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      How salary sacrifice schemes could change in Rachel Reeves’ budget

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      Reports indicate that Wednesday’s Budget may include a significant tax overhaul targeting salary sacrifice schemes, prompting fears that some people’s retirement savings could be jeopardised. Here we take a look at how salary sacrifice schemes for pensions work and what could happen in Rachel Reeves’ Budget.What are salary sacrifice schemes?Salary sacrifice schemes permit individuals to exchange a portion of their earnings for an employer-provided benefit. Often integrated into pension plans, this offers a tax-efficient route for workers to enhance their retirement savings. When contributing this way, the employer deposits the entire sum – including their own contribution – directly into the employee’s pension fund. What have reports suggested?Many people are already thought to be heading for a tough retirement financiallyThere have been reports of a potential cap for people sacrificing their salary while still receiving the tax benefit at £2,000 a year, although some reports have also suggested that restrictions could go further.What are the benefits of salary sacrifice schemes?Salary sacrifice enables people to maintain their take-home pay, as people end up paying lower national insurance (NI) contributions.There are also NI advantages for employers, helping them to offer more generous workplace benefits.Are there any downsides for pension savers from using salary sacrifice?A lower salary on paper might affect some borrowing applications, such as for mortgages. However, employers can maintain a “reference salary,” which may be considered.What could paring back salary sacrifice schemes mean for people and businesses?Pensions industry bodies have been urging Chancellor Rachel Reeves not to curb salary sacrifice schemes (Leon Neal/PA)Reducing the use of the schemes would mean more Government revenue, with some reports suggesting between £2 billion to £4 billion could potentially be raised, depending on how salary sacrifice was curbed.But the Association of British Insurers (ABI) and major pensions providers have been urging Chancellor Rachel Reeves not take such a step, pointing out that the next generation of retirees are already at risk of being poorer than the current pensioner population.Get a free fractional share worth up to £100.Capital at risk.Terms and conditions apply.Go to websiteADVERTISEMENTGet a free fractional share worth up to £100.Capital at risk.Terms and conditions apply.Go to websiteADVERTISEMENTPensions industry bodies have warned that it could mean people and employers cutting back on the amounts going into pensions, storing up problems for pension savers and putting more cost pressures on businesses.The ABI and the Reward and Employee Benefits Association (REBA) have warned that such a step would place additional strain on businesses and push millions of people into poorer retirements.Yvonne Braun, director of policy, long-term savings at the ABI, said on Saturday: “The industry has long-warned that we’re ‘sleep-walking’ into a retirement crisis. “If the Government goes ahead with suggestions to cap salary sacrifice, then we’re no longer sleep-walking, we’re speed-walking.”What issues already exist with people’s incomes and pension saving?Although automatic enrolment has brought millions of people into pension saving, there are fears that too many workers are not saving enough to give themselves a comfortable retirement More

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      What is the ‘stealth’ rise in income tax and how will it affect me after the Budget?

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      Sir Keir Starmer refused to rule out freezing income tax thresholds at Wednesday’s Budget, prompting concern that more people will begin payin extra tax by ‘stealth’.At Prime Minister’s Questions on Wednesday, Sir Keir declined to answer a number of questions from opposition leader Kemi Badenoch on the issue of threshold freezes. His refusal to answer came after chancellor Rachel Reeves had been expected to breach Labour’s manifesto promises and increase income tax as part of her plans to plug the gap in the public finances. The chancellor is instead widely expected to raise other taxes on 26 November.Additionally, frozen tax thresholds could be used to raise more money for the Treasury, in effect rising taxes by stealth. Even if income tax rates are not increased, people could end up paying more tax as a result of the freezes.The tax-free personal allowance was frozen at £12,570 until 2028 by the previous Conservative government. Freezing tax thresholds can create what economists call “fiscal drag” – more people are pulled into higher tax brackets as average earnings increase, but the thresholds stay the same.Rachel Reeves will deliver the Budget next week More

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      Budget 2025 latest: Sugar levy on milkshakes and lattes confirmed as first tax hike in Rachel Reeves’s Budget

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      Rachel Reeves ‘right’ about misogyny in politics, says CleverlyA sugar levy on pre-packaged milkshakes and lattes has been confirmed as the first of a series of tax hikes to be included in Rachel Reeves’ highly-anticipated Budget.The Chancellor is due to deliver her second budget in the House of Commons on Wednesday, in which she is widely expected to pull the lever on tax hikes in order to fill a £22bn black hole in the public finances.Wes Streeting told the Commons on Tuesday the government will end the exemption for milk-based beverages from the existing tax on sugary drinks. The move will affect packaged milkshakes and coffees, but not drinks made on site in cafes and restaurants.It is one of a series of taxes Ms Reeves is set to unveil, with other measures expected to include a profits tax on gambling companies and a levy on bank profits.Reeves has been accused of planning to launch a tax raid on savers, with the chancellor set to cut the cash ISA limit from £20,000 to £12,000.On Monday, it also emerged that the chancellor is set to hit thousands of Britain’s most expensive properties with a new “mansion tax” levy.Mayors to be given power to introduce tourist taxA new tourist tax can be levied on overnight stays if local mayors decide to introduce the measure, the Government has announced.Local leaders in England will be given the power to impose a “modest charge” on visitors, the Ministry of Housing, Communities and Local Government said.Announcing the measures ahead of the Budget on Wednesday, Local Government Secretary Steve Reed said: “Tourists travel from near and far to visit England’s brilliant cities and regions.“We’re giving our mayors powers to harness this and put more money into local priorities, so they can keep driving growth and investing in these communities for years to come.”A consultation on details of the measure will run until February 18.( More

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      Labour announces ‘tourist tax’ to boost England’s cities

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      Local leaders will be allowed to levy a “tourist tax” on overnight stays, the government has announced. Local leaders in England will be given the power to impose a “modest charge” on visitors, the Ministry of Housing, Communities and Local Government said.Announcing the measures ahead of the Budget on Wednesday, local government secretary Steve Reed said: “Tourists travel from near and far to visit England’s brilliant cities and regions.“We’re giving our mayors powers to harness this and put more money into local priorities, so they can keep driving growth and investing in these communities for years to come.” England is currently the only G7 country where local authorities are prevented from implementing tourist taxes. London mayor Sadiq Khan, who has been a vocal proponent of the measure, welcomed the announcement, saying it is “great news for London.”He added: “The extra funding will directly support London’s economy, and help cement our reputation as a global tourism and business destination. It also shows what can be done when ministers work closely with Mayors to devolve more powers to cities and regions.“As part of developing our plans for the levy we will work closely with the hospitality and tourism sectors to ensure it delivers the maximum benefits for London and our brilliant businesses.”A research report from the Greater London Authority in 2017 estimated that a 5 per cent levy on the cost of accommodation could raise £239m per year in the capital. A consultation on details of the measure will run until February 18.This is a breaking news story. More to follow… More

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      Milkshakes and lattes will be included in sugar tax in bid to tackle obesity crisis

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      The sugar tax will be applied to packaged milkshakes and lattes for the first time, Wes Streeting has announced. The health secretary told the House of Commons that ministers are removing the exemption for milk-based drinks and that ministers would not look away “as children get unhealthier”. The threshold for the tax will also be lowered to 4.5g of sugar per 100ml, from the existing 5g per 100ml. The move comes ahead of Wednesday’s Budget, in which Rachel Reeves is expected to announce a raft of tax rises as she looks to plug the gap in the public finances. Speaking at health questions on Tuesday, the health secretary said: “Obesity robs children of the best possible start in life, hits the poorest hardest, sets them up for a lifetime of health problems and costs the NHS billions.“So, I can announce to the House, we’re expanding the soft drinks industry levy to include bottles and cartons of milkshakes, flavoured milk and milk substitute drinks.“We’re also reducing the threshold to 4.5 grams of sugar per 100 millilitres. This Government will not look away as children get unhealthier and our political opponents urge us to leave them behind.”The move will affect packaged milkshakes and coffees, but not drinks made in cafes or restaurants. The sugar tax is to be extended to cover milk drinks including lattes, Health Secretary Wes Streeting is expected to announce (Alamy/PA) More

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      What Rachel Reeves could do to pension tax at the Budget

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      With Labour’s second autumn Budget taking place on Wednesday, speculation about further tax rises has grown rife. Chancellor Rachel Reeves may need to find at least £22bn next month, pre-Budget research from the respected Institute for Fiscal Studies (IFS) found, as rising borrowing costs and weak growth forecasts drastically reduce her room for manoeuvre.She has warned she will not be making “easy choices” at the fiscal event on 26 November, as No 10 looks appears less concrete on its commitment not to raise taxes on “working people”. This means no increase to the headline rates of income tax, VAT or national insurance contributions.Should these three largest bases of tax revenue closed off, the chancellor has fewer places to look to raise revenue, making it more likely she will pick from a diverse range of taxation tweaks.Changes to how property and capital gains are taxed have now been forecast by many economists, but some have also predicted that changes to pension policy could make an appearance.Pre-Budget research has found that the chancellor may need to find at least £22bn next month More

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      Starmer ‘told off’ by teacher after encouraging students to do 6-7 trend during school visit

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      Sir Keir Starmer participated in the viral 6-7 trend with primary school children during a visit to Peterborough.The prime minister and education secretary Bridget Phillipson discussed the importance of free school meals with pupils during a visit to Welland Academy, on Monday (24 November).During the visit, Sir Keir was reading with pupils when one pointed out they were on page 67. The prime minister then made the hand gesture that accompanies the reference, with the students quickly joining in.The teacher later jokingly told the prime minister off: “You know children get into trouble for saying that in school.” More

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      Here’s what you could do with your money after cash ISA cut in Reeves’s Budget

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      Rachel Reeves is set to cut the cash ISA limit in Wednesday’s Budget, with the cap poised to drop from £20,000 to £12,000.The proposed move, seen as a bid to encourage more people towards investing rather than only saving in cash, has prompted a mixed reaction from consumers and businesses. Many savers will not feel the impact of a cut on a day-to-day (or year-to-year, more specifically) limit, bearing in mind the difficulty many people have in saving upwards of £1,000 per month. But they could still be hit when they come into a lump sum – through inheritance, for example, or a property sale.Either way, some people clearly want to move money before limits are cut. One cash ISA provider, Plum, told The Independent they’d seen a 49 per cent spike in the amount deposited into accounts between 15 October and 15 November.Chancellor Rachel Reeves is set to cut the cash ISA limit in Wednesday’s Budget More