With Chancellor Rachel Reeves’ first UK Autumn Budget only days away, significant changes could impact businesses, investors and financial markets. Among other things, experts believe the Budget might introduce reforms in capital gains tax (CGT) and non-dom regulations, which could reshape the country’s economic landscape.
In this post, we’ll explore key topics we’re planning to monitor and explain how they could affect global banking and payments, international trade, foreign exchange (FX) volatility and the job market..
1. Capital gains tax and investment changes
On 30th October, Reeves could align capital gains tax (CGT) with income tax, increasing the tax burden for many investors and business owners. If this happens, it could slow mergers and acquisitions (M&As) as businesses delay transactions, anticipating higher taxes.
The government is also considering tax changes that could affect gains from selling shares, property, land and other specific assets. However, the primary focus before the budget is to reassure entrepreneurs about potential changes to CGT in an effort to avoid hindering UK growth.
How could the UK Autumn Budget impact international payments?
If increased taxes lead to a reduction in M&A activity, this could affect cross-border deals and consequently reduce the volume (or at least the size) of international payments. It's also important to remember that since April 2019, non-residents have been within scope of CGT when selling UK residential property and land.
2. Adjustments to VAT and inheritance tax
Considering pre-general election campaign messaging, widespread changes to VAT seem unlikely. However, the government has already taken steps to carry out its manifesto commitment to apply VAT to private and independent school fees.
Because the addition of VAT depends on where suppliers (in this case, schools) are located, rather than customers, both domestic and international students could see costs increase. This will place an unfortunate additional burden on the backs of expat parents.
Inheritance tax (IHT) reform has also been proposed as HMRC reports another record year in IHT collections, up 9% from last year to £7.5 billion. Updates to IHT laws are expected between now and 2028 as part of Labour's "tough choice" to address the budget deficit.
How could this impact global financial strategies?
VAT and IHT reforms could increase the costs associated with international transactions, especially for high-net-worth individuals (HNWIs) and families. As a result, family offices and other intermediaries could optimise their clients’ financial strategies to minimise generational wealth taxes.
3. The end of the non-dom scheme, plus private equity restrictions
Many tax experts believe that using domicile as a basis for taxation is outdated and that non-doms should pay taxes like other residents. However, restricting the non-dom scheme and increasing taxes on private equity carried interest could have unintended consequences, potentially driving HNWIs and private equity investors to relocate to more tax-friendly jurisdictions.
The government has also confirmed it will end the use of excluded property trusts, which were previously used to protect assets from Inheritance Tax. This decision follows a review of their impact on tax revenues needed for public services.
How could this impact the banking sector?
According to Henley & Partners, the UK could lose 9,500 HNWIs in 2024 – more than double the 4,200 who left in 2023. If this happens, it will make the UK the second-largest country from which millionaires are leaving, just behind China, and could weaken our banking sector.
Having said this, not everyone is worried about a HNWI exodus. Businessman and Phones 4u founder John Caudwell, for example, believes that economic stability stems largely from robust support for small businesses.
“Worry about the start-ups and SMEs,” he says, “not the wealthy individuals moving abroad.”
It’s important to note that the UK is well positioned geographically and remains one of the largest consumer markets in the world alongside the US, China, Japan and Germany. In total, this group of countries represent about half the global consumer economy.
4. FX volatility and cross-border payments
Most pundits agree that the tax reforms and monetary policy changes included in the upcoming Budget will probably result in volatility for the British pound, which could affect cross-border payments and create challenges for businesses involved in international trade.
Moreover, the upcoming US presidential election in November could exacerbate global market instability, creating a “perfect storm” for FX markets. Because of this, businesses will need to implement robust hedging strategies to manage FX risks into early 2025.
How could this impact international trade?
Fluctuating FX markets could lead to unpredictable costs for businesses reliant on cross-border transactions. To maintain stable international operations and protect profit margins, business owners should consider deploying solid FX risk-management strategies.
5. Inward investment and economic confidence
Ambiguous tax reforms and regulatory changes could reduce inward investment as businesses and investors delay major decisions until they gain a better impression of the UK’s economic direction. Additionally, reduced confidence in the country’s economy might lead to more businesses (particularly fintechs) favouring mergers rather than risking initial public offerings (IPOs).
How could this impact cross-border payments?
If confidence in the UK economy falters, global investors may seek more stable markets, impacting banking operations linked to international investments and cross-border payments.
From a business growth perspective, many firms could opt for instant access to capital and resources by merging with market peers rather than seeking investment via IPOs. This strategy becomes especially relevant when investors are cautious about the economic outlook and less inclined to support new public offerings, fuelling a wave of consolidation which can boost stability.
6. UK financial services job market
The UK financial services job market has been relatively quiet leading up to the Budget. Within the sector, businesses are largely taking a “wait and see” approach, pausing recruitment and team growth until the impact of the Budget on financial regulations, taxation and broader economic conditions is clearer.
This cautious approach has created a temporary dip in hiring, with only 28% of employers actively increasing recruitment initiatives. Although some firms are still recruiting and have seen a rise in candidate activity, many are struggling to find individuals with the right skills.
What are the long-term implications for the financial job market?
The cautious approach in the UK financial services job market could lead to talent shortages and skill gaps over time, especially if qualified professionals seek opportunities in more active markets or industries. As recruitment picks up, firms may face a highly competitive hiring environment, which could drive up wages and increase operational costs, particularly for smaller companies.
Prolonged uncertainty could also weaken the UK’s position in global finance as skilled professionals look elsewhere for stability. To adapt, companies may turn to contract or freelance roles, trading short-term flexibility for reduced job stability, which could reshape the workforce structure and impact long-term sector growth.
Preparing for change with Interpolitan
The Budget will probably make waves in the UK and beyond, with updates expected in capital gains tax, VAT and the non-dom scheme transforming the global banking scene and impacting international payments. Meanwhile, financial services hiring has slowed as businesses wait to see how new policies unfold. Adopting proactive financial and risk-management strategies will help businesses stay one step ahead of the shifting economic environment.
As the UK sees a rise in debanking, services that prioritise accessibility and efficiency become more valuable than ever. In this climate, alternative banking options like Interpolitan Money provide flexible multi-currency solutions for individuals and businesses facing hurdles with traditional banks, including complex structures that typically require special attention and enhanced due diligence.
Unlike other alternative banking providers, we match every client with a dedicated relationship manager to guide them through onboarding and beyond. We typically open accounts in 7–10 days and offer more than 55 currencies across 160 countries, helping clients live, work and do business all over the world.
To learn more about us or open an Interpolitan multi-currency account, get in touch today.
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