Spring Statement: What the Next Six Months Mean for Your Money

While the Chancellor didn’t announce any immediate tax hikes, the message was clear: changes are coming, and they might not be pleasant for everyone. With the economy under pressure, the government is looking for ways to balance the books, meaning taxes may rise for higher earners and businesses. 

Currently, capital gains tax (CGT) rates are relatively favourable, with many investors benefiting from lower tax rates compared to income tax. However, the government is reviewing this and could increase CGT, especially targeting second-home owners and investors holding stocks or shares outside tax-efficient wrappers like ISAs. 

Inheritance tax has long been a hot topic, and recent indications suggest potential tightening. Presently, you pay 40% on estates valued above £325,000, although couples can combine their allowances. Future changes could see this threshold lowered or allowances restructured, significantly affecting estate planning. 

VAT currently stands at 20% on most goods and services. Though not confirmed, an increase to VAT rates or broadening its application to more products and services is possible as the government seeks additional revenue. 

Self-employed workers may face tighter rules and increased National Insurance contributions. The Chancellor indicated a review of tax relief and allowances currently benefiting freelancers and small businesses. 

If capital gains taxes rise, investments outside ISAs and pensions may become less attractive. Now is a good time to review and possibly shift investments into tax-efficient accounts. 

With possible inheritance tax changes ahead, consider strategies like gifting assets, using trusts, or increasing contributions to pensions which are currently outside of your taxable estate. 

If you are self-employed, speak with your financial adviser about potential changes in tax allowances and prepare your business finances accordingly. Staying proactive can help mitigate unpleasant surprises. 

Inflation and interest rates continue to affect personal finances significantly. Higher interest rates benefit savers but create challenges for borrowers, especially those with mortgages or loans. 

As the cost of living remains high, careful budgeting and disciplined saving will become even more important in the coming months. Households should aim to reduce debt, build an emergency fund, and maintain flexibility in their financial plans. 

While the Spring Statement provided some temporary relief by avoiding immediate tax rises, it's evident that significant financial adjustments could be announced later this year. Being prepared, informed, and flexible with your financial strategies is crucial to managing whatever comes next.