The Autumn Budget is the government’s major fiscal event, during which the Chancellor sets out key monetary and economic decisions for the coming years. Tax rises, pension changes, school fees – a lot could change after the Autumn Budget but, whatever happens, the fundamentals of financial planning remain unchanged. Here, we consider various scenarios that might impact your personal finances, wealth generation or inheritance planning and explain how you can Get Budget Ready.
Significant changes incoming?
Amidst higher debt interest payments, the government is widely expected to prioritise fiscal prudence in this year’s Autumn Budget. That is because Chancellor Rachel Reeves has set a Stability Rule, which states that day-to-day government spending must be met by revenues by 2029/30. In theory, this means that the government should only borrow for investment.
Yet independent forecasts show that the government is on track to break the Stability Rule. This has led many to predict that changes to Income Tax bands, reforms to the Dividend Allowance and tweaks to tax-efficient saving could all be on the cards.
“Substantial adjustments in the Autumn Budget will be needed if the Chancellor is to remain compliant with her fiscal rules,” according to the National Institute of Economic and Social Research. So, how will the Chancellor’s announcements affect your wealth, retirement plans, business or your family’s future?
What could change in the Autumn Budget?
While we can’t predict the exact policy announcements that the Autumn Budget will bring, we have a fairly solid idea of likely focus areas, based on historical Budget trends.
These include tax reliefs and thresholds (especially for pensions and capital gains), Inheritance Tax (IHT) and generational wealth, Dividend Tax or business owner rules, school fees or education-related tax perks, Income Tax bands or National Insurance changes and business owner tax planning or entrepreneur’s relief.
1. Will we see fresh tax rises?
Although the government has pledged not to “increase taxes on working people”, this year’s Autumn Budget could test that promise. Higher-than-expected inflation and a slowdown in economic growth mean that the government is contending with a spending gap that could reach more than £40bn by 2029/30.
→ If taxes rise or thresholds are frozen, your financial plan may need to adapt. Meanwhile, tax-efficient saving products, including ISAs, will become even more crucial.
2. Will IHT rules change again?
Several IHT proposals have been floated that may increase revenues for the government, from tightening asset reliefs to reforming lifetime gifting rules. These changes could further impact those who will be handing over their wealth, potentially increasing the burden of inheritance and emphasising the value of trusts.
→ If you are succession planning or considering the most tax-efficient way to hand your wealth to the next generation, you’ll want to keep an eye on any modifications to IHT rules.
3. Will the Dividend Allowance be reformed?
Reforms could result in the current £500 Dividend Allowance being removed, while the top Income Tax rate for dividends might also be considered for a rise from its current rate of 39.35%.
→ If you are heavily invested in dividend-paying shares, watch out for changes to the Dividend Allowance; you may want to consider diversifying into more growth options – as part of a full investment review.
Download our Get Budget Ready guide here for more detail on the big Budget questions.
Plan ahead and skip the stress
Whatever the Autumn Budget brings, the best thing to be is prepared. Amidst all the uncertainties, we can review your financial plan early, making sure you have a clear idea of how to respond after the Chancellor’s announcements are made. Get in touch today.
The information in this blog is for general guidance only and does not constitute personal financial advice. Tax, pension, and financial planning rules may change and can vary depending on your individual circumstances. Past government budgets are not a reliable indicator of future policy changes. You should seek advice from a qualified financial adviser before making any financial or investment decisions.