Two things to do before the Budget next week, company founder advises

Chancellor Rachel Reeves is set to present Labour's first Autumn Budget since winning the general election in July. The annual statement, which outlines the Government's future spending plans, is scheduled for Wednesday, October 30.

While the specifics of the speech are yet to be revealed, the Chancellor has previously indicated that 'difficult decisions' are necessary to 'restore economic stability' in the UK. This comes after allegations that the Conservatives left behind concerning £22 billion black hole in 'unfunded pressures' that the new Government has now inherited.

In August, Prime Minister Sir Keir Starmer also cautioned about a 'painful' Autumn Budget, stating: "I'll have to turn to the country and make big asks of you to accept short-term pain for long-term good."

But what does this mean for you? The Express spoke to Saq Hussain, Founder of Financial Education, about what to expect and key dos and don'ts ahead of the crucial day.

In an exclusive interview, he said: " Based on what has been put out in the press, it's pretty clear that the upcoming Labour Budget is expected to have a significant effect on the financial landscape for many households. Although income tax, VAT, and national insurance are likely to remain untouched, fiscal measures like freezing tax thresholds - known as 'fiscal drag' - are likely to pull more people into higher tax brackets as wages rise.

"For example, even if your salary increases marginally due to inflation or promotions, you could pay more tax, effectively reducing take-home pay. This disproportionately affects middle earners, who may struggle as their disposable income shrinks, making it harder to cover everyday costs amid ongoing inflation."

While Brits shouldn't panic or do anything too hasty, Mr Hussain suggested that it may be worth considering two key things ahead of the Budget. These are as follows:.

1. Think about selling assets

In essence, Capital Gains Tax (CGT) is a fee you pay on any profit you make from selling an 'asset'. Typically, this includes personal possessions worth £6,000 or more (excluding your car), property that isn't your main home, business assets, shares that aren't in an ISA or PEP, and your home if you've let it out.

Although CGT is currently much lower than Income Tax, Mr Hussain speculates that Labour may increase it in the Budget to make things more aligned. So, if you're contemplating selling something, it might be worth doing so now to 'lock in lower tax rates'.

"Currently, basic-rate taxpayers pay 10% on capital gains, while higher-rate taxpayers pay 20%," Mr Hussain claimed. " If these rates rise, future profits on assets like property or investments could be taxed at significantly higher rates, possibly as high as 40-45%, which would eat into the profits made from sales.

"Acting now helps avoid the risk of future tax increases on gains, protecting current wealth. However, there is a risk that if the Budget doesn't significantly increase CGT or the changes are delayed, you might regret selling prematurely, as asset values may continue to rise, or you could lose out on potential future gains."

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2. Maximising Pension Contributions

Mr Hussain highlighted the importance of maximising pension contributions, especially because they are currently incentivised through tax relief. "For example, a 40% taxpayer can effectively get 40% relief on pension contributions, which significantly boosts retirement savings," he explained.

"However, Labour could introduce a flat tax relief rate of 30%, which would mean higher earners lose out on the additional relief, reducing the tax efficiency of their pension savings." By contributing now, Mr Hussain advised, individuals can 'maximise the relief' under the existing system and potentially save 'thousands over time'.

However, he acknowledged: "This change could benefit basic-rate taxpayers, offering a higher rate of relief than they currently receive, which could incentivise more pension savings in the future."

Aside from these two major factors, Mr Hussain also asserted that fuel duty may be reviewed and benefit payments could be reduced. His views come shortly after the Chancellor announced that households in England and Wales would 'no longer be entitled to the Winter Fuel Payment unless they receive Pension Credit or certain other means-tested benefits'.

Means-testing refers to issuing benefits based on your income and savings. Mr Hussain added: "On the benefits side, there’s talk of tightening welfare spending, possibly reducing payments for those on long-term sickness benefits or altering the way benefits like personal independence payments (PIP) are administered.

"This could involve transitioning from cash payments to vouchers or limiting the available support types, making it harder for individuals to use funds as they see fit. Additionally, a crackdown on benefit fraud is expected to save the government over £1 billion, which may result in stricter eligibility checks and potentially less support for some claimants."

He then concluded: "In conclusion, from my perspective, while the Budget is unlikely to increase headline tax rates like income tax directly, it will likely shift the tax burden through reforms to capital gains, pensions, inheritance tax, and indirect taxes like fuel duty. These measures will most impact middle- and higher-income individuals, potentially reducing disposable income and savings."