duties or council tax will be reduced. Amid this uncertainty, it seems they've avoided ruling out incremental reforms—making property taxation a key area to monitor throughout this budget and beyond.

Recent media coverage has indicated that the government was potentially considering reducing the High Value Council Tax Surcharge threshold—commonly known as the mansion tax—from £2 million to £1.5 million, with implementation scheduled for April 2028. Despite the absence of any formal government announcement, the Financial Times has now reported that this proposal has been abandoned.

Capital gains tax

Burnham's perspective on taxing work versus wealth, combined with pressure from within Labour circles to harmonise capital gains tax and income tax rates, has sparked discussion about potential additional capital taxation reforms, though no concrete proposals have materialised.

According to the Financial Times, which cited unnamed Treasury officials, aligning these rates has been ruled out. However, without an official confirmation, many analysts suggest that a more modest adjustment could still be on the table.

The primary capital gains tax rate was most recently raised from 20% to 24% in October 2024. Any subsequent modifications would require careful consideration of revenue generation potential. Certain analyses, including those conducted by HMRC, indicate that a simple rate increase beyond 24% might be counterproductive, particularly when weighing effects on investment and business creation.

This reasoning may explain why focus is shifting toward alternative growth-friendly strategies, with the Financial Times suggesting that Healey is exploring initiatives to incentivise business owners to reinvest their proceeds domestically.

Inheritance tax reliefs

The 2024 modifications to inheritance tax reliefs affecting farmers and family enterprises continue to face examination. The Prime Minister has reportedly expressed openness to "reconsidering" the reduction in agricultural property relief that was introduced in 2024. It remains uncertain whether this will result in additional modifications or encompass business property relief as well.

Income Tax Thresholds

While the manifesto addresses income tax rates, it deliberately sidesteps the question of thresholds. With thresholds locked in place until April 2031, fiscal drag becomes an automatic revenue generator—as wages climb, more workers find themselves pushed into higher tax brackets without any formal rate increase. This approach has become the go-to strategy for successive Chancellors seeking to boost government finances while keeping headline tax rates unchanged.

After years of maintaining these freezes, the strategy is now facing mounting political pressure. Burnham raised concerns about the personal allowance freeze during his Makerfield campaign. Reintroducing inflation-linked adjustments would carry a substantial price tag: according to the Institute for Fiscal Studies, restoring indexation from April 2027 would cost approximately £8.4 billion annually based on current inflation projections. Implementing such a change would almost certainly require offsetting tax increases elsewhere in the system.

What Happens Before 28 October

During Labour's Liverpool conference on 28 September, Healey's remarks on taxation were notably cautious. He reaffirmed the government's commitment to fiscal rules and emphasised that finances are tighter than those inherited by previous Labour administrations, though the substantive policy announcements are scheduled for 28 October.