Slowly but surely, the Budget jigsaw is taking shape – and while we don’t possess all the pieces (that ‘delight’ awaits us on November 26), we now have a clearer picture of the Chancellor’s direction of travel.
(Note: For the financially prudent majority among you, it might be advisable to grab a stiff drink before reading on, because it is you and me that Rachel Reeves has in her sights).
As much as it hurts to write this, every signal from Ms Reeves and her Treasury team suggests the Budget’s focus will be on raising billions of pounds of revenue from extra taxes on our personal wealth: be it our pensions, investments or homes (with bigger council tax bills for those living in higher-value properties now very much on the cards).
Assets that we have painstakingly accumulated over the years through a mix of forbearance and hard graft.
The Chancellor has confirmed as much in recent days, stating that it is those with the ‘broadest shoulders’ who should bear the brunt of tax rises in the Budget.
It doesn’t take an Albert Einstein to understand that this means it’s those of us with hard-earned assets that the Chancellor wants to target in order to plug a gargantuan £42billion hole in the nation’s finances.
Every signal from Chancellor Rachel Reeves and her Treasury team suggests the Budget’s focus will be on raising billions of pounds of revenue from extra taxes on our personal wealth
So, our personal wealth is going to take a big hit, as will our ability to accumulate more of it (and protect it from tax) to ensure our later years are spent in financial comfort rather than discomfort.
Yes, it’s terrifying and unfair, but horribly inevitable. It’s a result of many factors, including Labour’s war on the middle classes, its desire to appease financially illiterate MPs who still believe money grows on trees and, of course, the Chancellor’s own incompetence.
With significant spending cuts ruled out, a business community still reeling from last year’s National Insurance (NI) tax assault, and a manifesto commitment not to raise rates of VAT, income tax or NI (for workers), Ms Reeves has to come after our wealth. She has left herself no choice. A fool among a government of fools.
Is there much you can do to protect yourself from the tax storm heading our way? It’s a problem Money Mail has devoted considerable space to, much of it from my own pen (apologies if you feel I’ve bombarded you).
We’ve written about it because we care passionately about helping you keep your wealth intact. It’s also a matter that impacts us personally. It’s why my own finances have been very much front of mind in recent weeks.
For example, on the savings front, I’ve used my entire £20,000 annual Isa allowance for this tax year to take out a cash Isa. I’ve done this – gone cash – for two reasons.
First, to diversify my financial assets, which are investment-skewed. I’ve always been a keen investor, but I’m no longer a spring chicken and I’m more risk-averse than I once was.
I’m also reluctant to pour more money into stock markets with experts now talking of an impending market crash as a result of an artificial intelligence (AI) investment bubble at bursting point.
Secondly, I’ve taken out a £20,000 cash Isa before they disappear off the shelves altogether. It’s blindingly obvious that cash Isas in their present form will be axed in next month’s Budget as part of an Isa overhaul by Ms Reeves, designed to encourage people to invest rather than save.
For cash Isa fans, that could mean a reduced annual allowance of £10,000 – maybe as low as £4,000. It looks like this tax year will be the last time you’re able to take out a £20,000 cash Isa.
So, if you want to introduce more savings into your asset pool, and you have yet to use your Isa allowance – or have unused allowance remaining – go for it.
I’ve also been thinking about what to do about the tax-free cash available from my pension fund.
Should I take it ahead of a possible cut in the Budget, or hang on in the hope that Ms Reeves will keep things as they are – namely letting me take a sum equivalent to 25 per cent of my pension fund, subject to a cap of £268,275.
With strong rumours that tax-free money could be capped at £100,000 – even £40,000 – it’s tempting to cash in.
But with retirement a smallish speck on the horizon – and matters complicated by a lengthy divorce – I’d rather leave my pension intact until it’s time to retire and put my feet up.
Finally, although I hold investments outside of my tax-friendly Isa and pension, they are modest. If they were significant, I would be looking to trim them ahead of the Budget.
Not just because of the AI ‘bubble’, but also due to the likelihood that Capital Gains Tax rates will be hiked in line with income tax rates.
Jeff.prestridge@dailymail.co.uk
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