As the nation braces for Chancellor Rachel Reeves’ first autumn statement on October 30th, anxiety over potential tax hikes is palpable among UK households. Following her contentious Winter Fuel Payment revisions, there’s a widespread fear of more financial strain in the coming months.
Despite government assurances that income tax, National Insurance, VAT, and headline corporation tax rates will remain untouched, and a vow not to “raise taxes on working people”, scepticism remains. An expert has cast doubt on these promises, describing them as a “carefully worded promise” that leaves room for other fiscal manoeuvres. Jason Hollands, Managing Director at Evelyn Partners, has pointed out that Sir Keir Starmer’s talk of “pain” and “difficult choices to come” essentially signals “inevitability of some tax rises”.
With the budget just weeks away, the expert suggested a checklist for Brits to safeguard their finances against the looming changes. He also issued a stark warning to those with “even a modest amount of wealth”, cautioning them against “any drastic action” but suggesting they take certain steps before the Budget to protect their finances from potential tax changes. He added, “Not all of the following will apply to everyone or make sense in every individual circumstance – but these are some ideas to consider for people looking to batten down the hatches.”
In anticipation of possible income tax and capital gains tax changes targeting savings and investments, Jason advised Brits to fully utilise their tax allowances: “It makes sense individually to consider using ISA and other tax allowances and exemptions to mitigate against unnecessary tax bills.”
He also recommends that married individuals and those in civil partnerships maximise both sets of allowances related to capital gains, ISAs, and personal savings to “optimise your family finances”. This may require transferring assets or savings between spouses, which is typically not subject to tax charges.
Lastly, he suggests boosting pension savings as another strategy. Rumours are swirling that the Chancellor has set her sights on pension tax relief, which could shake up the tax-free status of pension contributions. An expert pointed out that higher and additional rate taxpayers might be hit hardest by this potential change but can counteract it by “considering injecting a lump sum into their pension pot” or increasing their pension contributions.
This move could also offer other advantages, such as lessening the impact of the frozen income tax thresholds. Jason commented: “Research suggests many workers are not saving enough to fund a decent retirement, then this could be a good time to raise monthly contributions…It is wise to seek out some professional advice to work out how much you could contribute and still benefit from the tax reliefs, as this will depend on your earnings.”
Regarding the option of withdrawing a pension tax-free lump sum, the expert stressed that making drastic financial decisions based on speculation isn’t advisable, especially before the budget is announced. However, for those already considering accessing their pensions soon, he suggested advancing their plans might be beneficial, saying: “We wouldn’t recommend hasty steps like accessing pension funds on the basis of speculation about what might be in the Budget.
“But if you were planning to do this shortly anyway, and have a clear intended use for it – such as mortgage reduction, paying off other debts or helping out family with expenses like school fees or university costs – then bringing the action forwards might not be the worst idea. What isn’t desirable is taking the 25% tax free cash in a bit of a panic and then holding it in a cash savings account where it will be liable to tax, rather than continuing to accumulate tax efficiently within a pension.”