A big Budget with high tax consequences

Last Wednesday, Rishi Sunak announced the government’s tax and spending plans for the year ahead. It was bold, promising £75bn of funding for certain sectors over the next few years, some of which had already been announced.  

But we shouldn’t be blinded by these handouts and the positive economic forecast that is allowing the Chancellor to spend this money. Because the reality is, the need for tax planning is more important than it has ever been. 

 The wages increase, coupled with the freezing of income tax allowances (basic rate at £12,570 and higher rate at £50,270 until 2026), will see people paying much more tax, making tax efficient investments such as ISAs and SIPPS even more valuable.  

The pension lifetime allowance will also remain frozen at £1,073,100. While the freeze may only affect a relatively small number of taxpayers, each year that the allowance fails to keep pace with inflation is a step closer to lifetime allowance charges affecting ordinary pension savers. 

As an investor you can relax a little, as there were a few things that didn’t happen in the Budget. No plans to raise capital gains tax or cut the capital gains allowance were announced. And pension tax relief and inheritance tax have been left untouched.   

A final sigh of relief can come from the knowledge that despite downgrading the controversial triple to double lock (see more about that below), the state pension will still rise by 3.1%, matching September’s level of inflation.