Pre Budget thoughts. What I expect and what are my Opinons?

What will Reeve's be doing on Wednesday?





I think a logical way of approaching this would be to understand what the current state of the economy looks like and the opportunities and threats that Reeves faces.

So what better way is there to judge than by doing a swot analysis of the UK economy? It'll be some nice interview prep too lol. I'll probably start off with some key indicators such as her black hole deficit and potentially may move onto some niche areas.

THIS IS UNFINISHED IM SORRY- It took way longer than expected to write this, currently spent like 3 hours.


Strengths:
  • Nov 2025 PMI at 50.2 suggests slight expansion.
  • OBR fiscal projections unexpectedly improved in recent weeks, reducing the expected scale of tax rises from £30-40bn → about £20bn.
  • Households still hold unusually high savings from the COVID period, which can support consumption if confidence stabilises.
  • Ik Mr Lay wouldnt really think this matters but despite volatility, the FTSE remains historically high, reflecting long-term investor confidence relative to Europe. Potentially might attract FDI.

Weakness:
  • Unemployment has risen to 5%, this is getting closer to the EU average
  • Inflation, also decreased from 3.8% is at 3.6%, which is currently not near the 2% target. EFS policy may just worsen inflation.
  • Consumer confidence remained stable in the euro area in November, while confidence fell in the UK ahead of the Autumn Budget
  • After implementing £40bn of tax rises in last October’s budget, the largest tax-raising budget in more than 30 years, the chancellor told the CBI that she would not be “coming back” with more tax rises.

Opportunities:

  • A recent BoE report suggested that there is building slack in the economy
  • An elevated savings rate, harod domar may suggest that this may also be good for investment? Could also argue this is bad in terms of recessionary territory?

Threats:

  • Labour costs and wage growth remain elavated, there may be structural issues to address
  • The deterioration in the public finances since last year’s budget is due to government U-turns on cuts to winter fuel and disability benefits, higher than expected government borrowing costs and downgrades to the OBR estimate of UK productivity growth.


What are the market and my views of Rachel's Current plans?

- I used these websites, and Ian's weekly mailing list:
  1. https://www.fidelity.co.uk/markets-insights/personal-finance/personal-finance/what-can-we-expect-in-the-autumn-budget/
  2. https://on.ft.com/3JPvskI (share link so you can access if you cant usually)

1. Pension Reforms (this is probably gonna to be a big area)

Tax-Free Pension Cash (an article said 25% lump sum)

  • There have been persistent rumours that Reeves may restrict the 25% tax-free pension lump sum (currently capped at £268,275).

  • Treasury sources have unofficially said this is “ruled out”… but at the same time there’s been a spike in panic withdrawals, which usually only happens when people fear changes.

  • So basically: officially denied, unofficially still possible.


Salary sacrifice crackdown

  • Much stronger rumours here.

  • Likely plan: cap the NI-free amount of pension salary sacrifice to £2,000 per year.

  • After £2k, NI will apply- mainly hitting higher earners who currently sacrifice big chunks of salary.

  • More extreme version (less likely): remove NI exemption entirely.

I guess this is one of the easiest ways for Reeves to raise several billion without “raising taxes” in the headline sense.


2. ISA System Changes (encouraging investment over cash saving)

  • Reeves ordered a full review of ISAs to see if the system is “getting the balance right” between cash and equities.

  • Expected: potential cut to the cash ISA allowance (to £10k–12k).

  • Why? Government wants people to invest more (Harrod-Domar logic: savings → investment → growth).

  • This fits with the broader push for long-termism and mobilising UK capital markets.


3. Income Tax & NI Adjustments (the stealthy stuff)

Frozen thresholds likely to continue

  • This is the simplest revenue-raiser and fits the political line of “we didn’t raise tax rates”.

  • Fiscal drag has already added millions to higher tax bands; Reeves will quietly continue that.

Possible Tax Swap: +2p Income Tax, –2p NI

  • This one is doing the rounds.

  • Net neutral for workers, but pensioners and landlords lose, since they don’t pay NI.

  • Politically risky but economically tempting.


4. Landlord Taxation (NI on rental income)

  • This is one of the strongest rumours in the whole Budget.

  • Government may impose National Insurance on rental income, which is currently exempt.

  • Could raise about £2.2 billion.

  • Fits Labour’s narrative that wealth should “contribute fairly”.


5. Property Tax Overhaul (big structural stuff)

Several proposals are floating:

Replacing Stamp Duty & Council Tax with an Annual Property Levy

  • This would be huge- the biggest shake-up of property taxation in decades.

  • Would hit the South East hardest (high-value homes).

Stamp Duty Spread-Out Payments

  • Instead of paying upfront, buyers could pay in instalments over several years.

  • Aimed at unfreezing the housing market.

New Higher Council Tax Bands

  • Increasing the top bands (F, G, H) or adding new tiers for expensive homes.

CGT on Main Residence (rare but mentioned)

  • Very controversial, but it has been floated.

  • Probably not happening now, but keeping it on the table signals future direction.


6. Dividend Tax Changes

Possible measures include:

  • Increasing dividend tax rates;

  • OR cutting the dividend allowance further (currently £500).

Hits investors and pensioners lol this aint hapening, so politically tricky but fiscally attractive.


7. Capital Gains Tax (CGT) Adjustments

Not officially confirmed, but strong hints suggest:

  • Another rise in CGT rates (recently raised to 18% / 24%).

  • OR more cuts to the CGT allowance (already slashed from £12,300 → £3,000).

  • OR specific higher rates for second homes.

This is a likely revenue stream because Reeves promised not to raise headline income tax/NI/VAT.

8. Inheritance Tax Reform

Very likely something will happen here, because it raises money quietly.

Possible moves:

  • Extend the 7-year gift rule → 10 years.

  • Introduce a lifetime cap on tax-free gifts.

  • Freeze IHT thresholds beyond 2030.

  • Replay the earlier plan to include the unused value of pension pots within estates.

Given rising house prices, freezing thresholds is an easy stealth tax.


9. Exit Tax (Tax on people who leave the UK)

  • This would impose CGT on assets when wealthy individuals emigrate.

  • The UK is almost the only G7 country that doesn’t do this.

  • Fits Labour’s fairness narrative and prevents tax flight.

10. Taxing LLPs (Lawyers, Accountants, Doctors)

  • Likely introduction of a new tax charge on LLP members.

  • Would be similar to employer NI (but slightly lower).

  • Aimed at stopping high-earning professionals from avoiding NI.

11. Wealth Tax (Low probability but politically alive)

  • Some Labour MPs want it.

  • Reeves cautious due to capital flight risks.

  • Probably won’t happen this Budget, but she may hint at a long-term review.





Okay so now I have come to grips of what the rather dire situation looks like. What do I think needs to be addressed:

1. Structural issues around unemployment. The level is at 5%, something is going wrong and I attribute it to a lack of HC. I feel there needs to be mass improvements in the 

2. How should she deal with the £20bn black whole 




Ian stewart shall be doing a post budget brief which would be valuable to tune into:

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