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