Dear Santa,
I know it’s a bit early for Christmas lists, but I wondered if you could help with something: next year, could we please have less Budget speculation?
Every year we get weeks of “someone said”, “a source claims”, “rumour has it”, and then – when the Chancellor finally stands up – most of it turns out to be complete fantasy. If you could pop that on your Nice List of things to fix, it would make life much calmer for all of us.
Anyway, this year’s Budget was less dramatic than the hype suggested. Yes, overall tax levels continue to creep up, but nothing jumped out of the chimney with Christmas-ruining surprises.
Here’s what the Chancellor did bring down the chimney this year:
- Income tax thresholds held at the current level (England Wales, although fully expect Scottish government to follow. More of us of paying income tax at the higher rates. Almost inevitable and expected.
- 2% income tax increase on savings, dividends and property income. Savers with large cash balance are being ‘encouraged’ to invest this money in the stock market. Property investors continue to get targeted with more discouragement in the small buy-to-let rental market
- A £2,000 cap on salary-sacrifice pension contributions. Only affects National Insurance contributions (so can still contribute up to £60,000 per annum and receive full tax relief). Probably more impactful for employers BUT it is 4 years away and would come into effect one month before the next election!!
- A reduced £12,000 allowance for Cash ISAs (for the under 65s). Another policy to free up some of money held in deposit accounts to get this money invested. Stocks & Shares ISA allowance unchanged at £20,000. Interesting exemption for over 65s (would have understood this from last government concerned about future votes)
- Abolishment of Lifetime ISA (LISA). The government consulting on abolishing existing Lifetime ISA and replacing with another solution purely focused on helping first time buyers. Existing scheme is unpopular with providers and penalties for cashing in early are a disincentive, so probably a good thing
- Plans to ‘write off’ income tax liabilities for pensioners only receiving state pension. As the value of the state pension continues to increase (4.8% next year) they have at least (temporarily) avoided the inevitable Titanic collision into the frozen personal allowance of £12,570. Avoiding the prospect for millions of pensioners completing an HMRC simple assessment return to pay back tens of pounds in income tax. I suspect this will only be a temporary respite and they will need to look at this again.
- A few niche changes to things like Employee Ownership Trusts (EOT)and Venture Capital Trusts. Selling your business to an (EOT) will no longer be free of capital gains tax, and you will now only get a 50% reduction. The income tax credit for investing in a VCT will be cut to 20% from 30%.
- Previously announced inheritance-tax rules on unused pensions are still coming, though the process has been tidied up a little.
Most of these don’t take effect until April 2026 with some changes pushed out to April 2029, which means – unlike Christmas – there is absolutely no need to rush. We’ve got time to understand the changes and decide what (if anything) needs adjusting.
It’s also worth remembering that, while the UK Budget dominates our headlines, it barely registers on the global stage. I doubt Donald or any other world leader took time out to watch it live. Markets around the world continue doing what they do, regardless of how the UK wraps its tax policies.
Over the next few weeks, I’ll be going through the finer details (with a mince pie and a black coffee). If there’s anything you need to know, or if any action is needed on your part, I’ll be in touch — well before Santa is.
For now, please be reassured: nothing in the Budget requires panic, urgency or dramatic life changes. As ever, I’m here to help you try make sense of it all and keep things on track.
Thank you Santa
Gerry (54 ¼)
P.S. Santa, if you could also arrange for fewer government leaks next year, that would be lovely. I suspect your elves would keep secrets better…