In light of the latest budget, will you be tweaking your long term budget planners?

Stubod

OK so long term planning budgets are normally in the realms of "best guess" re interest / inflation rates etc.

Just wondering if anybody will be making any significant changes to their longer term budget planning spreadsheets to reflect things like tax allowances etc.

eg the tax allowance I use on our planner did assume the this would increase year on year by inflation, (cpi/rpi), but I assume for the next few years this will now remain "fixed".

..hopefully enough "flex" in our plans to cover this, particularly having 2 years of lower than planned expenditure due to covid...

kinger101

Short answer no.

Long answer, for tax allowances such as the personal allowance, it's unreasonable to assume they'll move according to inflation for the rest of your life anyway so I don't see the benefit in planning for these.  I doubt income tax rates will be 20 % and 40 % by the time I retire too.

For the LTA, there's a possibility I may hit this, but if I do, it's because my pension has grown beyond my 2.5% PA after inflation target.  In all likelihood, I'd retire earlier if I approached LTA. Being two decades from state pension age (but hoping to retire or reduce hours a little sooner), I think all I can reasonably do at the moment is ask myself if I'm saving enough to allow a comfortable and possible early retirement.  

El_Torro

I think this is an interesting question, mainly because the LTA seems to be an easy target for the government to aim at. After all the LTA was £1.8 million about 10 years ago and is now significantly less than that, and is now unlikely to increase at all for the next 5 years.

i really can’t guess whether I will hit the LTA or not. I’m planning to retire in about 19 years, and if the LTA were to increase with inflation between now and then I think the chances of me hitting the limit are quite low. Who knows what the LTA will look like in two decades time though? 

To answer the original question, my answer is probably no, I won’t change what I’m doing in light of today’s announcement. I’ll continue to do what I have been doing for some years now, only put enough in my pension to avoid being a 40% tax payer. In my view any further investments beyond that are better off going in my ISA rather than pension.

westv

Frozen until 2026. Does that mean they could rise 1/4/26 or they will be the same through 2026 until 1/4/27?

OldMusicGuy

Yes. For tax allowances. But I don't see that as significant. Nothing else changes AFAIK (I am not a large corporation.......).

[Deleted User]

Interesting as he said 2026 and not 2026/27 which I assume is what he meant? Over time it will bring over a million people into paying tax and lots more will pay some tax at the higher rate, although I doubt it's going to be a massive money spinner for No.11

hugheskevi

The Budget document makes clear the LTA is frozen (or in the parlance of tax "maintained" and in the parlance of public sector pay, "paused") up to the end of 2025/26:

2.67 The inheritance tax thresholds, the pensions Lifetime Allowance and the Annual Exempt Amount for Capital Gains Tax will be maintained at their existing levels until April 2026.

Page 42: Pensions Lifetime Allowance: maintain at £1,073,100 up to and including 2025-26

ukdw

Personally I am going to apply the £70 tax free and £270 20% band rises (which are slightly better than I expected), then remove 10 years of projected inflation rate rises in tax bands and IHT limits.

Retireinten

We're aiming for financial independence (not necessarily early retirement) in around 10 years at 55, though we're on track to achieve this in 8 years, assuming no major life changes. 

I won't be changing my planners as I plan in today's money and uplift my income target and each affected income line for inflation annually.  I just find it far more relatable doing it this way. 

Anonymous101

Retireinten said:

We're aiming for financial independence (not necessarily early retirement) in around 10 years at 55, though we're on track to achieve this in 8 years, assuming no major life changes. 

I won't be changing my planners as I plan in today's money and uplift my income target and each affected income line for inflation annually.  I just find it far more relatable doing it this way. 

Similar here. I'm aiming for FI by mid 40's in around 6-7 years. This budget doesn't change my plans which kept the pension pot within the current LTA barring fantastic returns.

A more important question for me is what happens in 2026/27 and beyond.  I believe the current LTA provides sufficient to allow a fairly comfortable life. However any further changes to LTA (or income tax, retirement age etc) may alter that and of course will influence whether I see continuing to work as I currently do worthwhile or not.

LHW99

Tax allowances and rates for the future have always been crystal ball territory IMO, so I had never included an inflation increase in them on the spreadsheet anyway