Overview of the Autumn Budget
The autumn Budget was recently unveiled by Chancellor Rachel Reeves, bringing several changes that will affect various aspects of personal finance. One significant change is the freeze on income tax thresholds, which means more individuals could end up paying higher taxes in the coming years. Additionally, the cash ISA limit has been reduced, impacting savers across different age groups.
How to Protect Your Savings
Reeves announced a reduction in the cash ISA limit from £20,000 to £12,000 for most individuals, with those over 65 remaining unaffected. This change aims to encourage younger savers to invest in stocks and shares, thereby boosting the economy. However, many prefer the safety of easy access or fixed savings accounts.
Experts suggest using up the current ISA allowance before it changes in April 2027. Anna Bowes, a savings expert at The Private Office, recommends checking existing ISA rates and switching if they are not competitive. She also advises locking into a fixed rate now to protect against potential future reductions in savings deals.
Camilla Esmund, senior manager at interactive investor, emphasizes maximizing tax-saving opportunities through ISAs and pensions. These accounts offer tax shields, helping grow wealth over time. She highlights the benefits of ISAs and SIPPs (self-invested personal pensions), which cater to individual needs and circumstances.
How to Protect Your Pension
Millions of state pensioners will face income tax on their state pension starting in 2027. The earnings threshold for income tax remains frozen at £12,570, leading to more people paying tax as wages and pensions rise. Labour has also introduced changes to salary sacrifice schemes, affecting pension contributions above £2,000 a year.
Antonia Medlicott, founder of Investing Insiders, suggests considering a self-invested personal pension (SIPP) for greater control over investments. Basic taxpayers can benefit from a government contribution of £25 for every £100 invested. Additionally, investment growth inside a SIPP is tax-free, allowing for tax-free withdrawals from age 55 (57 from 2028).
Lisa Picardo, UK chief business officer at PensionBee, advises employees to maximize pension contributions before the April 2029 deadline. Craig Rickman, personal finance expert at interactive investor, encourages workers to review their contributions and check if changes affect them.
How to Protect Your Mortgage
The Government has introduced a high-value council tax surcharge of £2,500 on properties worth over £2m, raising about £400m. Properties over £5m will face a £7,500 charge, known as a “mansion tax.” This charge will be added to existing council tax.
There is also a two percentage point increase in property income tax, affecting landlords who pay income tax on rental earnings. The basic, higher, and additional rates have increased to 22, 42, and 47 per cent respectively. This could lead to more landlords exiting the market, potentially increasing demand and rent prices.
The cut to cash ISAs may impact mortgage availability for first-time buyers. David Hollingworth, associate director at L&C Mortgages, notes that lenders may adjust mortgage rates due to reduced cash savings. Jack Tutton, director at SJ Mortgages, suggests finding a competitive rate now and locking it in, as rates below 4% are still available for those with high deposits.
A potential change to Lifetime ISAs, a key scheme for first-time buyers, could scare potential buyers, but it remains a viable tool for now.