Rachel Reeves is after your wealth and you have just one week to fight back – this is how
The Chancellor’s Budget is now less than a week away.
Rachael Reeves will hike a ‘smorgasbord’ of taxes in the Budget next week (Image: Budget)
Rachel Reeves may have torn up plans to hike income tax, but don’t be fooled. She still intends to hit middle-class wealth wherever she can. Our pensions, savings, homes, investments and inheritances are all in the firing line. She’ll blame others but the truth is that Reeves and Keir Starmer were always going to hike taxes. It’s what Labour does. They just pretended otherwise to win the election.
November 26 looks set to be an assault on savers and strivers rather than an attempt to balance the books. Here’s what she may do and how to act today.
1. Freeze income tax thresholds. Reeves may not lift income tax rates but she is likely to extend the freeze in thresholds until 2030, keeping the personal allowance at £12,570 and higher-rate thresholds at £50,270 and £125,140.
Income tax is hard to avoid except by earning less, but it’s not impossible and here are 12 ways you might be able to reduce your bill.
2. Council tax increases. Homes in bands F, G and H could face punishing annual hikes as Reeves targets the higher bands. She may also unleash a ‘mansion tax’, charging a 1% levy on property values above £2m. Property taxes aren’t easy to escape but here are three ways you could potentially cut your council tax bill.
3. Multiple pensions raid. Workplace salary-sacrifice schemes that reduce National Insurance biills could be cut back. Reeves may also reduce the annual allowance on pension contributions from £60,000 to £40,000. Cutting tax relief on pensions contributions is another risk.
Paying extra money into pensions before the Budget could help lock into today’s more generous rules, in case Reeves makes changes with immediate effect.
4. Capital gains tax hike. Reeves lifted the basic and higher rates of capital gains tax to 20% and 24% in her last Budget and may hike them again. Or she could cut the £3,000 annual exemption.
Investors with shares outside of a tax-free ISA should consider realising gains before the Budget just in case she acts, then buying them back inside an ISA to shelter them for life, known as Bed & ISA. Married couples and civil partners can transfer assets so that gains fall under the lower-taxed partner’s rate. Your investment platform or broker can organise transfers.
5. Dividend tax. The Tories slashed the dividend allowance from £2,000 to just £500. Anything above that is taxed at 8.75% for basic-rate taxpayers, 33.75% for higher-rate and 39.35% for additional-rate. Reeves could raise these rates in line with income tax.
Shifting shares into ISAs or spreading investments between spouses can protect dividend income from HMRC.
6. Cash ISA curbs. Reeves may slash the annual £20,000 Cash ISA limit to just £10,000. This probably won’t come into force until next April, so there’s some time.
Savers should use as much of their 2025/26 Cash ISA allowance as you can now, and their partner’s too. Premium Bonds are another option. Anyone over 16 can hold up to £50,000 and all prizes are tax-free. The prize rate is 3.6%, which isn’t spectacular but solid. Premium Bonds won’t suit savers who need a steady income from their deposits. In some years they may win nothing at all.
7. Inheritance tax tightened. Another raid on family inheritances looks likely. Reeves may impose a lifetime limit on IHT-free gifts, scrap gifts out of surplus income or extend the seven-year rule to 10 or even 12 years. She may also impose an extra “death tax”.
Make full use of today’s £3,000 annual gift allowance and your partner’s too. That lets a couple gift £6,000 before the Budget or £12,000 if last year’s unused allowance is carried forward. You can also make unlimited £250 gifts to loved ones who haven’t benefited from other exemptions. Keep records in case HMRC asks. Found out more options to cut IHT exposure here.
Time is short, but action now can shield a significant slice of your money. Sadly, you can’t stop Reeves altogether.
