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The new Labour government’s first budget took place today (30 October), with UK chancellor Rachel Reeves announcing a £40bn tax increase and pledging to invest heavily in public services.

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What do I need to know? 

While we digest what all this could mean, the team at Chip HQ was listening out for any possible impact on your savings and investments.

Let’s take a look at what the chancellor announced today and how it affects your Chip accounts.

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No change to ISAs and savings allowances

Savers can breathe a sigh of relief with no major changes to allowances. Most importantly, there were no changes to the £20,000 ISA limit.

Annual subscription limits will remain at 

• £20,000 for Cash and Stocks & Shares ISAs
• £4,000 for Lifetime ISAs 
• £9,000 for Junior ISAs and Child Trust Funds.

The ‘Starting Rate for Savings’ will be retained at £5,000, allowing individuals with less than £17,570 in employment or pensions income to receive up to £5,000 of savings income tax-free.

There was no change to the Personal Savings Allowance, which just to remind you, is the amount of interest you can earn tax-free (currently set at £1,000 or £500 for higher earners).

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Capital gains goes up for investors 

For investors, the news wasn’t so good. An increase in Capital Gains Tax (CGT) was one of the tax-rises announced today.

The headline rates of CGT will increase by the following:

• The lower rate of CGT will rise from 10% to 18%
• The higher rate of CGT will rise from 20% to 24%.

To recap, capital gains tax is a tax on the profit when you sell an asset that's increased in value. It’s the gain that’s taxed, not the amount of money you receive.

This tax applies to the profit made on selling investments, so if you make a gain when you sell down an investment fund, this could be subject to CGT.
There was some good news however, as the amount of capital gains you can earn tax-free (currently £3,000) wasn’t reduced.  

Crucially, you should note that CGT would only apply to investments held in a General Investment Account (GIA). Investment returns on Stocks & Shares ISAs are not subject to CGT.

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‍When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment. Chip does not provide financial or tax advice and this is not a personal recommendation.

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Inheritance tax frozen

The inheritance tax (IHT) threshold freeze has been extended by another two years to 2030.

This keeps the tax-free allowance at £325,000 for any estate, rising to £500,000 if the estate includes a residence passed to children or other direct descendants. For spouses or civil partners, this threshold can go up to £1 million.

One change was the Chancellor announcing that from April 2027, inherited pensions will be subject to inheritance tax.

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‍Tax treatment depends on individual circumstances and may be subject to change in the future. ISA limits apply.

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Other changes that caught the headlines

While there was no change to the rate of national insurance we pay, a major change in the Budget was an increase in employers' National Insurance contributions, rising from 13.8% to 15% starting April 2025.

Additionally, the threshold for businesses to start paying National Insurance contributions has been significantly reduced from £9,100 to £5,000 per year.

Income tax thresholds will remain frozen until 2028, the national minimum wage is increasing to £12.44 and the State Pension is set to rise by 4.1%.

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So what should I do?

With the news on the increase in Capital Gains Tax, it could be a smart move if you’re investing to take advantage of your full £20,000 ISA allowance with a Stocks & Shares ISA.

With a Stocks & Shares ISA, all your investment returns are tax-free, so there’s no need to worry about any CGT or going over your tax-free allowances. 

Note that since April 2024, you can open multiple ISAs of the same type in the same tax year.

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‍Tax treatment depends on individual circumstances and may be subject to change in the future. ISA limits apply.

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We’re here to help

The team at Chip will be here to help you navigate any changes and keep you informed of anything you need to know. 

Please reach out to our team if you have any questions or concerns following any changes that might affect you. Remember, we can’t give financial or tax advice but are always there to help. Contact us in-app or email hello@getchip.uk.

All the best,
Stephen

NB: Always remember that tax treatment varies according to individual circumstances and is subject to change and this should not be taken as financial or tax advice.