Investing Insiders Weekly #17: The Budget date is set – but what does it mean for you?

TOP STORY: THE BUDGET DATE IS SET

Rachel Reeves has confirmed that the next Budget, where the government announces changes to taxes and other spending decisions, will be on Wednesday 26th November.

This is very late to hold an autumn Budget – in fact, it hasn’t been this late in the year since the ‘90s.

Why? Well, it’s probably simply that the chancellor needs more time to work out what she wants to do. The country’s public finances are allegedly facing a “black hole” of up to £50 billion, which the chancellor needs to find money to cover. That’s a big task.

The prime minister has also been re-jigging his team of economic advisers over the past few weeks, which could suggest he wants to be more involved in this Budget. That means talks could take longer, with more cooks involved.

But, it does seem surprising given that rumours about what they will announce are already circulating.

You might think the government would be keen to squash the rumour mill as soon as possible, as some of the speculation is actually quite damaging to the government’s image and to the economy. Literally no one likes tax rises.

We’ll be covering the Budget as it happens on social, via our blog and on email – sign up to our mailing list or follow us on TikTok 

💡 What does this actually mean for you?

Over the next few months (yes, months!), you’re probably going to see a lot of speculation about what this Budget will contain in the news. Our advice would be to prepare yourself for it – but, very importantly, don’t make any panic decisions based on speculation.

Last year, thousands of people made irreversible decisions about their pensions based on a rumour about the Budget that didn’t transpire, and for most people, that decision wasn’t wise.

Given the Budget is now almost three months away, the chances are that the vast majority is still being decided, and things can change right up to the last minute, so there is really no way of knowing what will be in the final plans until they are announced.

It’s also worth remembering that most policy changes announced in the Budget, such as tax rises, won’t come into effect immediately. These sorts of changes can take months to implement, meaning you will at least have until the start of the next tax year before they kick in.

However, you can make sure you’re prepared for all eventualities by getting your finances in shape. Make sure you’re making the most of all the tax-free wrappers available to you right now, such as ISAs, and that you are contributing to a pension, be it a workplace scheme or personal pension.

If you are particularly concerned about inheritance tax or other tax rises, it may be worth getting help from a professional independent financial adviser. 

Either way, make sure to keep your eyes peeled on the 26th – the Budget is usually broadcast live on TV, and the documents outlining everything in more detail are published online shortly after. 

TIP OF THE WEEK: USE CASHBACK TO PAY OFF YOUR HOUSE

Did you know that there’s a way to reduce your mortgage term and save yourself thousands of pounds, without spending an extra penny yourself?

There are lots of ways to earn cashback, but there is one app, called Sprive, where you can earn cashback which goes directly into overpaying your mortgage.

How does it work? Basically, you link your bank account and then do your everyday shopping through the Sprive app by purchasing a digital shopping card for the retailer you want to shop at.

There are dozens of retailers and chain restaurants which offer cashback when you spend at them via Sprive – and the app then puts this money directly into overpaying your mortgage. Over time, this could save you hundreds or thousands of pounds in mortgage interest.

For example, let’s say you spend £125 at M&S and earn £5 cashback. Instead of spending that, it would go to overpaying your mortgage, and that £5 alone would become around £22.50 in savings over 30 years on a £250K mortgage with an interest rate of 5%.

Thinking bigger – if you spend £500 a month on groceries through Sprive, you could save over £6,400 in interest and pay off your loan seven months faster.

You don’t need to use Sprive to do this, though. You could use cashback sites like Sprive, Kaldi, TopCashBack or Quidco, pocket the cashback, and then overpay your mortgage yourself at the end of the year. 

BEWARE THE £100K TAX TRAP

Everyone wants to earn £100,000, right? But did you know that you could actually lose thousands the moment you go over this threshold?

When one earner in a household hits £100,000, they lose:

• £2,000 tax-free childcare, plus most of the government-funded childcare hours (slashed from 30 hours for 9-month-olds to 4-year-olds, down to 15 hours for just 3 to 4-year-olds)
• Their personal allowance: you lose £1 for every £2 earned over £100k. This is a 60% effective rate of tax until about £125,000 of earnings

AJ Bell, a financial firm, highlighted that a family earning a £99,000 salary, then getting a £2,000 bonus, would actually end up £27,000 worse off due to lost childcare benefits and tax allowances.

But there are ways to keep yourself from going over this threshold, without having to take a pay cut. 

One key way is to put more money into your pension. Money saved into a pension is tax-free, meaning putting more of your money into your pension effectively reduces your income for tax purposes – but you’re still keeping that money.

If you’re close to the limit, consider topping up your pension to bring down your actual salary.

FROM THE REGULATOR: PENSION SWITCH DEALS UNDER REVIEW

The finance watchdog is eyeing up pension switching deals – where pension firms offer cash or other incentives for switching your pension to them.

These deals have been around for the past few years, but the pensions industry is starting to disagree on whether they are a good thing, or whether they should even be allowed.

The watchdog recently expressed concern that some people may be switching their pensions solely on the basis of the cashback deal, without looking at the rest of the benefits of their pension.

However, the firms which offer them argue that they are a great way of engaging people with their pensions, at a time when millions of people are believed to be under-saving for retirement.

Since these switching bonuses could be under review later this year, we’ve rounded up all of the deals currently on offer that you could still benefit from:

• This month, Interactive Investor is offering customers £200 cash back if they open a SIPP and deposit or transfer at least £15,000 into it. The offer ends 30 September, and the cash back will be paid after 12 months of having the account.
• Charles Stanley is currently offering up to £1,500 cash back to customers who transfer their cash or investments to an ISA, SIPP or general investment account. You need to transfer at least £20,000 in to be eligible for cash back. No end date.
• AJ Bell is currently offering to pay up to £500 to customers who transfer their SIPP or ISA to it. This includes up to £35 per investment moved, and up to £100 to cover exit fees. You need to transfer in at least £20,000 to be eligible. No end date.
• Fidelity is currently offering a £100 Amazon gift card to anyone who refers a friend to its SIPP or Stocks and Shares ISA – and the friend gets £100 for transferring too. The person transferring must transfer at least £5,000 to be eligible. No end date.
• Freetrade is offering 3% cashback on  pension transfers, up to a maximum of £1,500. It said the deal was due to end on 31 August, but the deal appears to still be live. You need to transfer in at least £10,000 to get the cashback.

Are there any catches? We’re glad you asked!

Before switching your pension, make sure you compare the fees and charges attached to your old pension and the one you want to switch to – and ideally move to one with a lower charge.

Big fees can eat away at your pension, and you could lose more to charges long-term than you would gain in cashback.

Also, make sure to check if your old pension scheme has any valuable benefits attached to it. Your pension provider should be able to explain this to you – ask if you’re not sure.

JARGON BUSTER: FINANCE TERMS EXPLAINED

Budget – an event where the Chancellor announces tax and spending decisions for the coming months.

ISA – a type of tax-free savings product (any interest you earn on your savings is tax-free)

Pension switch – where you move your pension savings from one provider or pension scheme to another

Finance watchdog – also known as the Financial Conduct Authority – the body that oversees the financial services industry and sets rules firms have to followMortgage term – the amount of time you have to pay your mortgage off. These typically range from 25-30 years, but can be longer