Our Autumn Budget 2021 predictions
With the Autumn Budget 2021 set to be outlined next week, many consumers are wondering how the Chancellor’s next set of decisions will affect their money. With some insight into what can be expected, we’ve listed our predictions on the biggest changes expected and how they affect your hard-earned cash.
Inheritance Tax Woes
Many families now use pensions as a tax-efficient way to pass on wealth to loved ones free of inheritance tax (IHT). If you die before age 75, your beneficiaries may escape income tax on future pension withdrawals too
Pension experts are warning the Chancellor against targeting families by introducing an inheritance tax charge on the nation’s pensions pots – hitting families at the most difficult time with a 40% pensions IHT charge.
‘That’ national insurance increase
The government has already confirmed that there will be an increase in national insurance contributions. From April 2022, national insurance contributions will increase by 1.25%. meaning people will pay national insurance at a rate of 13.25%. On top of income tax of 20% for basic rate taxpayers, this means most people will pay tax at a rate of 33.25%.
Climate change support
As the climate crisis worsens, the government might do more to align the tax system with its 2050 net-zero emissions pledge. With global gas prices rising, this could be a good time to encourage people to switch to greener alternatives. We also know that the government-backed bank, National Savings & Investments, has planned to launch the Green Savings Bonds. We could finally get more details on that in the Budget.
Lifetime allowance for pensions
If you build up a pension that exceeds the lifetime allowance, you can end up paying tax at a rate of 55% if you take the money as a lump sum. The lifetime allowance is currently £1,073,100. It has been frozen until 2026 so it seems unlikely that the government will tamper with it. The amount of tax-free cash that people can pay into their pension each year is currently set at £40,000. Savers can also “carry forward” up to three years of unused allowances.