After the Autumn Budget, high earners' income will be reduced by £15,000 by 2029

According to Rachel Reeves' Autumn Budget, high earners, also known as HENRYs, are now facing income losses in the thousands

Can you prevent it?

The Autumn Budget, which was implemented three weeks ago, may cause your purchasing power to drop by thousands of dollars by 2029 if you are a high earner but not yet wealthy (also known as a HENRY).

The amount of tax increases announced was not surprising given all the excitement surrounding Chancellor Rachel Reevess' Autumn Budget announcement (not to mention the early leak of the Office for Budget Responsibility's (OBR) report). However, for high earners who might end up thousands of pounds worse off by the end of the decade, that is little consolation.

According to analysis from investment platform IG, by 2029, the Budget's provisions may result in a 15,000 decrease in the real purchasing power of households in Henry that make about £100,000 annually.

Chris Beauchamp, chief market analyst at IG, stated that "the combination of policy measures and frozen thresholds will have a disproportionately large effect on HENRY households, even though the chancellor met her fiscal rules and avoided increases to income tax or national insurance."

According to IG's analysis, ninth-decile earners (with an average household income of 65,700) will see an average decline in real purchasing power of 8,935 by 2029 after accounting for household inflation and fiscal drag brought on by frozen tax thresholds over the next three years. The reduction is 15,658 for those in the top decile (average income of 103,700).

How will high earners be affected by the budget?

There are several actions that will cause financial hardship. These are the ones that HENRYs should be aware of, including frozen tax thresholds, increases in council taxes, and modifications to IHT.

Tax thresholds that are frozen.

Reeves extended the tax threshold freeze through 2031. Because more people will be forced into higher tax brackets without becoming appreciably wealthier in real termsa process known as fiscal dragassuming incomes rise roughly in line with inflation, this is widely considered a stealth tax.

According to Sarah Coles, head of personal finance at Hargreaves Lansdown, "at that point, it's not just more income tax you have to worry about, but potentially higher rates on everything from dividend tax to capital gains tax and a shrinking personal allowance."

Taxes on investments.

Reeves also announced increased investment taxes, despite the chancellor's claims to be fostering an investment culture in the UK. This includes reduced tax relief on new shares in venture capital trusts starting in April, as well as increased tax rates on dividend income.

Increased tax on inheritance.

The nil rate band for residences and estates will stay at 175,000 and 325,000, respectively, until 2031 due to the freezing of inheritance tax (IHT) bands. A cap of £3,000 has also been placed on the annual gift allowance. This basically implies that more families will become victims of the IHT.

According to Coles, "IHT used to be seen as a wealthy persons tax, but a mix of booming house prices and threshold freezes mean this may not be the case for much longer."

Tax increases by the council.

April will also see an increase in council taxes. The government has previously stated that councils will be able to raise council taxes by five percent without holding a referendum.

By 2029 - 2030, council taxes in some parts of the UK could increase by up to £500.

Additionally, starting in April 2028, homes valued at £2 million or more will be subject to a new mansion tax that will be collected through council tax.

More "sin taxes".

Taxes on a number of undesirable behaviors have been raised by the government. The withdrawal of the 5p fuel duty relief, which will be gradually unwound between August 2026 and March 2027, is probably going to have the biggest effect on households.

On February 1st, alcohol tax will increase due to RPI inflation. The annual increase in tobacco duty will be RPI + 2 percentage points (effective immediately). To make sure that there is still an incentive for smokers to switch to vaping, there will also be a one-time increase of 2.20 per 100 cigarettes or 50g of tobacco, coinciding with a similar levy on vaping products of 2.20 per 10ml of vaping liquid.

Ways to lower your exposure to budget taxes.

You can take steps to lessen the impact of the budgetary measures on your income and preserve your household's purchasing power.

First, take full advantage of your ISA allowance, which is still 20,000 for cash ISAs until the new cap takes effect in April 2027. This will shield you from taxes on your income from cash interest as well as increases in capital gains tax.

If you are a basic tax rate payer and your money is not in an ISA, you will pay tax on any interest that exceeds £1,000; if you are a higher rate taxpayer, you will pay tax on any interest that exceeds £500. Make the most of your cash ISA allowance while you can because keeping your money in an ISA protects your returns from taxes.

You will avoid the higher tax rates associated with this type of income because dividends from investments held in a stocks and shares ISA are likewise exempt from dividend tax.

For tax purposes, you can benefit from higher personal allowances if you are married or in a civil partnership. According to Coles, "if one spouse is a non-taxpayer and the other is a basic rate taxpayer, the marriage allowance allows the non-taxpayer to give their spouse 1,260 of their personal allowance in the current tax year."

In order to lower their tax liability, spouses who maximize their ISA allowance may also be able to transfer a portion of their holdings to their spouse. According to Coles, assets that generate income "can be passed between spouses (or civil partners) without triggering a tax bill." As a result, they can be divided between a couple so that both can benefit from their ISA allowances and earn up to the threshold. A "

Contributions to self-invested personal pensions (Sipps) also provide tax relief on the first 3,600 annually, and pension contributions up to 60,000 annually are also eligible for tax relief at your highest marginal rate.

Coles says, "It's a great way to lower your tax bill and secure the income you need in retirement if you can afford to put more money away for the long term."

Another strategy to lower your tax liability is salary sacrifice, and now is the perfect time to do so because starting in 2029, only the first 2,000 will be exempt from employer and employee national insurance. Coles adds, "But there's still time to take advantage before this change."