Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

THE Autumn Budget on Wednesday next week is expected to be a big one, with investors braced for sizeable change. It’s no surprise that is expected - the Government has doled out nearly £400 billion in support and measures already since the start of the pandemic, leaving a spending black hole in the UK’s finances.

The Chancellor will be setting out his multi-year spending review for the next three years alongside his Autumn Budget. And while exactly what Rishi Sunak has up his sleeve, of course, won’t be known for sure until next week, if events of the past 18 months or so have taught us anything, battening down the hatches and preparing for the worst using the information we do have right now, can’t hurt.

Here are some of the areas where any tax grabs might land after Wednesday’s Budget announcement.

1. Your pension

While the recent increase in National Insurance and the freezing of the income tax bands announced in the previous Budget, probably mean the Government is unlikely to announce any further significant increases in personal tax rates, that doesn’t mean they won’t shift their focus instead to find ways to tighten tax relief currently available, or even target tax free allowances.

Tax on pensions

The Government has already announced the suspension of the triple lock guarantee on state pensions. This is where the state pension rises each year in-line with whichever is highest: inflation, average wages or 2.5%.

But the question is what it might tinker with next. The consensus seems to suggest that the government is likely to avoid any further changes to the pensions tax regime. So the Lifetime and Annual Allowances are unlikely to be changed. And the same is expected around tax-free cash lump sum that can be taken at retirement.

Two areas that could come under fire though are Capital Gains Tax and/or Inheritance Tax changes. Changing inheritance rules could increase future revenues without changing headline tax rates, while changes to CGT would be likely to come in the form of technical changes to cut back on CGT reliefs.

These could very well be on the cards when it comes to pensions. Both have been looked at by the Office of Tax Simplification in recent years. They are complex taxes and because of that they offer plenty of scope for refinement and - more crucially to you and me - plenty of earning potential for a government that needs to get money into its coffers.

2. Your loved ones’ inheritance

Under the current rules, the value of your pensions when you die can usually be passed on free of inheritance tax. And because of that it is a very popular way for people who have other sources of income to live off in retirement to pass on money to loved ones after they die.

Under the existing rules, pension funds that have been untouched can be passed on free from inheritance tax.

Could your loved ones be in line for a big inheritance tax bill?

If the Chancellor does decide to change the rules in this contentious area, then families who inherit stand to face hefty tax bills when their loved ones die. One suggestion that has been put forward, that could soften the blow a little, is to make life insurance policies exempt from inheritance tax.

This is something the Office of Tax Simplification has recommended and it says it would save families hundreds of millions of pounds. The latest figures show more than 6,000 estates paid inheritance tax on insurance policies worth over £700 million in the tax year 2018-19. You can read more about inheritance planning here.

3. Your capital gains

Currently the annual tax-free capital gains threshold stands at £12,300, which means most people don’t currently pay much, if any, CGT making this an area that is ripe for a Budget tax grab.

The Office of Tax Simplification estimates that halving the current annual capital gains tax exemption to £6,000 would result in 235,000 more people paying CGT each year and generate a not insubstantial £480 million in the first year alone.

If the Chancellor were to go further and reduce the annual exemption to £2,500, that would result in 360,000 more people paying and generate a swift £835 million in the first year.

4. Student loans

Currently graduates eligible to repay their student loan do so only if their income comes to more than £524 a week, £2,274 a month or £27,295 a year (before tax and other deductions). Exactly how much they repay and how quickly they clear the debt, if at all, depends on how much they earn. The rules vary widely, so do take a look at student finance on the government website.

Under the existing rules, 30 years after the April you were first due to start repaying your loan, the entire balance is written off, which means a fair number of graduates never repay their loan in full.

According to think-tank the Institute for Fiscal Studies though, if the starting salary at which graduates become eligible to start repaying the loan is reduced to £23,000, then the Treasury could claw back just under £2 billion a year.

That would be a nice annual sum for the Government, but it would be very bad news for today’s graduates already earning a salary at the current threshold of £27,295. And who, thanks to the recent increase in National Insurance, will already see their take-home pay cut by more than £800 a year.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

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