Reeves to tackle £22 billion overspend as Autumn Budget announced

The Chancellor stated the Budget will aim “to fix the foundations of our economy”.

On 29 July, Chancellor of the Exchequer Rachel Reeves addressed the House of Commons to discuss findings from Treasury officials into the state of public spending.

This included a reported £22 billion projected overspend inherited from the outgoing Conservative Government.

If left unaddressed, this could mean a 25% increase in the Government’s financing needs this year.

The Chancellor also announced that the Autumn Budget will be taking place on 30 October and will “involve taking difficult decisions” to help ease pressures on public finances.

Reeves stated this would likely include tax rises, though in keeping with the Labour manifesto, the Chancellor reaffirmed that they “will not increase National Insurance, the basic, higher or additional rates of Income Tax or VAT”.

“This will do nothing to quell rumours that the Budget could usher in changes to capital gains tax or inheritance tax, or mean scaling back tax advantages of pensions – all of which could take a horrible toll on savers and investors,” commented Sarah Coles, Head of Personal Finance at Hargreaves Lansdown.

What does this mean for savings?

Income Tax thresholds have been frozen since 2021 and are set to remain at current levels until April 2028, which has already seen many dragged into higher tax bands.

In terms of the Personal Savings Allowance (PSA), this means more people are finding themselves paying tax on their savings.

Currently, basic rate taxpayers can earn up to £1,000 in interest before being taxed.

“While the Chancellor pledged in the election campaign not to raise the rate of income tax, that doesn’t preclude extending the current freeze on thresholds, which is tantamount to raising tax by the back door,” explained Laura Suter, Personal Finance Director at AJ Bell.

“The inevitable pre-Budget speculation about possible tax rises can be unsettling for savers and investors, but given the lack of certainty, it’s usually best to ignore the noise, deal with the tax rules as you find them and focus on the long-term,” she continued.

With this in mind, it’s always worth checking you’re still receiving competitive returns on your savings.