What the Autumn Budget could mean for your finances

Chancellor Rachel Reeves will deliver the Autumn Budget on 30 October. Discover how possible changes could affect your financial plans – and how to prepare.

Although we won’t know anything for certain until the day, there’s a lot of speculation around key policy changes the Chancellor may announce. At Wesleyan Financial Services, we’re here to help you get the most out of your finances. From understanding how these changes could impact your finances, to providing clarity once the Autumn Budget has been announced, we remain your lifelong financial advice partner. Here, we explore these potential changes and the steps you may be able to take in preparation.

Capital gains tax (CGT)

The Chancellor could seek to raise revenue by modifying CGT, a tax paid by just over 0.6% of the population annually. The annual allowance has already fallen over the past few years from ￡12,300 in 2020/21 to ￡6,000 in 2023/24 and then to just ￡3,000 as of April 2024. Further reductions could force more people to complete tax returns for even small gains.

What could change?

Rate adjustments. There’s speculation that CGT rates could be aligned with income tax rates, which would double CGT for higher earners. This move would increase the tax burden on wealthier individuals significantly.

Abolishing exemptions. Exemptions on items such as antiques, second-hand cars and jewellery may be scaled back, and even the tax-free status of ISAs could be under scrutiny.

What can you do?

Crystallise gains early. If CGT rates are set to rise, consider realising gains now to lock in lower rates. You may also want to use any available losses to offset your gains.

Financial planning. For those with significant CGT exposure, strategies like investing in Venture Capital Trusts or deferring tax through Enterprise Investment Schemes can help mitigate the impact.

Pensions and retirement planning

Pension policies are always a major area of focus. Labour has committed to retaining the ‘triple lock’ for state pensions but has not ruled out adjusting pension tax relief or the limit for tax-free lump sums.

What could change?

Pensions tax relief. Labour may consider a flat-rate relief (such as 30%) rather than the current marginal tax rate, which benefits higher earners more. This move could lead to a reduced incentive for contributing to pensions, especially for those in higher tax brackets.

Lifetime allowance. While Labour had previously indicated they might reintroduce a lifetime allowance cap, it now seems less likely. However, there could still be limits on how much can be withdrawn tax-free or changes to lump-sum allowances.

What can you do?

Review contributions. If pension tax relief is reduced, it may become less advantageous for high earners to make large pension contributions. Consult with your financial adviser to optimise contributions.

Consider alternatives. With pensions potentially becoming less tax-efficient, other investment vehicles like ISAs or offshore bonds might become more attractive.

Inheritance Tax (IHT)

IHT continues to be a contentious issue, with only a small percentage of estates currently liable for it. Labour has hinted that IHT reforms could be on the table, including reducing the tax-free threshold or adjusting the tax rate.

What could change?

IHT-free band. The current ￡325,000 allowance could be reduced, and exemptions for passing a residence to direct descendants might also be targeted.

CGT on death. One significant potential reform is the removal of the CGT reset on death, which currently allows capital gains on inherited assets to be wiped clean.

What can you do?

Early estate planning. If CGT reset rules are abolished, early estate planning, including gifting assets or using trusts, could become more critical to reducing tax liabilities.

Utilise reliefs. Tax-efficient vehicles like Business Relief investments can help mitigate both CGT and IHT exposure, though these should be reviewed in light of any Budget changes.

Note the Financial Conduct Authority does not regulate IHT planning and trusts. Tax treatment depends on your individual circumstances and may be subject to change in future.

How to prepare

It’s important to remember that none of these changes are set in stone, and this guide should not be taken as financial advice. However, understanding your current financial position and consulting with a financial adviser will help you respond more effectively to any announcements made in the Budget. Here are some steps to consider:

Consult an adviser. Before the Budget is announced, speak with a financial adviser to assess how these potential changes could affect your investments, pensions and estate.

Review your portfolio. With potential changes to CGT and dividend taxation on the horizon, it may be time to reconsider your exposure to certain types of investments, such as dividend-paying shares.

Stay informed. Keep an eye on the final details of the Autumn Budget and assess how these policies will impact your financial plans specifically.

By staying informed and proactive, you can seek to mitigate the effects of any policy changes and continue to build a robust financial strategy for your future.

Other potential changes to look out for

Beyond the headline reforms, the Autumn Budget could introduce several other changes that may affect your financial plans. Here are a few additional areas to keep an eye on to ensure you’re fully prepared:

Savings and investments. Changes to interest rates, inflation or potential reforms to ISAs could affect long-term savings strategies. There may be adjustments to ISA allowances or the introduction of UK-only investment vehicles, which could impact your portfolio’s tax efficiency and diversification.

Business owners and entrepreneurs. Changes to business tax reliefs, National Insurance contributions and incentives for investment in UK businesses. Adjustments to Business Asset Disposal Relief or corporation tax could also impact how you structure and invest in your own business.

Housing and property taxes. The property market could face changes in Stamp Duty Land Tax (SDLT), particularly for non-UK residents or second-home buyers. If you’re considering buying or selling property, review your plans in light of potential changes to property tax reliefs.

Self-employed and freelance workers. Potential reforms could include changes to National Insurance contributions, dividend taxes or tax-deductible expenses. It’s important to assess your financial structure to stay ahead of any shifts in how self-employed workers are taxed.

Non-domiciled status. Labour has announced plans to shorten the period non-domiciled individuals (non-doms) can remain exempt from UK tax on overseas income and gains. While this policy affects a relatively small group, it is part of a broader strategy to tax global wealth more aggressively