TOP STORY: TAX RISES FIRMLY (APPARENTLY) ON THE TABLE

Okay, so, the government is almost certainly raising income tax in the Budget on 26 November. Woohoo! Who doesn’t love paying more tax?

But in all seriousness, what could these tax rises really look like, and what would it mean for you? Let’s break it down…

What taxes will go up?

No one knows for sure, but the government has dropped heavy hints that it will be targeting increasing income tax, as this is one of the biggest levers it could pull to plug its £30bn+ “black hole” in the public finances. 

However, some economists believe the government will reduce National Insurance if it raises income tax. 

How much will the government raise taxes by?

It looks like if the government do pull the income tax lever, they will do some combination of the following:

  • Raise basic rate* income tax by 1p
  • Raise basic rate income tax by 2p
  • Raise all income tax brackets (basic, higher and additional) by 1p/2p
  • Raise income tax by 1p/2p, and reduce National Insurance by 1p/2p\

The Resolution Foundation, which is a very influential think tank, has advocated for an increase in income tax by 2p across all three tax rates, offset by a 2p cut in National Insurance.

This should mean ordinary workers are less affected, and will instead ensure people like landlords – who don’t pay National Insurance – pay a fairer share of tax.

The 20% rate of tax you pay on earnings between £12,571 and £50,270

How much will that cost me?

Here’s a breakdown of how much extra you would pay…

With a 2p income tax rise, offset by a 2p NI cut:

Source: Quilter

With a 2p income tax rise across all tax brackets:

Source: Quilter

With a 1p income tax rise across all tax brackets:

Source: Quilter

If you’re worried about tax rises, it’s a good idea to think about any adjustments you could make to free up some extra cash.

Go through your bank statements and look for any subscriptions you don’t use or regular expenses you don’t need. 

Be your own consumer champion and see if you can switch to a cheaper version of everything: think wifi, energy, phone contract, streaming service. 

If you’re rolled onto a more expensive deal, call the company and ask to be moved back onto a lower rate.

Try using just one streaming service at a time – most will let you pay monthly, so you can watch everything you want to and then swap to another provider.

Make sure you’re getting the best savings rate, too. Top accounts currently pay around 4% interest, so if yours is paying less than this, consider switching.

BREAKING NEWS: BANK OF ENGLAND HOLDS INTEREST RATES

The Bank of England has held its ‘base rate’ at 4% – but members of its Monetary Policy Committee were split, with five members voting to hold and four voting to reduce the rate to 3.75%.

What is the base rate and what does it do?

The Bank’s base rate is what other financial institutions, like banks, use to set their own interest rates. A lower base rate typically means lower mortgage – and savings – rates, and vice versa.

It uses the base rate to control inflation, which is a measure of how quickly prices are rising, and drive growth in the economy.

The Bank aims for inflation to be around 2%. If it gets higher than that, it means prices are rising too quickly. To combat this, the bank can increase interest rates, which makes it more expensive to borrow money (meaning people might spend less), and it incentivises saving money instead.

Conversely, it can reduce interest rates to get people spending, as borrowing is cheaper and the interest of savings is less generous.

So what’s going on right now?

Inflation is currently sitting at around 3.8% – almost double the Bank’s target. But the economy is also struggling. That leaves things in a sticky situation, as the Bank has to choose whether to drive growth – potentially risking higher inflation – or attempt to curb inflation and risk limiting growth even further.

Holding the rate is a cautious compromise and leaves room for the Bank to assess how things progress, so hopefully it can make a more informed decision next time (it assesses base rate around every six weeks).

What does this mean for me?

Unfortunately, it’s bad news for homeowners if rates are held, as mortgage rates won’t be coming down – or at least by very much. It could even push them up slightly if lenders think rates won’t come down for a while.

However, it means your savings rates should hold for the time being. That makes it a good time to lock in a good rate ahead of any future decisions.

Top interest rates currently pay an inflation-busting 4.51% for easy-access accounts, but if you don’t need access to your money, it could be worth locking into a fixed rate. View


SNEAK PEAK: HOW DO YOUR SAVINGS COMPARE TO THE REST OF BRITAIN?

How do your cash savings compare to other people your age?

According to recent data, the UK’s average cash savings (what you could spend in an emergency – not including your pensions or investments) by age are as follows:

  • Age 18-24: £4,759
  • Age 25-34: £9,357
  • Age 35-44: £7,434
  • Age 45-54: £13,318
  • Age 55 +: £27,943

PENSION PROBLEMS: TAKING TAX-FREE CASH COULD COST YOU TENS OF THOUSANDS

Retirees withdrawing their full 25% tax-free cash from their pension early could lose tens of thousands of pounds in potential growth, new analysis by AJ Bell has found.

A 55-year-old with a £500,000 pension who takes their full 25% tax-free lump sum and moves it into a cash savings account paying 4% could be £63,169 worse off by age 65 compared to leaving it in their pension.

Using a Cash ISA or Stocks & Shares ISA can mitigate this impact, but the same person could still be worse off by £45,029 and £18,358, respectively.

Why? Because when you take money out of your pension, the investments stop growing in a tax-free environment. Taking the money out also splits your pot, which impacts the compound growth.

Key Considerations Before Withdrawing:

Have a clear plan for how the money will be invested or spent if you do take it out

Only take the cash if you genuinely need it – once withdrawn, the money stops growing in the pension’s tax-free environment

Consider using ISAs to keep the money growing, but remember that contributions are capped at £20,000 annually.

FROM ANTONIA: WHAT TO WATCH AHEAD OF THE BUDGET

The Autumn Budget is shaping up to bring financial pain for many households, but here at Investing Insiders, we’ll be providing full coverage of any changes that may affect you. 

We’ll be decoding developments in plain English – explaining what’s happening, how it affects your money, and what you can do about it.

With the economy weak and government borrowing high, Rachel Reeves has made it clear that “we all need to do our bit.” That could mean changes to:

  • Tax reliefs for pensions and ISAs
  • Property taxes: The government could move away from charging stamp duty only when you buy a home, towards a smaller yearly property tax instead
  • Capital Gains Tax (CGT): The rules for how profits on things like second homes or investments are taxed could be tightened – meaning you might pay more when you sell
  • And the quiet killer – fiscal drag – where frozen tax thresholds mean even modest pay rises push you into higher tax bands.

For households, the key things to keep an eye on are:

  • Take-home pay: Frozen thresholds can reduce real incomes.
  • Savings and pensions: Any cut to pension tax relief could dent long-term returns.
  • Property and investments: Buying, selling, or gifting assets could get pricier.
  • Cost of living: Business tax rises could filter through to higher prices.

Don’t rush into major financial moves before Budget Day. Rumours often shift, and once the details are confirmed, we’ll break down exactly what’s changed and how to protect your finances.

Stay tuned for our full Budget coverage on social, via this newsletter, on our podcast, and via our

THIS WEEK ON THE INVESTING INSIDERS PODCAST: BREAKING DOWN THE BUDGET WITH A PENSIONS EXPERT

In this week’s episode of the Investing Insiders Podcast, we’re joined by pensions expert Tom McPhail to unpack what rumoured changes in this year’s Budget could mean for your pensions. 

We discuss:

  • Whether you should withdraw your pensions now
  • The current pensions landscape
  • The potential impact of the Budget 2025
  • Strategies for saving enough when you want to retire
  • Whether you will be able to rely on the State Pension in the future

Email your financial questions to us at podcast@investinginsiders.co.uk and we might answer it in a future episode!

DEAL OF THE WEEK: GET UP TO £2,500 FOR AVIVA TRANSFER

Aviva is offering people who transfer £20,000 or more into its SIPP by 11th November can get a gift card worth between £100 and £2,500.

See the full terms and conditions here.

Jargon Buster

  • Tax relief: Where money you would have paid in income tax is added to your pension instead.
  • Budget: An event where the chancellor announces upcoming tax and spending changes by the government.
  • ISA: A savings or investment account where any interest or returns are tax-free.
  • National Insurance: A kind of income tax you pay on your salary. National Insurance contributions count towards your State Pension record.

Your Questions Answered

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