Budget Countdown: The Five Measures Set to Hit Home

In anticipation of the routine opening of the red box, here are five measures households can expect for Chancellor Rachel Reeves’ upcoming Autumn Budget.

  1. A freeze on income tax thresholds

A move originally reported by the Financial Times, Reeves is expected to extend the freeze on income tax thresholds beyond the 2028-29 deadline. As wages increase with inflation, more people will be pulled into paying tax or adjacently pulled into higher tax brackets, allowing the Chancellor to increase tax revenues without a manifesto-breaking rise in headline rates.

  1. ISAs (Individual Savings Accounts)

The Chancellor is expected to cut the annual ISA allowance from £20,000 to around £12,000 in attempt to redirect investment towards the UK equity market. A lower threshold means ISA savers will be able house less of their earnings in tax-free accounts, affecting millions of ISA holders.

  1. Property

A planned “mansion tax” on properties valued over £2 million, which could affect around 100,000 households. Paula Higgins, CEO of the HomeOwners Alliance, warns that a mansion tax “hits ordinary family homes in London and the Southeast far more than the rest of the UK,” and that many affected homeowners are “asset-rich and income-poor,” making a sudden property tax difficult to assimilate.

  1. Pensions

Reeves is expected to raise £2-4bn by restricting salary-sacrifice pension contributions. Helen Morissey, Head of Retirement Analysis at Hargreaves Lansdown, cautions that capping NI-free contributions at £2,000 “could cause long-term damage to people’s pension prospects,” as employers may hold back on contributions and employees may be less inclined to contribute in excess of auto-enrolment minimums. Morrisey states that only 43 per cent of households are looking at a comfortable retirement and contends it is “counterintuitive” to remove saving incentives.

  1. Energy costs

Measures that could cut average bills by up to £200, including removing VAT on electricity and gas are being considered. Dhara Vyas, Chief Executive of Energy UK, says any policy changes made in the Budget must begin to remedy long-standing structural issues, claiming that while any assistance is welcome, “removing policy costs off electricity would be most effective,” saving nearly £200 for household using old electric heating and £75 for dual-fuel customers.