How to protect yourself from Rachel Reeves and her shambolic Budget

What a shambles.

Yes, dear readers, a dog’s dinner of a Budget on so many levels after weeks of twisting and turning by the Chancellor as she sought to fill a black hole in the nation’s finances of her own making.

It comprises a mishmash of measures that I fear will do little to take the country forward – and a lot to send it careering backwards.

It will do nothing to get Britain out of the economic morass it is currently bogged down in – and desperately needs to get out of.

Sustained economic growth remains far over the horizon. We’re trapped in an economic doom loop and while the OBR has upgraded its growth forecast for the economy this year from one to 1.5 pc, it doesn’t signal an economic renaissance. As the Confederation of British Business pointedly says, the economy remains ‘stuck in neutral’.

Irrespective of whether we’re working or retired, the Budget has done nothing to make us feel better off. As a result of freezing of income tax thresholds until 2031 (not 2030 as expected), income tax will continue to absorb a bigger slice of our gross income as more of us fall into higher rate tax bands. Even Labour’s ‘working people’ – those earning less than £46,000 a year – will be hit, as Ms Reeves admitted in her Budget speech.

Bar those getting by on the national living wage or dependent upon benefits, we have all been pickpocketed. Move over Arthur Dodger, Ms Reeves has upstaged you.

It has also put an almighty dent in personal aspiration and the cult of saving for a better tomorrow. Ms Reeves, guided by a motley crew of rabid Labour MPs, is pushing us towards a socialist state where the rich are no longer cheered for their success – and the middle classes are despised for their hard-earned homes and painstakingly accumulated pensions.

Many of this second group (myself included, a working-class boy made good) are dispassionately seen by Labour as children of Thatcherism, once encouraged to strive, work hard, become homeowners and build their own financial fortress – we are viewed as nothing but cash cows to be milked.

It is this attack on personal wealth that I find so distasteful. It’s nakedly political, a form of wealth distribution from the hard working (and those who have retired after a lifetime of graft) to those living on benefits.

Some of you may find such a view uncaring, but I can draw no other conclusion after watching today’s Budget.

Indeed, I am sure many of you will now question whether your quest to own your home and build a worthwhile retirement pot has been worth all the sacrifice as a result of a barrage of taxes coming your way.

And for many of you still working, I am sure you will be now assessing whether your current mission to be mortgage free and financially well-prepared by the time retirement comes should remain an absolute priority.

I’m not alone. One adroit financial expert said in the Budget’s aftermath that Reeves had conducted a ‘masterclass in disincentivising saving and investing’. Well said, that individual (Nigel Green, chief executive of wealth manager deVere).

Financial firm Blick Rothenberg didn’t mince words either, describing the Budget as one the most damaging in living memory. Its assault on personal wealth, it added, would adversely impact savers for years and years to come.

Reeves’ wealth attack is multi-pronged. For a start, the reduction in the annual cash Isa allowance makes no sense at all.

Although the reduction from £20,000 to £12,000 won’t kick in until April 2027 (a year later than we had anticipated) and will not apply to the over 65s (brilliant news for many risk averse pensioners), there’s no logic whatsoever behind the move. At best, it’s misguided.

The Chancellor mistakenly believes that this cash Isa curb will persuade younger people to use the tax-friendly wrapper to invest in stocks and shares rather than save (investors will keep the £20,000 annual allowance).

Maybe in a minority of cases, but most young people save into cash Isas because they don’t want to risk their capital by investing.

Their money is tucked away in a building society or bank cash Isa for a specific purpose: to help build a home deposit or to be used as a financial emergency fund.

Maybe today’s mention of a new home-deposit focused Isa (lifetime Isa, mark two) will assuage some young cash Isa savers. But I have my doubts.

All this Isa meddling makes a complex tax-friendly wrapper even more bewildering. It’s unnecessary and will do little to whet the country’s appetite for investing. Simplification, not over-complication, should have been the order of the day.

What makes this cash Isa allowance cut even more despicable is that Ms Reeves will impose extra taxes on those who squirrel money away into traditional savings accounts.

From April 2027, interest on savings will rise to 22, 42 and 47pc according to whether you are a basic, higher, or additional rate taxpayer.

At the moment, there is no indication that the annual personal savings allowance of £1,000 and £500 for basic and higher rate taxpayers will be trimmed – that could well happen in next year’s Budget – but the move will land millions of prudent savers with extra tax bills. It will also turn the battle of completing a self-assessment tax return into a protracted war.

Landlord income and taxes on share dividends will be hit with the same 2pc extra tax charge (memo to Ms Reeves: I thought you wanted us to invest more).

As for pensions, the Chancellor’s decision to clamp down on so-called salary sacrifice pension arrangements is equally crazy.

The Chancellor purely sees these pension plans as a way for both businesses and workers to pay less national insurance – rather than a super vehicle for employers to offer stellar work pensions for their workers.

Her tax assault on them will be horribly destructive. In short, it will lead to workers building smaller pension pots to take them through retirement. The only blessing – and it’s a small one – is that the restrictions won’t come in until 2029. Maybe sufficient time for the Chancellor to see the errors of her ways.

Throw in a nasty mansion tax (a council tax surcharge) that will kick in from 2028 – and land homeowners living in £2million-plus properties cost with a minimum extra annual bill of £2,500 – and you get the picture loud and clear. Labour wants to plunder our wealth.

What can we do to protect ourselves?

For a start, sit down and make a note of when all these extra taxes come in.

If you’re an ardent saver (and will be under the age of 65 by the time April 2027 comes around), use as much of your remaining full cash Isa allowances as you can – this tax year and next.

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And ensure that as much of your household taxable savings is protected by personal savings allowances. For married couples, that means two allowances can be used to shield tax.

If you’re an investor, put Isas at the front and centre of your portfolio. And for other stocks and shares, don’t be frightened to take some profits using your annual capital gains tax allowance of £3,000.

As for pensions, I urge you to keep saving irrespective of how your works scheme is set up. Indeed, try to save a wee bit more than you are now.

The more you tuck away today and tomorrow, the greater the retirement fund you will build. And ensure your pension is invested to deliver long-term growth.

Finally, if you are looking to pass on wealth to loved ones, now is a good time to put plans into action before Reeves turns her attention to inheritance tax. Speak to a financial adviser.

As for the mansion tax, don’t do anything now like selling your home in a panic. Hold fire.

Hopefully, by the time you retire, we will have in situ a government that understands the importance of personal wealth in the wider economy.

Yes, a right old dog’s dinner of a Budget.