I'm a Budget nerd - this is how Rachel Reeves's latest announcement will affect you: Sarah Coles

The most far-reaching tax hike was the extension of the freeze in the income tax thresholds to 2031, so pay rises and inflation-linked pension rises push even more people into paying more tax. It’s not just the tax on earnings that’s affected. Crossing thresholds can also mean a lower personal savings allowance and higher rates of tax on dividend tax and capital gains tax.

You can protect yourself from some of this. You can cut the tax you pay on your salary by boosting your pension contributions and getting tax relief at your highest marginal rate. You can protect savings interest from income tax in a cash ISA, and a stocks and shares ISA will protect you from tax on dividends and capital gains.

Graduates

Starting working life after studying will be more expensive, because the threshold for English graduates repaying Plan 2 student loans will stay frozen until 2030. It means more people will need to repay earlier in their career and repayments will be higher.

People paying into pensions

The change to salary sacrifice schemes is complicated enough for people to miss the impact on them. Essentially, they let you give up a chunk of your salary in return for pension contributions. There’s no tax or National Insurance applied, so the full value of every pound goes into your pension. There’s no limit on how much you can contribute this way – so you can use it for your full annual allowance: for most people that’s £60,000 or their annual salary – whichever is lower.

The change, coming in April 2029, will limit the National Insurance break on employee contributions to the first £2,000 a year, so you get less bang for each buck. You can still use the schemes in the same way, but you won’t get the NI saving on anything over £2,000. It’s still a hugely tax efficient way to prepare for retirement – it’s just not as tax-efficient as it was.

Savers

There was bad news for those with plenty to save, because the cash ISA allowance will be cut to £12,000 a year, from April 2027, within an overall allowance of £20,000. Those aged 65 and over will still be able to put the full £20,000 in a cash ISA. If savings are the right home for your money, there’s a decent chance those with more to save will have to put some in a standard savings account too, where there’s a risk of tax on savings interest – and there’s bad news on this front too.

Any savings interest that you need to pay tax on will attract a higher rate from April 2027. It means if you bust your personal savings allowance, basic rate taxpayers will pay 22% on interest, higher rate taxpayers 42% and additional rate taxpayers 47%. It’ll make the cash ISA an even more vital first port of call for savings.

Investors

The government is committed to encouraging more people to invest, so there were some positives in the announcement. Investment platforms will build hubs championing UK investment, and there’s a stamp duty holiday on newly listed companies, which will make them cheaper to invest in.

However, this came with a side order of bad news, because dividend tax is also being hiked by two percentage points for basic and higher-rate taxpayers. This comes off the back of an increase in 2022 – plus cuts in the dividend tax allowance in recent years. This will make it even more important to protect your investments in ISAs and pensions.

For those who invest in property, the income tax on rental income will rise by 2% across the board from April 2027. Landlords already face a huge tax burden, and can’t use things like ISAs and pensions to shelter their investments, so some will have to reconsider whether the maths still adds up under these rules.

There was also a change to investments in early-stage businesses through VCTs and EISs. On the one hand, the annual and lifetime limits may rise, but on the other, the tax relief on VCTs will be cut from 30% to 20%.

Wealthy people

People on higher incomes will tend to save and invest more, and put more into their pension, so they’ll be hit on all sides. But it doesn’t end there, because if they live in a property worth more than £2 million, they also face a new annual tax of between £2,500 and £7,500 from April 2028.

Those with more assets will also be more likely to pay inheritance tax, so they’ll be particularly unhappy to hear the freeze on inheritance tax has been extended another year – to 2031. It means anyone facing a potential tax bill needs to consider making lifetime gifts to ease the pain.

People on lower incomes

Two changes will help boost these incomes: the two-child cap for universal credit was axed, which is expected to lift 550,000 children out of poverty. There was also confirmation that the minimum wage will rise ahead of inflation – and even more steeply for younger people.

There were also steps to keep costs down, so some charges will be removed from energy bills, cutting them by about £150. Prescription charges will be frozen, regulated rail fares won’t rise next year and the bus fare cap has been extended for another year.

Finally, the help to save scheme has been expanded to more people on low incomes. This is a really generous and flexible savings scheme, so is well worth looking into.

First time buyers

The Budget documents revealed plans to replace the Lifetime ISA with an ISA product to support first-time buyers. The LISA has provided an essential boost for hard-pressed young buyers, and is a valuable way for people to save for retirement, especially self-employed people. This is disappointing news, but focus needs to be on consultation - to ensure existing LISA-holders aren’t damaged by any change

Drivers

The good news is that fuel duty has been frozen, and the temporary 5p cut extended to August 2026. However, there’s bad news for electric car owners, because there’s also a 3p new per-mile tax on electric vehicles, and 1.5p for hybrids.

The sheer number of changes in the document, and the consultations on the way mean there are still things we don’t know, and need to keep an eye out for. Anyone who was watching the conveyor belt of announcements and holding out for a cuddly toy will unfortunately remain disappointed.

Good news for Premium Bonds

Hidden away in the Budget documents was news that NS&I’s fundraising target has been hiked by £1 billion for this year – to £13 billion. It means the Premium Bond prize rate may hold steady, despite rate cuts in the wider savings market, to help hit this target. Its half-year haul was just £3.9 billion, and while the first half of the year does tend to be more sluggish, it’s a long way shy of the new £13 billion target.

Bondholders can also draw hope from the fact the savings market is so competitive at the moment, and news about the cut to the cash ISA limit is likely to mean ISA rates in particular remain stronger for a while. If this pushes NS&I rates down the best-buy tables, it could mean slower fundraising, which would push Premium Bonds up the agenda.