The upcoming Autumn Budget, to be delivered on October 28, is set to have a significant impact on middle-class earners rather than the wealthiest individuals, according to a leading financial education expert. Antonia Medlicott, Founder and Managing Director of Investing Insiders, has provided a detailed breakdown of which policies are likely to cause the most financial strain.
Who Really Bears the Brunt of Tax Changes?
Medlicott explained that while common assumptions point to the wealthy being the first to feel budget changes—particularly around pensions, Inheritance Tax (IHT), and upper bracket earners—the reality is quite different. "Some of the most common taxes and allowances to change with the budgets are those associated with pensions, Inheritance Tax, and upper bracket earners, so many think that it’s the wealthiest who are first to feel the changes," she said.
"However, this is rarely the case. The truth is that they often have advisers to help with their finances and some warning, meaning they’re often quite prepared for the changes," she added. Medlicott emphasised that it is typically the middle-class who find themselves most affected, particularly those with modest private pensions, a paid-off house, and a good amount of savings tucked away—individuals who wouldn't typically consider themselves truly wealthy.
Frozen Thresholds and Pension Changes
The expert highlighted the ongoing freeze on the Personal Allowance, which has been held at £12,570 for five years and is planned to remain frozen until 2031. This means more earners are being pulled into higher tax brackets as wages increase, while the thresholds and allowances fail to keep pace with inflation.
Medlicott also pointed to pensions as a continuing area of concern. "From April 2027, unused pension funds will now fall under inheritance tax for the first time, marking a huge turning point in how IHT operates," she said. This change, while aimed at targeting those with large leftover pension pots, is likely to have a disproportionate effect on middle-earners.
Potential Relief on the Horizon?
Despite these concerns, Medlicott noted some positive signs. "The good news is that affordability seems to be one of the key priorities for Burnham’s government, potentially looking to ease the burden currently placed on middle-earners," she said. Rather than changes to income tax rates, National Insurance, or VAT, the focus appears to be on wealth-adjacent taxes, Capital Gains Tax, and Inheritance Tax reliefs.
Burnham has also indicated openness to reviewing the Personal Allowance after the topic was raised during his by-election campaign, which could potentially ease the tax burden on those for whom it would make the most difference. Medlicott concluded: "Whilst we can only give our best guess as to what the future may hold for our finances under Burnham, the one thing we can say for sure is that it’s time for us all to get more involved with our finances, and do what we can to prevent getting caught out by any future changes."
