The Labour leader addressed journalists in the Downing Street rose garden, and though he said income tax, VAT and National Insurance would not be increased, “things will get worse before they get better”.
Starmer said: “I will be honest with you, there is a Budget coming in October and it is going to be painful.
“We have no other choice given the situation we are in. Those with broader shoulders should bear the heavier burden – that’s why we’re cracking down on non-doms.
“Those who made the mess should have to do their bit to clean it up, that’s why we’re strengthening the powers of the water regulator and backing tough fines on the water companies that have let sewage flood our rivers, lakes and seas.”
However, the PM said he will also have to rely on the country and “make big asks of you as well”.
The Government will have to take action “and do things differently”, which is due to inheriting a black hole in the UK’s public spending of £22bn, according to the PM.
As well as outlining the Labour Party’s plan until the end of the year, Starmer also addressed the Winter Fuel Payment cuts announced earlier this month, which will hit around 10 million people aged over 65.
Despite pressure from campaign groups, charities and a petition by Age UK over the means-tested method of the payments, he insisted this policy will remain.
Between October and January 2025, pensioners will only receive the £200 or £300 payment if they receive certain state benefits, including Income Support and Pension Credit.
Starmer told journalists: “I didn’t want to means-test the Winter Fuel Payment, but it was a choice that we had to make, a choice to protect the most vulnerable pensioners while doing what is necessary to repair the public finances.”
“So far as the winter fuel allowance is concerned, firstly I would say it’s not a particularly well-designed scheme. Frankly, I think everybody would concede that.”
He added: “I do think it’s important that we make sure the support is there for those pensioners who need it most, which is why we’re pushing for the Pension Credit to be taken up and looking at other allowances.”
Ahead of the next Budget by Chancellor Rachel Reeves, Ian Cook, chartered financial planner at Quilter Cheviot, responded to the PM’s speech.
He said: “The key to effective financial planning in the face of potential budget changes is staying informed and flexible. While it’s essential to prepare, it’s equally important not to make hasty decisions based on speculation.
“Keep an eye on official announcements and be ready to adjust your plans as more details become available”.
The financial planner also provided tips surrounding the four potential changes that could come in October’s announcement.
Capital gains tax
One of the most talked-about potential changes is an increase in capital gains tax (CGT). If you hold assets that have appreciated significantly, such as property or investments, it may be worth considering the timing of any sales.
While it’s important not to make rash decisions, understanding how CGT works and anticipating possible changes can help you plan more effectively.
Inheritance planning
Changes to inheritance tax (IHT) could also be on the agenda, with potential reforms that might close existing reliefs or increase tax rates. If you’re planning to pass on significant assets, it might be beneficial to review your estate plan now.
Consider making use of current IHT exemptions, such as annual gift allowances, and explore options like setting up trusts to manage and protect your wealth for future generations.
These strategies can help reduce the tax burden on your estate, ensuring more of your wealth is passed on to your heirs, especially if the rates are raised or thresholds lowered come October.
ISA allowances
Each year, you can invest up to £20,000 in ISAs without paying any tax on the income or capital gains these investments generate.
Consider whether you’re making the most of this allowance, especially as other tax benefits may be reduced in the budget. Stocks and Shares ISAs, in particular, can be an excellent tool for long-term growth, offering a shield against CGT.
Pension contributions
There have been discussions about altering the rate of tax relief on pension contributions, which could affect how much you can save tax-efficiently for retirement. Currently, higher-rate taxpayers benefit from pension tax relief, but this could change if a flat rate is introduced.
To prepare, consider maximising your pension contributions under the current system, especially if you are a higher-rate taxpayer. This is particularly relevant if you’re close to retirement and want to boost your pension pot before any changes are implemented. However, keep in mind that pension contributions are subject to the annual allowance, so be sure not to exceed this limit
