There can be no doubt that it has been a baptism of fire for Chancellor of the Exchequer Rishi Sunak since he was appointed in February 2020, coinciding with the beginning of the Covid-19 crisis. During his time in the role and including the latest cut in Stamp Duty and VAT, he has pledged in the order of £190Billion to combat the impact of the pandemic on the UK economy. It is highly likely more will be required.
This is the deepest recession in history and according to the Institute of Fiscal Studies (IFS), annual borrowing as a share of the economy is on course to be its highest outside wartime in more than 300 years.
Unfortunately, when the time comes to begin repaying this colossal sum, inevitably it will be taxpayers (over many generations) who are forced to bear some of the pain in the form of reduced tax-free allowances, reduced public spending and higher taxes. Economic growth and inflation alone will not redeem us. With that in mind, we must remind everyone that valuable tax concessions and investment allowances may not be around forever and even if finances are far down the list of priorities right now, we must also remember that global concerted efforts are focused on the strive for the ultimate goal of the vaccine and we shall begin the slow job of recovering and healing, as will our finances.
Do remember that every UK resident is entitled to a tax-free ISA allowance of £20,000 per annum. Whilst many savers continue to opt for cash ISAs, with the appallingly low interest rates and therefore insignificant tax saving, for longer-term savers who are willing to accept a degree of risk to their capital in pursuit of superior returns, the stocks and shares ISA is our preference. Pensions too are a wonderful option to avoid Income Tax (and receive tax relief on ingoing contributions), Capital Gains Tax and potentially even Inheritance Tax, as well as allowing us to save for our retirements! Flexible options at the time of taking benefits too mean that pensions truly are a fantastic option for most and with that in mind, they may be targeted first by the Government in the coming years as a means of repaying some of its mountain of debt.
