What It Means for Your Finances – Clarity Wealth Limited Client Report
The Autumn Budget and the Office for Budget Responsibility’s latest Economic & Fiscal Outlook set the tone for the UK’s financial landscape over the next five years. For individuals, families and business owners, the message is clear: taxes are rising, economic growth remains subdued, and proactive financial planning has never been more important.
At Clarity Wealth Limited, our role is to translate the complexity into practical, personalised guidance. Below is our full analysis of the key changes and how they may affect your income, savings, retirement plans, investments and long-term financial wellbeing.
1. A Slower-Growth, Higher-Tax Environment
The OBR expects UK GDP growth to average just 1.5% a year over the next five years, constrained largely by weak productivity. As a result:
- Real household disposable income is forecast to rise by only 0.25% per year.
- Tax receipts will reach over 38% of GDP by 2029–30 – the highest in modern UK history.
- Clients may feel financially “stretched” despite rising wages.
This backdrop reinforces the value of long-term planning, efficient tax structuring and disciplined investing to maintain real wealth.
2. Income Tax Threshold Freezes: The Stealth Tax That Keeps Growing
The Government has extended the freeze on income tax and National Insurance thresholds until April 2031.
This is one of the most significant stealth tax measures in decades:
- By 2030–31, over 5 million more individuals will be paying income tax.
- Nearly 5 million more will become higher-rate taxpayers purely through wage inflation.
- Many clients will see rising tax bills even if their purchasing power hasn’t increased.
Planning implications:
Prioritise tax-efficient wrappers—pensions, ISAs, salary structuring, profit extraction for business owners—to mitigate bracket creep.
3. Pensions & Retirement Planning: New Pressures and New Opportunities
Salary Sacrifice Hit by New National Insurance Charges
The Government plans to apply NI charges to salary-sacrifice pension contributions—a major change to a widely used tax-efficient strategy.
This means:
- Reduced tax savings for employees and employers.
- Many workplace pension arrangements will need reviewing.
- High earners may find retirement funding materially less efficient without restructuring.
4. Higher Taxes on Dividends, Savings & Rental Income
A 2% rise across dividend, savings and property income tax rates will affect:
- Retirees drawing dividends
- Business owners
- Investors with unwrapped funds
- Landlords with rental income obligations
Combined with higher interest rates, many savers will now exceed the Personal Savings Allowance—creating unexpected tax liabilities.
Client actions to consider:
- Maximise ISA allowances
- Restructure portfolios to reduce taxable income
- Evaluate company structures for landlords or business owners
5. Capital Gains Tax & Inheritance Tax: Increasing Pressures
CGT Relief for Employee Ownership Trusts Cut from 100% to 50%
Business owners planning succession may need to rethink EOT strategies.
Inheritance Tax Drag Deepens
With IHT thresholds frozen and asset values rising:
- IHT receipts are forecast to grow from £9bn to £14.5bn by 2030–31
- More estates than ever will fall into the IHT net
Required actions:
- Early estate planning
- Lifetime gifting strategies
- Consideration of trusts (where appropriate)
- Efficient use of pension assets
- Charitable gifting where aligned with clients’ intentions
6. Property Investors & Landlords: Squeezed Returns Continuing
The OBR highlights several pressures:
- Higher income tax on rental profits
- Mortgage interest relief restrictions
- Rising regulatory standards
- Higher financing costs
Projected result: a gradual contraction in rental property supply.
For clients with property portfolios, we recommend:
- Reviewing borrowing levels
- Considering incorporation
- Assessing whether buy-to-let still provides appropriate risk-adjusted returns
- Diversifying into alternative income-producing investments
For aspiring first-time buyers, rising rents may slow deposit accumulation, requiring structured saving plans.
7. Electric Vehicle Taxation: A New Cost to Factor In
From April 2028, a mileage-based tax for EVs and plug-in hybrids will begin—initially around half the fuel duty equivalent but expected to rise over time.
Clients planning for:
- EV purchases
- Long-term motoring costs
- Retirement expenditure budgets
should account for EV running costs rising more than previously assumed.
8. Welfare and Support Changes
The Budget reverses earlier reductions in the Winter Fuel Payment, and removes the two-child limit in Universal Credit.
While this boosts support for vulnerable groups, persistent inflation and rising taxation may offset some gains. Clients near eligibility thresholds may see benefits change as income shifts.
9. Investment Landscape: Higher Yields, Higher Risks
Inflation is projected to:
- Average 3.5% in 2025
- Fall to 2.5% in 2026
- Return to target by 2027
Other key OBR insights:
- 10-year gilt yields expected to remain around 5% into 2030
- Stronger long-term prospects for fixed income
- Higher volatility across global markets
- Elevated risk of US equity corrections due to stretched valuations
What this means for clients:
- Diversification is essential
- Return expectations should remain realistic
- Cashflow models should include higher long-run inflation assumptions
- Behavioural discipline remains a key determinant of outcomes
10. Key Messages for Clients
Clients should be aware that:
Taxes are rising even without headline increases.
Bracket freezes and targeted rises will affect most households.
Tax-efficient investing matters more than ever.
Full use of pensions, ISAs and allowances is crucial.
Landlords, business owners and investors with unwrapped assets face disproportionate pressure.
Inheritance Tax exposure is rising.
Frozen thresholds mean more estates drift into the IHT net.
Investing requires resilience.
Higher yields, equity risks and inflationary pressures require balanced, long-term portfolios.
Our View: Proactive Planning Is Essential
Regular financial reviews, tax planning conversations and updated retirement projections are now critical to ensuring long-term financial security.
For our clients and in response to the budget and ongoing legislation changes we will continue to monitor
- Annual tax optimisation reviews
- Updated retirement and cashflow modelling
- Reassessment of pension contribution strategies
- Estate planning conversations well ahead of time
- Ongoing portfolio risk assessments
If you would like to discuss how these changes affect your personal plans—or if you want us to model the impact on your long-term finances—please get in touch. We’re here to help you stay one step ahead.
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