Public borrowing hit £20.5 billion in April, the highest level for that month since 1993 and nearly £3 billion above forecast.
Economists warn the Chancellor may have little choice but to plug the gap with tax rises, spending cuts or changes to fiscal rules if elevated levels of borrowing persist.
While nothing is confirmed, several areas are drawing speculation.
Income Tax
Extending the Income Tax threshold freeze beyond 2028 could push millions of people into higher tax brackets, because inflation-driven wage increases are not being matched by rises in tax thresholds.
More retirees are also being caught out with the full new State Pension edging closer to the £12,570 personal allowance.
Those with additional income from private pensions or savings could soon face basic rate tax, or higher, where none applied before.
Utilising allowances, such as the starting savings rate or Marriage Allowance, can help mitigate the impact.
Cash ISAs
There is widespread speculation that the £20,000 annual tax-free allowance will be reduced to encourage people to invest in the stock market.
A lower limit would reduce options for cash savers and expose more of your savings interest to tax.
Making full use of the allowance early in the tax year could offer some protection against mid-year rule changes.
Inheritance Tax
A revision to the seven-year gift rule is also reportedly under consideration.
Individuals planning to transfer wealth should consider acting while current rules remain in place.
On top of this, many families will also have to contend with the nil-rate freeze until 2030 and the inclusion of unspent pensions within the scope of IHT from 2027, which could already bring many more estates within the tax regime.
Stamp Duty Land Tax
Surcharges on second homes have already risen to five per cent in England and Wales.
A further rise to match Scotland’s eight per cent is not out of the question.
Buyers should factor in potential changes before committing to new property investments.
With so much uncertainty, now is the time to seek expert guidance and ensure your finances are as future-proof as possible.
Contact us for a thorough tax review and proactive advice tailored to your needs.
