This year, we will see an incredibly late Budget. The Treasury has set Wednesday 26 November as B-Day, nearly a full month later than the 2024 Budget.
It gives the Chancellor more time to cook up and finalise plans to ‘balance the books’ – but equally adds extra time for speculation to mount over where our personal finances could face further attack.
Will it be pensions, Isas, inheritance, property – all of them, some of them, none of them? What can possibly plug the supposed £50billion black hole in the nation’s finances?
In a defiant video message yesterday morning, Rachel Reeves claimed ‘Britain’s economy isn’t broken.’
And she’s doubled down on her fiscal rules, saying: ‘We must bring inflation and borrowing costs down by keeping a tight grip on day-to-day spending through our non-negotiable fiscal rules.’
A major problem is that increases in income tax, national insurance or VAT are off the menu.
Missing ingredients: Increases to income tax, NI and VAT are off the menu – and it leaves Chef Reeves with some extremely hard choices
The extended run-up to the next Budget has had a lukewarm reaction from some.
Rebecca Williams, of Rathbones, said: ‘For households, the long wait only prolongs uncertainty at a time when many are still grappling with the cost-of-living squeeze.
‘Markets and savers alike dislike being left in the dark, and it is little wonder we’ve seen a surge in queries around pensions taxation, estate planning, and whether it remains worthwhile to hold on to buy-to-let properties amid growing speculation.’
She goes on to add: ‘Whatever the shape of the Chancellor’s statement, it remains good practice to avoid knee-jerk reactions based on rumour.’
It’s been a rocky week for the Government. Britain’s long-term government borrowing costs hit a 27-year high, as global investors fret about the state of public finances ahead of the Budget.
The yield on 30-year UK government bonds, known as gilts, rose as much as 9 basis points on Tuesday to 5.73 per cent – the highest level since May 1998.
It means a volatile start to the month for investors and further concern for mortgage borrowers, who still shoulder painful memories of the fallout from Liz Truss’ disastrous 2022 mini-budget.
Throw in inflation sneakily creeping back up towards 4 per cent and the commitment to build 1.5million new houses by 2029 being way behind schedule already – not to mention the Deputy Prime Minister’s stamp duty gaffe – and things don’t look promising.
Many hard-working Britons will be panicking what could lie within the Chancellor’s red box a month before Christmas and Labour’s ability to run the country’s finances.
And that’s before mentioning that left-leaning Torsten Bell is said to be helping Rachel Reeves with Budget preparations.
Mr Bell, who was elected as MP for Swansea West last year, will reportedly help lead economic policy.
It could represent a significant departure from Labour’s manifesto if the ideas Bell has previously proposed are anything to go by.
Bell, who previously worked for Labour figures Alistair Darling and Ed Miliband, ran the Resolution Foundation think tank, which proposed the triple lock be scrapped and inheritance tax be overhauled, among other ideas.
You can read them here: Rachel Reeves confirms MP Torsten Bell will help with Budget prep – here’s seven tax ideas he’s had in the past…
Unknown:Â Markets and savers alike dislike being left in the dark, says one financial expert
So, what can you do now?
Well, as Ms Williams mentions, ‘avoid knee-jerk reactions based on rumour.’
Recently, someone asked me whether they should pull out of their London property purchase as they faced a £93,000 stamp duty bill.
They were worried about the speculation around property tax, having been burnt before – two days after they bought their last flat, a stamp duty holiday was announced.
It’s likely to be playing on other buyers’ minds.
Simon Gerrard, of Gerrard Estate Agents, said: ‘The panic, confusion and uncertainty sparked by these potential new taxes have caused almost 20 per cent of our agreed sales in August to see the buyers withdraw only a week or two later.
‘The shadow of the Budget now looms and this constant chatter will put a hold on the property market during September and October, detrimentally affecting the overall economy whilst we are in this limbo.’
Buying agent Henry Pryor hit the nail in the head with his response to the £93,000 stamp duty question: ‘Don’t put your life on hold. Move if you can afford to, and you’re confident that you will be able to continue to afford to.’
Recently, in light of an almost daily stream of reports on what the Chancellor has up her sleeve, we looked at the nasty tax grabs possibly coming our way – and the action that can be taken (if any) to mitigate them.
The buck doesn’t solely fall on Labour. The freeze to income tax bands by the Conservatives in 2022 until 2028, for example, was among many bad moves made in the final throes of the last Government.
I’d get into brace position… adding pensions pots to inheritance tax calculations and increased national insurance contributions to employers in the last Budget might just have been the appetiser.
What’s being slowly cooked for main course by Chef Reeves and Sous Chef Bell might be even harder to digest.
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