Six ways Brits can save money from any surprise autumn Budget tax rises and spending cuts
With potential spending cuts or tax rises looming in the autumn Budget, personal finance experts share six proactive steps freelancers can take now to safeguard their finances
Surprises that come in boxes are usually a good thing. However, personal finance and pension experts say any surprises coming out of the Chancellor of Exchequer’s Red Box in this year’s autumn Budget could come in the form of spending cuts or tax rises. Here she shares six ways to be “Red Box” ready to protect our income, savings and investments from the Budget
A lot can happen in a week as we have witnessed with the impact of US-imposed tariffs on the global markets. Planning even 6 months ahead for any unexpected changes in government tax, worker or spending policies is therefore a wise move for freelancers. Case in point is the autumn Budget, which is usually in late October or early November – just six months away.
Treasury’s tax income threatened
Threats to global growth from the looming threat of Trump’s tariffs mean the government may not have the tax income it needs to stay within its fiscal rules by then Sarah Coles, head of personal finance, Hargreaves Lansdown.
This could mean spending cuts or tax rises. While the PM has insisted the fiscal rules and the pledge not to change income tax, NI or VAT are iron clad, circumstances could mean a rethink.
You have six months to protect yourself from whatever the autumn Budget holds, warns Coles.:
The threat of tariffs and the looming spectre of global recession have shelved your relaxing summer plans. Forget long lazy days on the beach, this summer is all about putting the legwork in to get Red Box Ready. The fallout from the tariff drama could come together in a difficult autumn Budget, so we need to fix the roof while the sun shines, and prepare for whatever it may hold.
Six ways you can protect yourself from any Budget surprises
Bring down your taxable income
Coles is not ruling out higher taxes on income since they are a major money-spinner for the government. “You may need to prepare for more tax,” she says.
Continuing, “We could get an extension to the freeze in the income tax thresholds, so this stealth tax has even more pain in store. That may not be enough though, and if the situation deteriorates significantly, we can’t completely rule out a U-turn on promises not to hike income tax – although this would be politically incredibly difficult, so wouldn’t be an easy step for the government to take.”
But how can you bring your taxable income down?
If you are an umbrella contractor, check if your umbrella company/employer operates a salary sacrifice scheme, where you give up a portion of your salary, and spend it on certain things free of tax – including pensions. If not, you can still pay into a pension and receive tax relief at your highest marginal rate.
Coles suggests if you’re making income from savings interest, you can use a cash ISA to protect as much as possible from tax. This is particularly beneficial for higher and additional rate taxpayers, who get a smaller personal savings allowance (or none at all) and pay a higher rate on the excess.
Take advantage of all your ISA allowances before the Budget
Our ISA allowances may change. The government is set to launch a consultation on the future of ISAs, according to Coles, which could lead to changes in the autumn Budget.
While we could see some positive reforms in the autumn Budget, it still makes sense to make the most of the system as it stands, ahead of any changes, while you can be certain of the allowances and tax treatment. The new tax year has brought a fresh new set of allowances from cash ISAs to stocks and shares ISAs, the Junior ISA and the Lifetime ISA.
Make fewer taxable gains on investments
Coles says one benefit of the turmoil is that you may have some losses “you can crystallise” and use to offset capital gains and cut your tax bill.
While this shouldn’t drive your decisions about what to own, if it makes sense for you to sell any assets that have made a loss, you can report them, and then use them to reduce overall taxable gains either in this year or in future years – by carrying them forward.
“It’s a good idea to realise gains as you go along too, so you can take advantage of your £3,000 annual allowance for tax-free gains,” suggests Coles.
Here is one of her suggestions:
When you’re selling up, if you have the ISA allowance available, you can move the assets into a stocks and shares ISA, using the Bed & ISA or share exchange process, which will ensure these investments are protected from capital gains tax in future too.
Cut your costs and build a savings safety net
Wages and freelancer rates have been rising ahead of prices for a while now, so more people have wiggle room in their budgets. However, the cost of living isn’t making those gains any easier paying the bills.
Sometimes you need to save while you still can, before the autumn Budget. Once you get used to not having that extra streaming service, or weekly takeaway you start to not miss it.
For many freelancers, Cole’s suggestion to build a financial safety nest is near impossible. But it does make sense. Any savings is better than none. But in an ideal world she suggests while you’re working age, you should be building an emergency savings safety net big enough to cover 3-6 months’ worth of essential sending in a competitive easy access account.
Then, once you’ve retired, you should aim for 1-3 years’ worth.
“If this needs work, it should be a priority, but don’t overlook the longer term. There’s no need to hoard more cash than you need, when it could be working harder for your future in investments and pensions.”
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:
Use your pension allowance for family members before it runs out
Your annual pension allowance allows you to contribute whatever is the lowest of your annual income and £60,000 to your pension and receive tax relief at your marginal rate. This, explains Morrissey, means that a higher rate taxpayer making a £60,000 pension contribution will find it only costs them £36,000. Added to this you can also make use of any unused allowances from the previous three tax years through carry forward. If you earn enough you can contribute up to £240,000 to your pension this tax year. For many high-earning contractors, this is a reality, but not everyone.
That’s why it is important to know that you can also take the opportunity to boost your loved one’s retirement prospects. You can contribute up to £2,880 to the SIPP of a non-working spouse or child and they will receive a tax relief top up to £3,600. It’s a great use of your money if you have used your own allowances and it can help a spouse or partner to keep contributing to their pension during times when they aren’t working. You are also giving a child a real leg up the retirement ladder with these early contributions.
Inheritance tax and your pension: start gifting if you can
Come 2027 pensions would possibly become liable for inheritance tax. The rules are not yet set in stone but it is making people think about what they can do to mitigate a bill.
For example, if you have an annual allowance of £3,000 per year, this money will drop out of your estate for inheritance tax purposes immediately. You can give the whole amount to one person or split it between several. You also have a small gift allowance of £250.
“You can give as many of these as you want (although not to the person you gave £3,000 to),” says Morrissey. “There are also gifts attached to loved ones getting married or entering a civil partnership. You can give up to £5,000 to a child, £2,500 to a grandchild and £1,000 to anyone else and it leaves your estate immediately.”
Making regular gifs from surplus income may also prove popular. According to Morrissey, you can give any amount, and it leaves your estate straightaway, as long as you can prove the gifts are regular, come from income and don’t affect your standard of living. Examples could include paying school fees for a grandchild. You will need to make careful notes of your gifting to prove it is being made regularly and enable your loved ones to explain to HMRC if any questions are asked.
“You can also make larger one-off gifts, which will pass out of your estate after seven years. These are known as potentially exempt transfers. If you’re concerned about a potential inheritance tax bill, you might want to make the gift sooner rather than later and get the clock ticking.”
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