Energy VAT cuts could offer short-term relief for households, but investors and higher earners may need to prepare for a bigger tax squeeze in the Autumn Budget, warns Tim Grimsditch, Managing Director at Unbiased.
Tim says that while removing VAT from electricity bills could help households with rising costs, potential changes to Capital Gains Tax, dividend taxation and pension tax relief could have a far greater impact on those with significant investments.
Tim Grimsditch, Managing Director at Unbiased said:
“Removing VAT from energy bills would provide some welcome relief for households, but investors and higher earners should not lose sight of the bigger tax decisions that could come later this year.
“Tax cuts in one area often lead to wider questions about how the government balances its finances, and the Autumn Budget could bring changes that have a much greater impact on wealth and investments than any short-term saving on household bills.
“While there is no certainty over what measures may be announced, investors should be aware of the potential impact of changes to Capital Gains Tax, dividend taxation and pension tax relief. For people with significant investments outside ISAs and pensions, even small changes to allowances or rates could have a meaningful impact on their long-term financial plans.
“Rather than waiting until after the Budget, now is the time to review whether your finances are structured in the most tax-efficient way. This could include making full use of available allowances, reviewing investments held outside ISAs and pensions, and checking whether your pension strategy still reflects your circumstances and goals.
“The most effective way to prepare for potential tax changes is to plan ahead. An independent financial adviser can help you understand your options and make informed decisions, so you are prepared whatever announcements are made in the Autumn Budget.”
