Think the Autumn Budget won't affect you? Think again. Here's what you need to know

The UK Chancellor’s Autumn Budget is right around the corner, and there’s a lot of talk about potential changes that could hit your wallet. You’ve probably heard that major tax hikes on income and VAT are off the table. But make no mistake, the government still needs to balance the books, and there are plenty of other ways they could bring in extra cash.

As a busy, time-poor professional, you’ve worked hard to get where you are. You’ve got a good job, but your lifestyle has probably crept up alongside your income. You may have a nice house (with a hefty mortgage), and perhaps you've started thinking about investing and buying property. With expenses almost matching your income, though, any tax changes could impact your plans for financial freedom.

But don’t worry—while we can’t control the tax man, we can plan to make sure you come out on top. This guide will walk you through five potential changes in the Autumn Budget. Then explains how they could hit your finances and give you practical steps to minimise the impact.

(As always, we caveat this with the fact this is speculation and does not represent specific financial advice)

1. Pension Tax Relief: Will You Get Less for Your Contributions?

One of the big targets in the Autumn Budget could be pension tax relief—particularly for higher earners. If you’re in the higher tax bracket, you get 40% tax relief on pension contributions (45% if paying additional tax rates). But the Chancellor might reduce this relief or introduce a cap on how much you can contribute each year with full tax benefits.

If this happens, it could majorly blow your long-term savings strategy. Pensions are one of the most tax-efficient ways to save for the future, so any cuts to the relief could mean you’re getting less bang for your buck.

What You Can Do to Minimise the Impact:

• Maximise Your Contributions Now: If you’re in a higher tax bracket, it might be time to max out your pension contributions before any changes come into effect. This could be your last chance to make the most of the current 40% relief.
• Diversify Your Retirement Savings: While pensions are great, they’re not the only game in town. Look into other tax-efficient savings options, like ISAs, which can offer flexibility and shelter from taxes in the future.
• Get Professional Advice: A financial adviser can help you adjust your retirement planning to stay efficient, even if pension tax relief takes a hit. Don't leave this to chance—professional guidance could save you thousands.

2. Capital Gains Tax (CGT): Could You Pay More When You Sell Assets?

Capital Gains Tax is another area where the government could make changes. Currently, the CGT rates are lower than income tax rates, which is a pretty sweet deal if you’re selling assets like second properties, stocks, or shares. But the Chancellor might decide to align CGT rates with income tax rates, meaning you’d pay more on any profits.

If you plan to sell an investment property or cash in on your shares, this could significantly affect your profits. But there are ways to soften the blow.

What You Can Do to Minimise the Impact:

• Use Your CGT Allowance: Each year, you have a tax-free allowance for capital gains (£6,000 for the 2023/24 tax year). Make sure you’re using this allowance each year—sell assets gradually if possible to avoid one big tax hit.
• Hold Long-Term Investments: If you’re not in a rush, consider holding onto your investments for a bit longer. You can defer any tax liabilities, giving you time to adjust to any tax changes.
• Shelter Your Investments in ISAs: Investments held within ISAs are completely free from CGT. If you’re not already making the most of your ISA allowance, now’s the time to start. It’s a great way to grow wealth without worrying about future tax hikes.

3. Inheritance Tax (IHT): Could It Become Harder to Pass on Wealth?

Inheritance Tax (IHT) is another area that might see reform in the Autumn Budget. The government could reduce the tax-free allowances or tighten up the reliefs available for passing on property and other assets. Passing wealth down to children or other family members could be more expensive.

IHT only affects estates worth more than £325,000 (with an extra allowance for passing on your home to direct descendants). However, with house prices rising, more and more estates are falling into the IHT bracket. And if the rules get stricter, it could cost your heirs a lot more.

What You Can Do to Minimise the Impact:

• Use Gift Allowances: You can give away up to £3,000 per year, tax-free. If you start gifting smaller amounts now, you can reduce the size of your estate over time, potentially saving your heirs thousands in IHT.
• Set Up Trusts: Trusts are a smart way to manage how your assets are passed on. They can help reduce your IHT liability and give you more control over your legacy. A good estate planner can help you set this up in a tax-efficient way.
• Review Your Will and Estate Plan: If you haven’t reviewed your estate plan in a while, now’s the time. Make sure it takes advantage of all the current IHT reliefs, and work with an expert to keep things as tax-efficient as possible.

4. Dividend Tax Increases: Will Your Investment Income Shrink?

If you’re receiving dividends from shares or your own business, you might see a tax hike coming your way. The government could raise dividend tax rates, reducing the income you take home from investments. Dividend tax rates range from 8.75% to 39.35%, depending on your income.

While this won’t affect your salary directly, it could hurt your investment income—especially if you rely on dividends from shares or a company you own.

What You Can Do to Minimise the Impact:

• Consider Salary vs. Dividend: If you’re a business owner, now’s the time to review how you’re paying yourself. If rates increase, it might be more tax-efficient to take a higher salary and reduce dividends. Work with your accountant to find the best balance.
• Shelter Investments in ISAs: As with CGT, dividends from investments within ISAs are not taxed. Ensure you fully use your ISA allowance each year—this could protect your dividend income from future tax increases.
• Reinvest Dividends: Instead of taking dividends as income, consider reinvesting them to grow your portfolio. You’ll defer any tax liabilities and potentially build greater wealth over time.

5. Cracking Down on Tax Avoidance: Could You Face More Scrutiny?

Finally, the government might turn its focus to tax avoidance and evasion. This could mean a crackdown on loopholes that allow wealthy individuals and corporations to avoid paying their fair share. While this might not affect the average person directly, it’s worth being aware of—especially if you have complex finances or business interests.

The last thing you want is to be caught up in a tax investigation, even if you’ve done nothing wrong. The rules could get tighter, and the penalties for non-compliance could increase.

What You Can Do to Minimise the Impact:

• Stay Compliant: Make sure your tax affairs are fully compliant and transparent. Even if complex tax avoidance schemes tempt you, they can come back to bite you if the government decides to crack down.
• Invest in Professional Advice: A good accountant or financial adviser can help you navigate the rules and optimise your tax position while staying on the right side of the law. Don’t try to game the system—it’s not worth the risk.

Conclusion: Stay Ahead of the Taxman

The Autumn Budget could bring changes that hit your finances, but there’s no need to panic. By taking action now, you can protect yourself from potential tax hikes and keep working towards your goal of financial freedom.

Whether it’s maximising your pension contributions, using your CGT allowance, or setting up a trust to manage your estate, you can make plenty of smart moves to minimise the impact of any tax changes. And with the right planning, you’ll stay one step ahead of the taxman.

Remember: tax laws are always changing, and staying proactive is the key to protecting your wealth. Keep an eye on the Autumn Budget, review your financial plans regularly, and don’t hesitate to get professional advice when needed. The road to time and financial freedom might have a few bumps, but with the right strategy, you’ll get there.

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Good luck on your journey!