The Autumn Budget will be the first since most coronavirus support measures came to an end, and the Chancellor will be keen to show that he can put Britain’s finances back onto a sustainable footing.
Here are some possible measures that could affect your pocket.
Capital Gains Tax reform
With taxes on earned income already set to rise in April as the Chancellor hikes National Insurance rates, it is possible that he may have unearned income in his sights through a reform of Capital Gains tax.
The Government has yet to respond to consultations on CGT, which is levied when assets grow in value, and it is possible that rates could rise, or the threshold at which the tax is paid could be lowered.
What you can do about it
Everyone has an annual exempt amount for Capital Gains tax of £12,300 a year, so ensuring you realise gains each year instead of in one burst can take the tax bill down. CGT is also not charged on gains in an ISA so make the most of your annual £20,000 allowance, which also ensures your dividends are not taxed. A financial adviser will help you to make use of other tax reduction schemes including carrying forward losses from previous years, to save CGT.
Pension tax relief reform
The tax relief on pension contributions is very generous, so there are always rumours that the relief may be watered down, particularly for those who pay higher or additional rate tax.
At present, most of us can pay £40,000 into our pensions every year and receive tax relief on this, with basic rate tax automatically added back and higher and additional rate tax claimed back through a tax return.
Possible changes could involve removing the higher rate of tax relief and reducing the lifetime allowance (the largest amount of pension you can have) from £1,073,100 to £900,000.
The government could also remove some of the benefits of making your pension payments through a salary sacrifice scheme, which currently allows you to reduce the amount of national insurance you pay as they can be made free of National Insurance Contributions (NICs).
What you can do about it
There have been rumours about pension tax relief being watered down for many years, and this may not be the Budget where a decision is made. However, making the maximum contributions now ensures that you are benefitting from as much tax relief as possible, as well as building the best pot for retirement.
With the Budget coming just before the UK hosts the UN climate change conference COP26 in Glasgow, there may be carrots, or sticks, to encourage us to go green.
These may come in the form of grants for those who choose to install greener forms of heating such as air-source heat pumps, or they may come in the form of higher taxes on those who heat their homes with gas. It is worth looking out for changes, especially if you have a boiler that will need replacing in the near future.
What you can do about it?
With energy prices rising and much of Britain’s housing stock leaking energy through badly insulated walls, floors and roofs, grabbing any green grants that are available to insulate your home can help to stop your energy bills (and your expensive warmth) going through the roof.
It is worth being aware of what is available and taking advantage of it as quickly as possible – the last green grants scheme was pulled abruptly after just six months.