The UK has a new growth industry: the speculation business. 

In the run-up to the Spring Statement, the rumour mills have been working overtime, churning out unsettling theories about what might happen, and what it could mean for you.

Fortunately, you don’t need to get ground down by all of this, because there are some sensible no-regrets moves you can take ahead of the Spring Statement that will stand you in good stead, even if nothing changes.

Tax threshold freeze

One rumour is that income tax thresholds could be frozen beyond the current end point of 2028 – and stick around to 2029 or 2030.

This stealth tax has been quietly picking our pockets since 2021/22. It’s crafty, because it doesn’t make you worse off today, it just takes an extra slice of any pay rise, so it sneaks under the radar. However, the impact over the years has already been fairly nasty. In the current tax year, there are a 4.4 million extra taxpayers thanks to the freeze, and 1.88 million more higher rate taxpayers.

Regardless of whether we get this change or not, there are sensible steps you can take to cut your income tax bill. Pensions can help enormously, because contributions receive tax relief at your highest marginal rate. Meanwhile, you can protect your savings from income tax by holding them in a cash ISA. You can pay in up to £20,000 in the current tax year, so there’s a chance to take advantage before the end of the tax year.

If you’re married or in a civil partnership and your partner pays a lower rate of tax, you can transfer income-producing assets into their name.

The extra income tax is bad enough, but when you start paying higher rate tax, your personal savings allowance shrinks, from £1,000 for basic rate taxpayers to £500 for higher rate taxpayers, and disappears altogether for additional rate taxpayers. You also pay a higher rate of capital gains tax when you cross into paying higher rate tax, and your dividend tax rate rises as you cross each income band.

To protect against these taxes, it makes sense to invest within a stocks and shares ISA. If you have existing investments outside an ISA and the available allowance, you can use share exchange (Bed and ISA) to move them into the ISA and protect them from tax. Take care not to exceed your capital gains tax annual allowance of £3,000 in the process though.

If you transfer assets to a spouse or civil partner, so you can both use all the tax-efficient vehicles at your disposal – protecting £40,000 from tax this side of the tax year in ISAs.”

Rumours that income tax thresholds could remain in the deep freeze will be worrying for pensioners surviving on the state pension. The full new state pension is due to hit £11,973 in April – just a whisper under the £12,570 threshold for paying tax. Even annual increases of 2.5% – the minimum under the triple lock – could see it breaching taxpaying territory in just two years’ time. This will cause concern for pensioners who are already struggling to stretch their day-to-day budget.

Those with other assets, such as personal pensions, will also see their tax increase if the freeze is extended. They can soften the effect of this by using other products alongside their pensions, such as ISAs, which generate a tax-free income that could help keep their tax costs down, and even prevent them from breaching a threshold into paying a higher rate tax.”

Speculation on ISA changes

The government seems to have ruled out any immediate changes to the cash ISA, but the balance between cash and investment within the £20,000 allowance still seems to be up for debate in the longer term. The immediate priority for savers and investors will be to stick to sensible no-regrets moves that meet your needs, rather than being worried into taking steps you otherwise wouldn’t. There is still plenty of opportunity to take advantage of your ISA allowance in the current tax year – ahead of the 5 April deadline.

It shouldn’t stop there either, because you’ll have a fresh set of allowances at the start of the new tax year to get stuck into. It’s tempting to put things off until we inch closer to a deadline, but the longer you have to save and invest, the better the potential returns, so it pays to be an early bird.

How you divide your annual allowance between cash and stocks and shares will depend on your time horizon, risk profile and objectives, but the majority of people should consider a mix of both.

Spending cuts

There has been discussion of changes to disability benefits. It’s a worrying time for anyone with a disability who relies on state support, because their financial resilience is already under pressure. The HL Savings & Resilience Barometer shows that a household headed by someone with a disability has an average of £37 left at the end of the month after covering their usual expenses – compared to £240 among those without a disability. It damages their short-term resilience, because 43% have enough emergency savings – compared to 70% of those without a disability. It also makes it harder to plan for the long term: 29% are on track with pension savings – compared to 39% of people without a disability.

For those currently in good health, it’s vital to consider what would happen if you were unable to work for a long period. You may have benefits from your employer that would kick in, but check what would be available and whether you need to consider stand-alone critical illness cover or income protection. At this kind of time, you will be grateful for any emergency savings. It’s one reason why it’s so important to have emergency savings in place to cover 3-6 months’ worth of essential spending while you’re working age.