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Autumn Budget winners and losers
"Someone has to suck up the costs - those who can pay will pay,” says Kalpana Fitzpatrick
Following months of speculation, various leaks, and U-turns, this was perhaps the most chaotic Budget I have seen. Made worse when the Office for Budget Responsibility leaked its budget report almost half an hour before chancellor Rachel Reeves’s major announcement.
While the leak may have made Reeves’ Autumn Budget speech seem inconsequential, the impact it will have on your bank balance certainly won’t. Especially if you own a property valued at £2 million or more, drive an electric vehicle, are a saver, and use salary sacrifice for your pensions.
Oh, and if you are a nervous investor, then the reduced amount you can put into your cash ISA may be giving you anxiety as you are forced to choose between testing out the stock market or handing over some extra cash to the tax man. You choose!
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You could even take advantage of money market funds as an alternative to cash, meaning you max out the full ISA allowance - see our article on cash ISA alternatives.
Like any budget, there are winners and losers. The fact is, the chancellor's job is to find extra cash, reduce government debt and balance the books - and someone has to suck up the costs. Those who can pay will pay.
Reeves has done a fair job when it comes to the most vulnerable, putting a stop to further increases that impact everyday living costs like freezing rail fares for the first time in 30 years and keeping prescription costs to £9.90. And today, she confirmed that the two child benefit cap will be lifted, reducing the risk of child poverty.
I think Reeves has done right here and it was clear to me that this was high on her list of priorities.
Pensions are tax-efficient savings vehicles, so I feel taking this sway has perhaps left a bitter taste in the mouths of diligent pension savers.
Reeves has capped salary sacrifice pensions to £2,000 a year from 2029, the amount that can be paid into a pension before National Insurance Contributions (NICs) are payable. Salary sacrifice saves you around 8% on NIC costs and according to Brewin Dolphin, the savings are bigger for employers at 15%.
Taking away from pensions saving to me didn’t feel right, and could deter people from saving into pensions. To me, that is the wrong message - especially as people are barely contributing enough to their pension pots as it is, so will this ultimately lead to the government having to one day bail undersavers out? And will employers reduce other benefits to compensate?
ISA changes
The ISA changes were also a bit disappointing. I do support the need to funnel people into investing where it is right for them.
But Reeves has totally ignored the point that savers are not driven by incentives, and are in fact held back by their lack of understanding.
Limiting cash ISAs to £12,000 for tax year 2027/28 has caused uproar, but let’s remember, the average amount in a cash ISA is around £7,000 HMRC data shows.. So, this is a policy that hasn’t bothered me much.
What does bother me is that this adds another layer of complexity to ISAs and pensions, and is off-putting for would-be investors.
Financial planning
The changes Reeves has announced in today's budget will not hit your pay slip for some years, so now is the time to really think about financial planning.
What impact will the pension changes have on your take home pay and how can you make up for any shortfall?
For cash ISA savers, if you do not invest, now is a good time to understand how it works and consider whether this is right for you.
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