Chancellor Rachel Reeves has unveiled the Labour government's Autumn Budget, setting out a financial plan that places a significant burden on workers, savers, and owners of expensive properties. The announcement detailed a series of tax changes and freezes that are set to reshape the financial landscape for millions across the UK.
The Biggest Losers in the Budget
According to Antonia Medlicott, founder of Investing Insiders, several groups will feel a negative impact. The freeze on income tax thresholds has been extended for three additional years, now lasting until at least 2031. This policy is projected to drag 780,000 more people into the basic rate tax band and 920,000 into the higher rate by the 2029-30 tax year.
From the period when thresholds were first frozen in 2022-23 through to 2030-31, a staggering 5.2 million additional individuals will have been brought into paying income tax, with 4.8 million more moving to the higher rate and 600,000 more onto the additional rate. The overall tax take is forecast to hit a record 38% of GDP by 2030-31.
Workers who save into a pension via salary sacrifice will also be hit, as they will now be charged National Insurance on contributions exceeding £2,000. This measure is expected to raise £4.7 billion, indicating its wide-reaching effect.
Savers and Investors Face New Rules
The Budget delivers a double blow to savers. The annual allowance for Cash ISAs has been reduced to £12,000. While the overall ISA allowance remains at £20,000, savers must now place at least £8,000 into a Stocks and Shares ISA if they wish to maximise their tax-free savings.
Furthermore, the government has increased the tax on savings income held outside of ISAs by a further 2%. Antonia Medlicott criticised this move, stating it "penalises diligent savers who don't want to take risks with their money."
Property and Other Impacts
Owners of high-value properties are also in the firing line. A new High Value Council Tax charge will be introduced for homes valued at over £2 million. Additionally, tax on income generated from property will be increased by 2%.
Other notable changes include:
- A 2% increase in tax rates on dividend income.
- A new mileage-based charge for electric and plug-in hybrid cars from April 2028, expected to raise £1.4 billion.
- Reforms to gambling taxation, projected to raise £1.1 billion.
- An extension of the inheritance tax-free allowance freeze.
Despite the widespread tightening, there were some positive announcements. The National Living Wage for workers aged 21 and over will see a 4.1% increase to £12.71 per hour, boosting a full-time worker's annual earnings by around £900. The Help to Save scheme for low-income earners is also set to be made permanent from 2028, offering a 50% boost on savings for 4.5 million people.
