Comment: The ‘broadest shoulders’ is a broader group than ever

Stephanie Pratt | supplied

After all the expectation, the Budget has proved to be something of an anti-climax for many people. That said, we should not underestimate the impact it will have.

One key point to note is it reaffirms that the stereotype of people who can afford to plug the gap in our public finances no longer applies. In particular, because many of the allowances are being frozen, more individuals and estates will pay tax across the board.

This means many people who would never have imagined being in the Chancellor’s sights may now find themselves paying higher taxes, and that has significant implications for a growing number of unsuspecting households across Scotland.

None of this is to pass comment on the rights or wrongs of Rachel Reeves’ decisions; it is merely to point out the obvious – which is that the burden of revenue-raising will fall on a wider range of the population than previously. It may be appealing to imagine she can wipe out the Treasury deficit by taxing captains of industry, top-flight footballers and landed gentry. However, that is not the reality.

Despite assurances, by freezing the thresholds for a further three years, more people will have to pay income tax and those who already pay will pay more.

Those individuals with rental income, savings and investments will also now pay more in income tax.

Pensions will be affected too, with salary sacrifice schemes capped at £2,000 each year and contribution in excess of this being taxed.

The three inheritance tax (IHT) thresholds – nil rate band, residential and agricultural/business – will be frozen too until 2031. As the value of estates continues to rise with inflation, more will be taxable.

On the other hand, the £1 million agricultural / business allowance announced in Autumn 2024 budget will now be transferrable between spouses and civil partners, in line with other IHT allowances. This will help simplify business and agricultural succession planning, but expert advice is still essential for all business or agricultural owners.

This is just a snapshot of what’s coming. Pensions, properties and personal spending have been captured in tax-raising measures to an extent not seen before. It’s one reason why our client base is diversifying at a marked rate, as individuals who were able to largely disregard such issues now seek advice on how to navigate their way through uncharted territory.

All of the groups I’ve mentioned need to look at their asset ownership, pensions and savings, wills and trusts, and what might happen in the future. And let’s be honest. Changes from 2024’s Budget are still to take effect. We need to consider the detail from 2025’s Budget. There will undoubtedly be more to contend with in 2026. And we can expect further measures in the Scottish Budget in January.

This is a crucial moment for individuals, families and businesses to review their arrangements. Clients with complex estates, investment portfolios or cross-border assets may find that today’s measures alter the effectiveness of long-standing plans. A proactive review now will help ensure affairs remain resilient, tax-efficient and aligned with the evolving fiscal landscape.