With the Government’s Autumn Budget looming, PensionBee discusses the ramifications of rumoured changes to tax policy, and the potential consequences for savers.
Becky O’Connor, Director of Public Affairs, commented:
On raising income tax:
“Increasing income tax rates at a time when household budgets are already stretched would be a damaging move for workers and the wider economy.
The squeeze on disposable income would directly affect people’s ability to save and invest, eroding financial resilience and long-term retirement security.
It risks penalising work at precisely the moment when the UK needs stronger productivity and spending power to sustain growth.
Rather than raising taxes on earnings, the focus should be on giving workers greater breathing room to rebuild savings and plan confidently for the future.
The suggestion by some economic think tanks to cut the rate of National Insurance and merge it with income tax would make the overall tax system more transparent and streamlined.”
On freezing income tax thresholds:
“The freeze on personal and higher-rate income tax thresholds (currently until 2028) being extended even further is a subtle but powerful way of raising meaningful revenue for the Government.
As earnings rise,”fiscal drag” occurs, with more people being pulled into higher tax bands, effectively paying more without feeling better off.
For households already managing rising costs, this stealth tax can feel particularly unfair and risks undermining disposable income and savings capacity.”
On changes to VAT:
“An increase in the 20% headline VAT rate would be a gross breach of the government’s promise not to increase taxes on working people, and would hit the consumers who are less well off particularly hard.
At a time when the government needs to be boosting consumer confidence and growing the economy, this would be very unpopular.
Reducing the VAT threshold from £90,000 to £30,000 of turnover would create an additional paperwork and compliance burden on micro-businesses and the self-employed.
Policymakers should be very wary of dampening the very small business activity that supports local economies and keeps people in work.”
