0:02 On the 26th of November, Rachel Reeves
0:04 will deliver her autumn budget. Yet
0:06 again, she has a big hole to fill. And
0:07 if Labour are not willing to cut
0:09 spending, then it's expected that Reeves
0:12 will need to find 30 billion pounds by
0:14 raising taxes. Just like last October,
0:16 there is a huge amount of fear and
0:18 speculation about what taxes could
0:20 change. And this is largely caused by
0:22 the government themselves endlessly
0:24 leaking potential ideas, refusing to
0:26 rule out any changes, and pushing the
0:28 budget back by a month. but also because
0:31 of the media's constant, often unfounded
0:33 speculation about what changes we'll see
0:36 from limits to ISIS and further
0:38 increases to capital gains tax and IHT
0:40 to new property taxes and radical
0:42 changes to pension tax relief and
0:45 taxfree cash. As a financial adviser, I
0:48 see firsthand the stress and anxiety
0:50 that this is causing. Last week, I had a
0:52 client say that it feels like I'm just
0:54 sitting here waiting for the bombs to
0:56 drop and praying that they don't blow up
1:00 my business or my retirement. I'm sure
1:01 part of you feels the same way, too,
1:03 which is why I needed to make this
1:06 video. I have seen so many half-baked
1:08 opinions and unhelpful suggestions
1:11 online that I think are causing
1:13 unnecessary stress and may push you into
1:14 making decisions that you come to
1:18 regret. So, just as I did last year, I'm
1:20 going to help you cut through the noise.
1:22 Look at what the government has actually
1:24 said and what is pure speculation, what
1:26 changes may be introduced, and most
1:30 importantly, when. If Reeves announces a
1:32 series of changes on the 26th of
1:33 November, but they don't come into
1:35 effect until the start of the next tax
1:38 year, then clearly spending time now
1:39 speculating about what these changes may
1:42 be is a waste of time. All you'll do is
1:44 get yourself riled up by a bunch of
1:46 far-fetched ideas that will probably
1:48 never come to pass. The writing is on
1:50 the wall. Taxes are going to rise. But
1:52 if you can't do anything about it, then
1:53 you're better off shutting out the
1:55 noise, waiting for the changes to be
1:57 announced, and then only updating your
1:58 plans once you've had time to digest the
2:03 new rules. If however, Reeves announces
2:04 changes that come into effect
2:06 immediately, then there may be actions
2:08 that you can take today to protect
2:10 yourself, like making a gift before IHT
2:12 rules change or taking taxfree cash from
2:14 your pension. At this point, it's
2:16 important to remember that no one, not
2:17 even the government themselves, knows
2:19 for certain what they are going to do.
2:21 But what I think is much easier to
2:24 determine is when these purported
2:26 changes may come into effect. In many
2:28 cases, it's obvious that these changes
2:30 could never be introduced immediately.
2:31 So, there's no point in stressing about
2:34 them now. Whereas with others, there is
2:37 a real possibility. And in these cases,
2:39 in certain personal situations, it may
2:41 make sense to take action now to protect
2:43 yourself. Let's start with ISIS. We know
2:44 that the government is looking to make
2:46 changes to ISIS. Reef said so in her
2:48 Mansion House speech in July. There has
2:51 been no sign of wanting to cap stocks
2:53 and shares ISIS or any other radical
2:55 changes like that. In fact, on the Okay,
2:56 I'm going to have to stop myself there
3:00 because that is no longer true. Whilst
3:02 I've been editing this video, I've just
3:05 seen this article from the FT which
3:07 suggests that Reeves is now considering
3:10 forcing stocks and shares ISIS to hold a
3:12 minimum allocation to UK equities,
3:19 This is exactly what I'm talking about.
3:22 The government leaks yet another
3:23 half-baked idea to the press and the
3:25 next thing you know it is front page
3:27 news causing unnecessary stress and
3:30 confusion. The source is the classic
3:33 vague people briefed on her thinking and
3:35 it gives just enough information to wind
3:37 you up and get you thinking the worst
3:39 when in reality I expect the government
3:40 themselves have probably not even
3:41 thought this through and it would
3:43 probably never come to pass at least not
3:45 in the way that this article is
3:48 suggesting. The premise of the idea is
3:50 not actually unreasonable. Imagine if
3:52 say ISIS did not exist and the only
3:54 other option was to invest via a taxable
3:56 investment account. But then the
3:57 government comes along and said, "Hey,
3:59 we're going to open this new tax-free
4:01 investment account, but you need to
4:04 invest 25% in UK assets." You probably
4:05 say, "Well, thank you very much, at
4:07 least for some of your money." But the
4:10 problem is that ISIS do already exist.
4:13 So, are they really going to force
4:15 everyone to sell their existing ISA
4:17 holdings and invest in UK stocks? What
4:19 about all of the people who don't have
4:21 the risk appetite for that? Will they
4:23 have their ISIS that they've spent years
4:25 accumulating revoked? And like, how do
4:27 you even define what a British company
4:28 is when so many of them are
4:31 international? And what what is to stop
4:33 people just offsetting this by holding
4:35 less UK assets in other parts of their
4:38 portfolio like their pension? And I
4:40 thought the plan was to simplify ISIS,
4:42 not make them a hell of a lot more complicated.
4:44 complicated.
4:46 Even if something like this is announced
4:48 in the budget, the complexities of
4:50 implementing it would require extensive
4:52 consulting with ISA providers, which
4:54 could take years during which there is
4:56 still a good chance that it could be
4:58 scrapped by Labor themselves or the next
5:00 government, just like what happened with
5:02 the British ISA. But of course, you
5:04 don't get any of that context in this
5:07 article, which is why this is the type
5:09 of article that I think is best ignored.
5:12 The type of noise that you need to block out.
5:13 out.
5:15 The other leading rumor is that Reeves
5:17 is looking to reduce the cash iser
5:20 allowance to £10,000. Although this
5:22 would be easier to implement, we only
5:24 ever see changes to ISER allowances come
5:25 into effect at the start of a new tax
5:28 year. So, there's no point in worrying
5:31 about this now. So, for now, try not to
5:34 get sucked into articles like this and
5:35 let's just see what happens in the
5:38 budget. Now, back to the original video
5:41 and capital gains tax. Last year, Reeves
5:44 increased capital gains tax from 10% to
5:46 18% for basic rate taxpayers and from
5:49 18% to 24% for higher rate taxpayers
5:51 with this change coming into effect
5:54 immediately. Now, you might think that
5:56 due to the recent change, we won't see
5:58 anything this time. But many people
6:00 think that capital gains tax is broken
6:03 and needs serious reform. And I have to
6:06 agree. Let me explain. You may have
6:07 heard reports in the press that
6:09 influential think tanks like the
6:11 Institute for Fiscal Studies have been
6:14 calling for CGT rates to be aligned with
6:16 income tax rates. Although this is true,
6:19 what the press often misses is that the
6:22 IFS actually thinks that raising CGT
6:24 rates on their own would make things
6:27 worse. Imagine if 10 years ago you
6:29 bought a Berlet property for £100,000
6:32 and since then its value has increased
6:36 in line with UK averages to £143,000
6:38 today. If you sell that property, you've
6:41 made a £43,000 capital gain. If your
6:43 £3,000 capital gains tax allowance is
6:46 available, then you'd pay 24% capital
6:48 gains tax on the rest, assuming you're a
6:50 higher rate taxpayer, leaving you with
6:54 an after tax gain of £33,400,
6:57 which might sound good, but that's
6:59 before we consider inflation. According
7:01 to the Bank of England, today you would
7:04 need £139,000
7:05 to buy the same amount of goods and
7:08 services as what £100,000 would have
7:10 bought you back in 2015. So, in real
7:12 terms, before tax, you've only just made
7:15 a profit. But you're then paying all of
7:17 that profit and more to the government.
7:19 And if they increase capital gains tax
7:23 to 40%, you'd be in even more of a hole,
7:25 leaving you with two options. You can
7:27 either sell the property, pay the tax,
7:30 and take your £127,000 and invest it
7:32 elsewhere, perhaps in another rental
7:34 property, or you could keep your
7:37 £140,000 property, keep receiving that
7:38 higher rental income, and if you need
7:40 any money, take out a mortgage and
7:43 invest that elsewhere. Which do you
7:45 think you'd choose? I hope this simple
7:47 example demonstrates why. Capital gains
7:50 tax is largely a tax on inflation which
7:52 penalizes long-term investors and
7:54 distorts investment behavior by forcing
7:56 people to hold on to assets for longer
7:58 than they would like. And clearly the
8:02 higher you push CGT rates, the worse
8:04 this behavior gets and the more it
8:06 deters people from investing, which is
8:08 bad for everyone. So although the IFS
8:10 does suggest that CGTG rates should go
8:12 up and perhaps even be aligned with
8:14 income tax rates, this is only if a
8:16 bunch of other reforms are introduced
8:18 like implementing some sort of
8:20 indexation or capital gains tax
8:22 allowance that rolls up over time. So
8:24 investors are in effect only taxed on
8:26 capital gains after accounting for
8:28 inflation, as well as a way for
8:31 investors to roll over or offset capital
8:32 gains so they don't feel locked into
8:34 investments. But what are the chances of
8:36 changes like this actually being
8:37 implemented? and is there anything that
8:39 you can do to protect yourself? I think
8:41 it's unlikely that the government will
8:43 just tinker with CGT rates again. So, if
8:45 we do see a change here, I expect we'll
8:47 see more significant reform. There are
8:49 sensible changes that could be
8:51 introduced in a tax neutral way, but
8:53 given the situation, that's not likely
8:55 to be the case. So, if we do see a
8:58 change here, taxes are likely to go up
9:00 and these changes could be implemented
9:02 quickly. But that does not necessarily
9:04 mean that you'd be better off selling an
9:06 asset and realizing a gain before the
9:08 budget. As in our example, if they
9:10 introduced an indexation relief for
9:13 inflation, this person could actually be
9:15 better off waiting. And who knows, the
9:17 rules could even be retrospective.
9:18 Clearly, these are highly nuanced
9:20 decisions. So, if you are thinking about
9:21 selling something before the budget, I
9:23 suggest you speak with an accountant who
9:24 can help you understand the personal
9:25 factors you need to take into
9:27 consideration when it comes to selling
9:29 property. However, unless you are
9:31 already near the end of that process,
9:33 you're not going to have time to push
9:35 through a sale now. So, although there
9:36 has been a lot of speculation in the
9:39 press about property taxes and how they
9:41 might change or how new taxes might be
9:43 introduced, there's no point speculating
9:45 about them now because we can't do
9:47 anything about it. So, let's just wait,
9:49 see what happens, and then make plans
9:51 when we have the details. Now, for
9:54 pensions, for most people, a pension is
9:55 the most taxefficient vehicle we have
9:58 for building wealth in the UK. So much
10:00 so that the Treasury estimates that
10:02 pension tax relief cost the government
10:04 50 billion pounds per year. Given that
10:06 there is such a big hole to be filled
10:08 and all of the other big tax raising
10:11 revenues have been ruled out. Yet again,
10:13 speculation is rife that we could see
10:16 significant changes to pensions with the
10:18 biggest tax raising opportunity being in
10:21 how pension tax relief works which is
10:22 viewed by many as being skewed towards
10:25 higher earners. If you are a higher or
10:27 additional rate taxpayer getting 40 or
10:29 45% tax relief on your pension
10:30 contributions, then clearly you're
10:32 getting a much bigger boost towards your
10:34 retirement savings than a basic rate
10:36 taxpayer. As such, some think tanks and
10:39 politicians have supported the idea of a
10:41 flat rate of income tax relief. In the
10:43 past, even Rachel Ree herself has
10:45 suggested a flat rate of 33% would be a
10:47 good idea. If there is a chance that a
10:48 change like this is brought in
10:50 immediately, then perhaps basic rate
10:51 taxpayers should hold off on making
10:53 pension contributions until after the
10:55 budget, whilst higher rate taxpayers
10:57 should expedite their contributions to
10:59 make use of higher tax relief whilst
11:01 they still can. But let's just think
11:03 about this. Although the idea may sound
11:06 simple, this would be a radical change
11:07 from how pensions have worked in the
11:10 past. It would require re-educating the
11:13 population on the fundamentals of how
11:15 pensions work, making them even more
11:18 confusing, which might put people off
11:20 using them. It would also add a lot of
11:22 cost and complexity for employers. And
11:24 according to the Pension and Life
11:26 Savings Association, it would take at
11:28 least 2 to 3 years to update payroll
11:30 systems to work in this way. Given that
11:32 Reeves is backed into a corner, she may
11:34 decide to push through a change here.
11:36 However, it seems impossible that a
11:38 change of this magnitude could be
11:40 implemented overnight. It would probably
11:42 take years. If you are a basic rate
11:44 taxpayer looking to make a pension
11:46 contribution, you may think that there's
11:47 no harm in waiting until after the
11:49 budget and seeing what happens. But, as
11:51 I'll explain shortly, that may come back
11:53 to bite you. So, in summary, I don't
11:55 think there's any point in speculating
11:57 about this type of change. Now, an
11:58 easier target would be for the
11:59 government to start applying national
12:01 insurance to employer pension
12:03 contributions. Currently, if your
12:04 employer makes a contribution directly
12:07 to your pension, it avoids both income
12:09 tax and national insurance. Whereas, if
12:10 you make a personal pension
12:13 contribution, you get income tax relief,
12:15 but no relief on national insurance.
12:16 This asymmetry has resulted in what's
12:18 known as salary sacrifice, where
12:21 employees can choose to sacrifice some
12:23 of their salary in return for their
12:24 employer making a larger pension
12:26 contribution that avoids national
12:28 insurance. Currently, the rate of
12:31 national insurance is 15% for employers
12:34 and between 0 and 8% for employees. So,
12:36 that is a big saving. Scrapping salary
12:38 sacrifice in its entirety would clearly
12:39 be a breach of the government's
12:41 manifesto not to increase national
12:43 insurance or raise taxes on ordinary
12:45 working people. But Reeves had no
12:47 problem increasing employers national
12:50 insurance in April. So, she could choose
12:53 to apply some or all of that rate to
12:54 employer pension contributions. This
12:56 would yet again increase cost for
12:58 employers, much of which would likely
13:00 feed its way through to employees anyway
13:01 via reduced hiring and smaller pay
13:04 rises. But it is a backdoor option that
13:06 apparently somehow enables the
13:07 government to keep their manifesto
13:09 intact. If there is a chance that they
13:11 can implement this change overnight, it
13:12 may make sense for those who have a
13:15 salary sacrifice scheme to make pension
13:17 contributions before the budget to avoid
13:20 having to pay national insurance. But
13:22 what if you're a basic rate taxpayer? Do
13:23 you contribute to your pension before
13:25 the budget to avoid national insurance?
13:27 Or do you wait till after the budget
13:28 just in case they increase income tax
13:30 relief? Or what if there is some other
13:32 change that we haven't even considered?
13:35 This is a perfect example of how trying
13:37 to make financial decisions based on
13:39 speculation can so easily tie you in
13:42 knots. It creates stress and often
13:44 results in jumping out of the frying pan
13:46 and into the fire. Fortunately, this
13:49 decision is likely to be already out of
13:51 your hands, as it's typically hard to
13:53 make changes to salary sacrifice levels
13:55 at short notice. Even so, I think it's
13:57 highly unlikely that a change like this
13:58 could be implemented overnight. It would
14:00 of course depend on the specific change,
14:02 but employers would need time to change
14:04 their processes, update their payroll
14:07 systems, and educate their staff on how
14:09 their pensions now work. So, I think
14:11 that the earliest that this change could
14:13 come into effect would be at the start
14:15 of the next tax year. Of all of the
14:17 headlines in the press, it's changes to
14:19 pension tax-free cash that get people
14:22 riled up the most. And that includes me.
14:24 Currently, once you reach retirement
14:27 age, you can draw down up to 25% of the
14:30 value of your pension tax-free up to a
14:38 But just as before the last budget, the
14:40 press has been relentlessly speculating
14:42 that taxfree cash could be reduced or
14:44 removed entirely, spamming us with
14:46 articles that suggest that there is now
14:49 a flood of retirees taking taxfree cash
14:52 whilst they still can.
14:54 A few weeks ago, I was speaking with a
14:57 gentleman who retired earlier this year,
14:59 and his decision to retire and walk away
15:02 from a secure, well-p paid job was on
15:05 the basis that he would be able to take
15:08 taxfree cash from his pension to pay off
15:09 his mortgage.
15:12 Unfortunately for him, he turns 55 on
15:15 December the 5th. So, he's not going to
15:17 be able to access his pension until a
15:21 few days after the budget. As such, if
15:24 Reeves decides to reduce the taxfree
15:26 cash that he can draw and implements
15:28 that change overnight, it would
15:31 devastate his retirement plans. This is
15:34 a man who has saved earnestly for the
15:36 last 30 years only to have his
15:38 retirement cut out from underneath him
15:41 by the government's moving the goalposts
15:44 right at the last minute. There are
15:46 millions of people across the UK who are
15:48 in a similar situation whose retirement
15:50 plans would be turned upside down if
15:53 they did this. The press loves pushing
15:56 this story because it gets so many
15:57 clicks. And it gets so many clicks
16:00 because this would be so damaging to so
16:03 many people. The irony being that this
16:05 is exactly why it is so unlikely that a
16:07 change like this would ever be
16:11 introduced overnight. Back in 2011, the
16:13 maximum amount of taxfree cash that
16:16 could be drawn was £450,000,
16:20 25% of the lifetime allowance. Over the
16:23 following years, this was reduced again
16:25 and again and again. And each time this
16:27 happened, not only did the government
16:30 notify us of these changes at least a
16:32 year before they came into effect, but
16:34 transitional protections were introduced
16:36 so that people who were close to
16:39 retirement or who already had large
16:41 pensions got to keep their benefits.
16:43 Keep going back all the way to the
16:45 1970s. Whether it's a conservative,
16:47 Labor, or coalition government, when
16:50 reforms have been made to taxfree cash,
16:53 existing benefits have been protected.
16:55 Now, I'm not saying that we won't see
16:57 changes to taxfree cash. As you can see
16:59 here, the rules have been tinkered with
17:01 many times in the past, and I'm sure
17:02 they will continue to be tinkered with
17:04 in the future. Who knows, they may even
17:06 get better at some point. But it is
17:08 unthinkable that these changes could be
17:11 introduced immediately without any type
17:13 of transitional protection. Which is
17:15 again why I think we'll be in a much
17:17 better position to make good financial
17:20 decisions after the 26th of November
17:22 when we have the details of any changes
17:24 in our hands.
17:27 One area, however, where we could see
17:28 more immediate change is with
17:31 inheritance tax. Last October, Reeves
17:34 announced that from April 2027, unused
17:36 pension funds and death benefits would
17:38 be brought into the value of our estate
17:40 for inheritance tax purposes, as well as
17:42 putting limits on business and
17:44 agricultural property relief. The
17:46 government has not said explicitly that
17:47 they are looking to make any further
17:50 changes, but commentators have suggested
17:52 that to fill the hole, they could look
17:54 at introducing a lifetime gifting
17:57 allowance above which any gifts that you
17:59 make during your lifetime are taxed. or
18:00 they could look to extend the seven-year
18:04 rule or remove taper relief. These are
18:06 changes that could be introduced
18:08 immediately, which means that making a
18:12 gift before the 26th of November could
18:13 be beneficial. But these are not the
18:15 types of decisions that should be
18:17 rushed. There is no point in prematurely
18:19 making a gift to your child to try and
18:23 avoid 40% IHT and then they lose 50% of
18:25 it in a divorce or all of it if it's
18:28 spent unwisely. So unless you're already
18:30 planning on making a gift, I think it's
18:32 best to wait, think it through properly,
18:34 and see what changes are introduced,
18:37 especially as these changes could be
18:39 introduced retrospectively. Anyway, to
18:40 conclude, I think that speculating about
18:42 what changes may be in this budget is
18:45 largely a waste of time. We all know
18:47 that taxes are going to rise, but it's
18:49 highly likely that most of these changes
18:51 won't come into effect until the new tax
18:55 year, April 2026, at the earliest. Which
18:57 is why in the meantime, I suggest trying
18:59 to block out the noise, waiting for the
19:01 new rules to be announced, and then
19:03 updating your plans when you have the
19:05 information to hand. Of course, I could
19:07 be wrong. So, if you already have plans
19:10 to perhaps sell an asset or make a gift
19:12 in the near future, there may be an
19:14 argument to try and do that before the
19:16 budget. As I have said throughout, these
19:18 are deeply personal decisions with
19:20 plenty of moving parts. So, please do
19:22 seek advice if you're unsure. And this
19:24 is a reminder that if you are looking
19:25 for help with your finances, the only
19:26 way that you can get in touch with me
19:28 and my team is through the link in the
19:30 description of the video. These days,
19:32 there are lots of bots in the comment
19:34 section and people pretending to be me
19:36 on Facebook and Instagram. There are
19:37 scammers everywhere. So, please remember
19:39 that unless you are signed up to my
19:41 newsletter, I will never contact you
19:44 directly. Good lucking out the noise and
