In the run-up to the Spring Statement, the rumour mills have been working overtime, churning out unsettling theories about what might happen, and what it could mean for you.
Fortunately, you don’t need to get ground down by all of this, because there are sensible no-regrets moves you can take ahead of the announcement that will stand you in good stead, no matter what changes.
This article isn’t personal advice. If you’re not sure what is right for you, ask for financial advice.
What are the main Spring Statement rumours?
Income tax threshold freeze to extend?
One of the biggest rumours is that income tax thresholds could be frozen beyond the current end point of April 2028 – and stick around to 2029 or 2030. While an announcement might not come until the Autumn Budget, it’s worth being aware of what the current freeze means for you.
This stealth tax has been quietly picking our pockets since April 2022, pushing more people into paying more tax – a fifth of taxpayers are expected to be paying higher rate tax by 2027.
The extra income tax is bad enough, but when you start paying higher rate tax, your personal savings allowance shrinks.
Basic-rate taxpayers get £1,000, but this then drops to £500 for higher-rate taxpayers, and disappears altogether for additional-rate taxpayers.
You also pay a higher rate of capital gains tax when you cross into paying higher rate tax, and your dividend tax rate rises as you cross each income band.
Remember, the capital gains, dividend and personal savings allowance is the same for taxpayers in all UK regions.
Speculation growing on ISA changes
The government seems to have ruled out any immediate changes to the Cash ISA. But the balance between cash and investment within the £20,000 ISA allowance could still be up for debate in the longer term.
The immediate priority for savers and investors will be to stick to sensible no-regrets moves that meet your needs, rather than being worried into taking steps you otherwise wouldn’t.
Remember, ISA, pension and tax rules can change, and benefits depend on individual circumstances.
What can you do?
The power of pensions
Pensions, like the HL Self-Invested Personal Pension (SIPP), can help enormously. That’s because you get tax relief at your highest marginal rate on what you put in – this is up to 100% of your UK earnings, or £3,600 if this is greater (if you’re a low or non-earner).
You can pay up to £60,000 into a pension, like the HL SIPP, in the current tax year.
And when you come to retire, the first 25% taken from the pension is usually tax-free and the rest taxed as income.
Remember you can only normally access money in a pension from age 55 (rising to 57 by 2028).
Use your ISA allowance
Meanwhile, you can shelter your savings from income tax by holding them in an HL Cash ISA. You can pay in up to £20,000 in the current tax year, as part of your ISA allowance, so there’s a chance to take advantage before the end of the tax year on 5 April.
To shelter your investments against dividend and capital gains taxes (CGT), it might also make sense to use your ISA allowance and invest within the HL Stocks and Shares ISA.
Unlike the security offered by cash, all investments and any income from them can rise and fall in value, so you could get back less than you invest.
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Have existing investments outside an ISA and haven’t used all of you available ISA allowance?
If you have shares in an HL Fund and Share account, you can use the Share Exchange (Bed & ISA) process to sell them outside an ISA, move the cash into the HL Stocks and Shares ISA and buy back the shares again, all in one instruction.
When your investments are in an ISA, you then won’t have to worry about future UK income tax or CGT.
But don’t forget about your £3,000 CGT allowance when you’re selling investments to move into an ISA. It could help you, but any gains over the £3,000 allowance could trigger a charge. And while its free to hold shares in a Fund and Share Account, bear in mind there’s a 0.45% annual charge – up to £45 – for the Stocks and Shares ISA.