Rachel Reeves will unveil her budget on November 26 (Image: Getty)
With the Autumn Budget just days away, households across the UK are bracing for possible tax rises. New survey figures suggest that only 3% of people think they will escape Budget tax hikes, while another 3% say they would be happy to pay more tax. That number falls to 2% among women and people aged 35 to 54, often referred to as the “squeezed middle”, according to Opinium polling of 2,000 people for Hargreaves Lansdown.
The research found that millions are expecting changes that could affect income tax, council tax, inheritance tax, capital gains tax, stamp duty and VAT. Sarah Coles, the head of personal finance at Hargreaves Lansdown, said the direction of travel appears clear as the Government prepares to unveil its plans. She said: “As the Budget countdown creeps closer to a conclusion, we can be confident that the Budget is going to include tax hikes. The only questions are which taxes, how much they’ll rise, and how it will impact our finances.”
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Only 3% of people think they will escape Budget tax hikes (Image: Getty)
Recent speculation has focused on a potential longer freeze to income tax thresholds, which Ms Coles described as an “effective stealth tax” that has already pushed over 6 million more people into paying income tax, and 3.36 million into higher or additional rate bands.
Hargreaves Lansdown estimates suggest that if thresholds were kept frozen for another two years, instead of rising in line with wages over that period, someone earning £60,000 could pay an additional £1,529 by the end of 2029/30, assuming wages rise 4% a year.
Ms Coles warned that moving into a higher tax band can have multiple consequences. She said: “It also means any dividend tax or capital gains tax may be paid at a higher rate. Plus, your personal savings allowance halves or disappears overnight.”
Given the uncertainty surrounding capital gains tax, dividend tax and inheritance tax, experts say there are still steps people can take before Rachel Reeves delivers her statement.
Ms Coles added: “This isn’t the time to panic, but it’s definitely a good time to plan.”
There are still steps people can take before Rachel Reeves delivers her statement (Image: Getty)
Seven last-minute money moves to consider
Experts at Hargreaves Lansdown say there is still time for households to take action before the Budget, with both Helen Morrissey, the head of retirement analysis, and Sarah Coles, the head of personal finance, sharing seven possible steps that could help protect people from potential tax changes.
1. Boost pension contributions
Ms Morrissey said: “Pay into a pension to protect against the rumoured extension to the freeze on income tax thresholds and make the most of tax relief as it stands.” She also warned that rumours about a flat rate of tax relief mean higher earners could see support fall, and that changes to salary sacrifice could make it less generous in future.
2. Use ISAs alongside a pension
Ms Morrissey said: “If you’re worried about income tax in retirement, consider using cash and stocks and shares ISAs alongside your pension. Income from an ISA can be taken tax free.”
3. Consider inheritance tax gifting
Ms Morrissey explained that gifting can help families support loved ones while rules still allow it. She advised keeping records and ensuring gifts are made from income and “not impact your own standard of living.”
4. Use cash ISAs to protect savings interest
Coles said: “If you’re worried about paying income tax on your savings interest, and you have the ISA allowance available, saving in a cash ISA will protect your hard-earned savings.” She said this can help people make the most of their allowance while the government considers future ISA reforms.
5. Look at stocks and shares ISAs for investments
Ms Coles said that for those beginning their investment journey, a stocks and shares ISA can be a “first port of call”, offering protection from dividend and capital gains tax.
6. Realise gains gradually and use Bed & ISA / Bed & SIPP
Ms Coles said investors with assets outside tax wrappers can realise gains within the £3,000 capital gains allowance and use share exchange processes to move assets into an ISA or pension to protect future growth.
7. Share assets within a couple to reduce tax
Ms Coles said that “if you’re married or in a civil partnership and your partner pays a lower rate of tax, you can transfer income-producing assets into their name”. She added that couples can also make use of Junior ISAs and Junior SIPPs for eligible children.
