The Budget brought a short-term reprieve for investors

The Budget spared investors for now – so make sure you use up all your your allowances.

Barman pouring beer in glass
Draught beer is cheaper now – but the good news ends there
(Image credit: © Getty Images/iStockphoto)

For all the fanfare about cheaper draught beer and sparkling wine, few will be raising a toast to last week’s Budget. Tax rises and personal-allowance freezes will leave the average household £3,000 a year worse off next year than they were at the time of the last general election, according to calculations by Hargreaves Lansdown. The already-announced health and social care levy, a 1.25% rise in national insurance that takes effect next April, plus an associated dividend-tax rise, will net the Treasury £13bn a year.

More insidious are frozen personal allowances. In April, the chancellor froze the basic-rate tax band at £12,570 and the higher-rate band at £50,270 until 2026. At a time of high inflation and strong wage growth, many earners will be sucked into higher bands over the coming years: the Office for Budget Responsibility (OBR) estimates that an extra one million taxpayers could be paying the higher rate by 2026. Several other thresholds – including the capital-gains tax (CGT) allowance, pension contributions and inheritance tax – have also been frozen. The “stealth tax raid” looks set to raise £47bn over the next five years, says Laith Khalaf of AJ Bell. Taxpayers always face “fiscal drag” – the practice of the Treasury holding tax threshold increases below the rate of wage increases. Yet these frozen thresholds amount to “fiscal drag on steroids”. The freeze means a taxpayer earning £80,000 could pay an additional £5,505 in tax over the next five years, assuming current OBR forecasts for wage growth and inflation.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.