Grunberg, one of London’s top accountancy firms, is advising the British public to take a closer look at their plans for saving and investing following this year’s Autumn Budget announcements.
After a surprise, early publication of the OBR report, Chancellor Rachel Reeves addressed Parliament and the public on 26 November to share this Government’s plan for economic stability.
One of the main announcements made in her speech is that Income Tax thresholds will now be frozen until April 2031.
Nimesh Patel, Tax Partner at Grunberg, said, “The extension of the freeze on Income Tax will mean that by 2031, the band will not have changed for almost a decade. When Rishi Sunak introduced the freeze in 2022, it was only meant to be until 2026. Then it was extended to 2028 and now another three years have been added to that timeline.
“On the surface, that can seem like a positive outcome. The Government promised not to raise Income Tax, and they haven’t, at least not directly.
“When freezes like this happen, the outcome is usually that more individuals and families get dragged into higher tax bands following wage increases, where they’ll ultimately end up paying more in tax. This will place more strain on families already trying to make ends meet after years of financial hardship.”
Inheritance Tax will also receive the same treatment. Although not addressed directly in the speech, the red book released after Reeves completed her speech shows that the threshold will remain fixed at £350,000 until 2031.
The Chancellor also announced plans for a High-Value Council Tax Surcharge for residential property in England.
Properties above £2 million will attract a £2,500 levy, while properties above £5 million will attract a £7,500 levy, starting in 2028-29.
“This so called ‘Mansion Tax’ is the closest thing to a form of wealth tax in this Budget, set to target the top one per cent of properties mainly in the London area.
“The combination of these new levies and the freeze on Inheritance Tax increases the long-term cost of holding and transferring property, so families should think ahead rather than act under time pressure.
“There’s also the addition of the two per cent increase to basic and higher rates on property, savings and dividend income which will increase taxes and will come into effect from April 2027,” added Nimesh.
The Chancellor’s speech addressed some future changes to pensions. From April 2029, salary sacrificed pension contributions above £2,000 will be subject to National Insurance.
“Salary sacrifice has been a useful tool for efficient long-term saving for years,” said Grunberg
“Once the new charge applies, reviewing contribution levels and exploring alternative approaches will be important for many clients who are keen to build their retirement fund.”
Rumours around Individual Savings Accounts (ISAs) reforms have been making headlines since the beginning of the year.
Rachel Reeves has now confirmed her plans for change. While the £20,000 annual tax-free allowance is here to stay, from April 2027, the cash limit will be reduced to £12,000 and the other £8,000 can be put in a stocks and shares ISA.
This will not apply to individuals over the age of 65, as they can continue to use the full allowance in cash ISAs.
“Investing in shares can deliver stronger returns over the long term, but it also exposes savers to greater fluctuations than cash,” said Nimesh.
“Individuals will need to consider how much risk they are willing to take before allocating a larger portion of their savings into the stock market.
“Those who have preferred the certainty of cash over shares will need early guidance to understand their options.”
While businesses have avoided the brunt of the measures in this year’s Budget, they will still face pressures, particularly from the planned increases to the National Minimum Wage and National Living Wage, which take effect in April 2026.
Grunberg is advising clients to take a proactive approach and review income, property holdings, pensions and any estate arrangements ahead of the new rules.
“As many of the changes don’t take effect immediately, it allows for more time to get a working strategy for your finances tailored to your circumstances.”
To find out how the Autumn Budget could affect your finances, visit Grunberg at www.grunberg.co.uk.
– ENDS –
