A cautionary message has been issued regarding the impact of the Autumn Budget set to be delivered by Andy Burnham and his Labour Party Chancellor, John Healey, on 28 October. Antonia Medlicott, Founder and Managing Director of financial education firm Investing Insiders, has highlighted which groups are likely to be most affected by the forthcoming financial policies.
Medlicott explained that while adjustments to taxes and allowances are commonly associated with pensions, Inheritance Tax, and higher-income earners, the reality often differs. “Many assume the wealthiest are the first to feel the effects,” she said. “However, these individuals typically have financial advisers and advance notice of changes, allowing them to prepare accordingly.”
She emphasised that the middle classes tend to be the hardest hit. This group often comprises people with modest private pensions, paid-off homes, and substantial savings - individuals who might not consider themselves wealthy. Yet gradual increases in tax rates and stagnant allowances can increasingly draw them into stricter tax rules originally designed for much larger estates.
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Specifically, the Personal Allowance, which determines the income threshold before tax applies, has been frozen at £12,570 for five years and is expected to remain unchanged until 2031. As wages rise during this period, more earners risk being pushed into higher tax brackets because the thresholds do not keep pace with inflation.
Pension-related changes also present a concern. From April 2027, unused pension funds will, for the first time, be subject to Inheritance Tax (IHT), signalling a significant shift in tax policy. While aimed at those with considerable pension savings, Medlicott warned that middle earners may again bear the brunt of these changes, lacking the resources to shield their savings like wealthier individuals do.
On a positive note, Medlicott pointed out that affordability appears to be a priority for Burnham’s government, potentially offering some relief to middle-income earners. Rather than altering income tax rates, National Insurance, or VAT, the government seems focused on taxes related to wealth, such as Capital Gains Tax and Inheritance Tax reliefs. Burnham has also expressed openness to reviewing the Personal Allowance following discussions during his by-election campaign, which could ease tax pressures for those most affected.
Medlicott concluded, “While we can only speculate about the details of Burnham’s financial plans, one certainty is the need for individuals to engage actively with their finances and take steps to safeguard themselves against any upcoming changes.”