Struggling Households Experience £20,000 Decrease in Income Expansion – Do You Feel the Financial Squeeze?
In the current economic climate of the UK, concerns about potential tax hikes in the upcoming November Budget are growing. Meanwhile, the incomes of working-age families in private rented accommodation have only increased by 4% since 2005, a stark contrast to other demographics.
According to recent data, pensioner incomes have grown by 21% during the same period, while those who own their own homes have seen a 14% increase. This disparity has raised questions about income equality and the need for policies that benefit all sectors of society.
One strategy that could help individuals reduce their adjusted net income and avoid some tax cliff edges is salary sacrifice. This approach, where employees give up a portion of their salary in exchange for benefits like pension contributions, can offer significant tax savings.
The current tax year's Individual Savings Account (ISA) allowance stands at £20,000, and savers have until 5 April 2026 to make the most of this allowance. Investing a set amount each month using the strategy of pound-cost averaging can help cushion the effects of market volatility.
Another financial strategy is topping up a pension, which not only reduces the income tax bill today but also boosts retirement income in the future. Contributions to a pension attract tax relief at the marginal rate for basic, higher, and additional rate taxpayers.
Moving investments into an ISA or pension (Bed & ISA or Bed & Pension) allows future returns to be tax-free. This can be particularly beneficial in a climate where the Consumer Prices Index measure of inflation in the UK remains almost double the Bank of England's target.
The increase in employer National Insurance contributions has had a significant impact on business confidence in the UK. The Government's recent hike in these contributions has added to the financial pressures faced by many businesses.
In a bid to address the issue of living standards, the Labour government has made it one of its key policy aims to raise living standards in every part of the UK. The Resolution Foundation's report states that the story of the last twenty years has been one of a broad-based collapse in living standards in Britain, which can only be addressed by increasing productivity growth in the British economy.
The Government's recent moves to tighten its grip on investors, such as the hike to capital gains tax rates and reduction in the annual capital gains tax exemption, have been met with criticism from some sectors.
Over the last 20 years in the UK, EU migrants and other immigrant groups have seen the strongest growth, driven primarily by positive net migration rather than natural population growth. These groups are more likely to be employed or self-employed and work across all economic sectors, including critical areas like healthcare and social work.
In terms of economic growth, UK GDP failed to grow month-on-month in July, following a 0.4% rise in June, and slowed to just 0.2% on a three-monthly basis. This slowdown in growth highlights the challenges facing the UK economy and the need for effective policies to stimulate growth and improve living standards for all.
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