The 2025 Budget: what does it mean for your money?

0:01Hello, this is Claire Barrett from the Financial Times and I am thrilled to be back behind the mic bringing you this bonus budget episode of Money Clinic and Political Fix. It has been a rollercoaster week for both UK politics and our personal finances as Chancellor Rachel Reeve set out tens of billions of pounds worth of tax rises in the budget. But how will these new taxes be applied and what could they cost you? We've got a brilliant panel of experts answering all of your questions about tax, investing and the wider economic impact. Plus, I'll chip in a few thoughts myself. This podcast was recorded live at the FT on the afternoon of Friday, 28th November.

0:44As usual, what you're about to hear are our opinions. Nothing we say is intended as financial, tax or investment advice, but we do hope it's useful and broadens your understanding of how the Chancellor's political decisions could impact your financial future. So, let's get on with the show.

1:06Hello and welcome to this special live recording of the Money Clinic podcast, unpacking everything you need to know about how your finance will weather the autumn budget. Joining me today to answer your budget questions in this special interactive webinar are three very wise men. Dan Needle, the founder of Tax Policy Associates, and my FT colleague Stuart Kirk, who's the FT's investment columnist, and Tej Parikh, who is our resident economics expert in the FT's leader writing team. Now, no surprises that a raft of different tax rises were announced at this budget, many of them aimed at those with the broader shoulders.

1:46We will be explaining many of these in detail, including changes to salary sacrifice arrangements on pensions, the freeze on income tax thresholds, some important changes for investors and the wider economic impact these measures and the chaotic run up to the budgets could have. Plus, Stuart has got something big to reveal about his own investment portfolio, so stay tuned for that. And lots of FT readers have already sent in their questions in advance, so thank you to everybody who did so. But just please be aware, what you're about to hear are our opinions. Nothing we say is intended as financial tax or indeed investment advice, but we do hope that it's useful and it broadens your understanding of how the Chancellor's political decisions on Wednesday could impact your financial future.

2:37So let me start by asking all of the panel for their brief verdict on the budget, starting with you, Dan.

2:45Dan Neidle: It was nothing like as bad as the last budget. The employer national insurance was almost a uniquely damaging tax rise, all the tax rises that could have been chosen. We didn't have a repeat of that. It's probably accurate to a good first approximation to say this was just about freezing thresholds, because that's really where the money is coming from, and it will kick in in three years' time, and it amounts to overall£30 billion of additional tax, most of which is threshold freeze. We then get the other items we can talk about later, but a fairly chunky tax increase. Yeah, so those frozen thresholds on income tax, obviously lots of political debate about whether that actually breaks Labour's manifesto pledge not to raise the rates of income untax in spirit, if not by the letter.

3:28But Stuart, what were your impressions of the budget? My impression was that nothing too positive, nothing too negative. And in my view, that's the worst of all worlds, because I feel like there needs to be a rupture. Tax take needs to come down a lot and spending needs to come down a lot. And so for as long as things just muddle along, like this budget has allowed it to do, we just keep continuing down a path that we really shouldn't. OK, all right. So that's the investors take. But Tej, with your economics hat on, I mean, I know that, you know, both you and I, we're investors too in our spare time.

4:01But from an economics point of view, you've done some blinding leaders in the run-ups of the budget and afterwards. Tell us your take. Yeah, I mean, I agree with Dan and Stuart. I mean, the lead up was pretty chaotic. And then what happened wasn't too surprising, given that a lot of it was already leaked. I mean, in terms of the content, she had two criteria, in my view. One was to balance the books, which is the low bar. And second, in my view, was to ensure that the way she balances the books prevents the need from coming back with future tax rises. So we don't have this cycle of worry for months and months, hanging over the economy, hanging over wealthy people, investors, normal people trying to run their own businesses.

4:45Exactly. I mean, look, on the first one, she just about did it with this hodgepodge set of tax rises. Bond markets didn't revolt, which is, I guess, a good thing. But fundamentally, looking at the documents back over the last two days and the feedback that we're hearing from businesses, individuals, I'm pretty concerned that you'll have to come back for tax rises, whether it's next year or later on in their term. So I don't think, you know, I would see this as a stopgap exercise rather than dealing with the underlying issues that the UK faces. OK, well, interesting first takes from the panel there.

5:21Now, we've had registration for this event open for about two weeks now. So we've been able to take people's questions as they've been coming in. Now, I have to say there's one topic that we receive more questions about than any other. And that was, of course, the changes to salary sacrifice, which were well rumoured, Dan, in the run up to the budget. I certainly written strongly about why I felt that they shouldn't make these changes. You're going to give us a little explanation of what the changes are. But I should say my biggest delight on Budget Day was finding out that they're not going to come in until 2029, which gives people and businesses an awful lot of time to plan around them.

5:59Dan Neidle: Yeah, is that the medium term or the long term? It certainly seems far enough away that you shouldn't really think about it now. Well, anyway, tell us a little bit about how salary sacrifice works. So if you're a higher earner, you can make additional payments into your pension. I mean, anyone can just go and buy a SIP. And if you haven't used your pension allowance for the year, you can make payment into it. And as long as you're within that allowance, it is tax deductible for income tax. So it's as if you hadn't been taxed, you hadn't paid income tax on whatever you pay into the pension. You will pay some on the way out, of course.

6:31But on the way in, it's a big upfront saving. And with salary sacrifice, you and your employer, of course, also save national insurance.

6:39Dan Neidle: Yes, which is huge. So national insurance, that's 8 % if you're a basic rate taxpayer, 2 % if you're a higher additional rate taxpayer. But that's peanuts. The real money is that the employer side, where the 15 % just vanishes for salary sacrifice, which makes it very attractive. And it's been used significantly for pensions. It's also been used for other stuff, which varies between a little bit racy and dead dodgy shouldn't be allowed. We've seen childcare, salary sacrifice, grocery, salary sacrifice, shopping, salary sacrifice. some of which I think goes over the line, past tax avoidance into tax fraud, and the people selling it should be ashamed of themselves.

7:19Dan Neidle: But I don't think that's the motivation for the change. I think the motivation for the change is simply they were scrabbling around trying to find ways to raise tax. This was a way to do it. Okay, so known as the six-figure salary trap, this is why lots of FT readers are interested in salary sacrifice, because if they're earning more than£100 ,000, if they make large contributions using salary sacrifice, into their pensions. They can keep the level of their pay on paper under that£100 ,000 threshold, and then they'll avoid really high marginal tax rates. And if they're working parents, the loss of childcare benefits, which also starts to happen as a cliff edge at£100 ,000.

7:58Now, we know now that income tax thresholds, including that£100 ,000 ceiling, are going to be frozen until 2031. So in that time, as many as half a million more people could enter this highly taxed 100K club, many of them FT readers, and lots of them have written in saying they're worried that the salary sacrifice changes could limit their ability to manage their salary around this cap. For example, Helen says, will the budget changes impact how people can stay under the£100 ,000 threshold for childcare support? And Vladimir asks, considering the national insurance charges that will happen in future, will it still make sense to contribute large amounts of your salary to stay under this£100 ,000 tax cliff?

8:44Dan?

8:45Dan Neidle: So depending on where you are, salary sacrifice has been something between a nice to have and an essential. So if you look at the data which we in The Times published a few weeks ago, you see in the chart of people earning different ranges of salary, you see a bump just before£50 ,000 because that's where the higher rate and child benefit clawback used to kick in. And you see another bump at£100 ,000 and that is people partly avoiding the 62 % marginal rate that everybody has about£100 ,000. But it's also some people who, as you say, have a childcare subsidy who will lose all of it when they earn a penny over£100 ,000.

9:21And that could be worth tens of thousand pounds if they've got, say, two children in a London nursery.

9:27Dan Neidle: Yeah, it could easily be worth£20 ,000. And if it is worth£20 ,000 to you, then that one penny pay rise will cost you£20 ,000 and you won't be back where you were until you're earning, I'm not sure I can remember the figure, but it's something like£150 ,000. Yes, correct. So it's pretty astonishing. So for those people, staying under 100 grand is critical. A lot of them did it with salary sacrifice. Main message is, forget about it now. There's just no need to think about or plan something that won't be happening until 2029 and may not happen then. We could have a change of government. This government could change its mind.

9:56Dan Neidle: I used to say to clients, don't base planning, which is going to change your life or your business, on something which is years out because tax rules have a habit of changing. But the thing is, you don't need salary sacrifice to stay under 100 grand. You could just make additional pension contributions. And that is more of a faff, because you will have to open a SIP if you don't already have one. It's a bit more expensive, because you won't get a deduction for national insurance. But if you're at that point, it's only 2%, not 8%. So it's not going to cost you all that much more. No. So in a rational world, this shouldn't stop people managing the 100 grand.

10:31Dan Neidle: It's more of an issue at the 50 grand point, both because the national insurance is bigger, but also it's just more awkward for you to open a SIP. and it's so much easier if the employer's doing it for you. And SIP, of course, being a self-invested... If you've got a lot of kids like me, I've got to learn to storm into the boss's office and demand a pay cut. Yes. That's the other way to do it. You could absolutely save yourself money, assuming salary sacrifice goes and you're out of SIP. So I should say, for someone of years of experience, like you or I, Stuart, putting money into our pension can make a lot of sense.

10:59Dan Neidle: But if you're in your 20s or 30s, the idea that you work harder now, maybe working one day a week more for money you won't see for 20 or 30 years' time is nuts. So, yes, storming into the office and demanding a pay cut could absolutely be the value for money answer. Gosh, I mean, that's absolutely incredible. I mean, we do have a question from John, who's an NHS doctor earning just over£100 ,000. Now, I mentioned the NHS because this is going to be a problem for all of us if it limits our ability to get to the top of a waiting list or indeed see a GP. He's considering cutting his shifts to stay under the£100 ,000, not the first NHS person to put this question to me.

11:34And he says, do you think the government should just eliminate these tax traps that disincentivise additional work? It is having an economic impact if people are thinking, well, it's more effective for me to withdraw my labour than to pay a really high rate of tax. I mean, Tej, from an economic point of view, you're shaking your head. I mean, they missed a trick here. They've complicated things more with these freezes, first of all. And the OBR has, you know, in the details says, you know, people are going to react to this by trying to reduce their hours to avoid extra charges. So even the Office for Budget Responsibility can see that this is going to happen.

12:10Precisely. And, you know, we've been talking about these cliff edges for a long time. And as Dan outlined, how complicated things are when you layer on the salary sacrifice and national insurance elements to it as well. We shouldn't be designing a tax system like this. That's utterly complicated. And the fact that it creates this disincentive for people to work is pretty ridiculous. The government needed to do something to try and boost productivity and work hours. This would have been the thing to do was to look at that 100k to 150k cliff edges and also sorting out how the loss of various benefits lower down the income scale also affects people's incentives to work.

12:52Unfortunately, all I can see in this budget elsewhere is just layering on more reliefs and complexity. As you say, Dan, it won't come in if it comes in until 2029. So no need for people to panic immediately. We won't see employers making changes to their arrangements overnight. Interestingly, we might see more who are alerted to the tax savings of salary sacrifice, perhaps changing the tax arrangements for their schemes. But as you say, in future, people will still be able to use pension saving to manage this. but the admin and the time spent, as well as the extra national insurance charges, will be the cost there.

13:28Dan Neidle: And lots of people don't want to self-manage a pension fund. They want to be on their employers. Especially not if they've got a child under the age of one, I would imagine. Now, let's move on to talk about how else the budget impacted our savings and investments. So changes to ISAs in April 2027 have been well explored in the FT. There's going to be a drop in what you can save into a cash ISA, going down from£20 ,000 to£12 ,000 a year, unless, of course, you're over the age of 65. A panel might want to come in on that, the intergenerational inequality that's opening up in the ISA system. But also, we're going to face higher tax rates from 2027 on other forms of savings interest, dividends and rental income from property, which could have an impact on the buy-to-let market.

14:18If you're somebody renting, this could impact you. All of these are written about in detail in the FT Money section this Saturday. Does anyone want to come in on any of the ISA changes before I ask Stuart about some other changes that have happened to really... I'll talk on ISA just from my point of view. Rachel's fallen into the same trap that everybody does when they talk about cash and the equity market, thinking that the cash is on the sidelines and flows in and out of the equity market. Equity markets are permanent capital. Equity is permanent capital. Money doesn't flow in and out. The height of the equity market goes up and down.

14:55So if Rachel's asking me to buy more stocks, guess what happens? I press the buy and somebody has to sell. So exactly the same amount of cash comes out of the equity market as I put into the equity market. So no more cash will go into the equity market from this announcement by labor. All that happens is that the person who holds that certificate will change. So from my point of view, for the UK stocks, it makes absolutely no difference whatsoever. It does, in IPO sense, if more money goes into IPOs. This is companies listing the stock market. Listing new equity, primary equity, not secondary markets.

15:30But IPOs are infinitesimally small relative to the size of the actual market.

15:35Dan Neidle: Which she could have done something to boost. Which she could have done something to boost. Actually, she kind of did at the margins. Staff duty is also tiny compared to markets moving up and down. So in future, if you're a retail investor and you buy shares in a company that lists on the London stock market, a young company, then you won't have to pay stamp duty. Whereas at the moment you do. For the first three years, I have to say, I mean, stamp duty does increase the cost of capital. It most certainly puts people off IPO-ing in London. I've seen it myself. I'm kind of doubtful a three-year holiday is going to change that.

16:06But Stuart, talk to me about some other changes that were less noticed to investments that people who've got bigger amounts of money than to just fill up their annual pensions and ISA allowance, they often look next to other forms of tax advantage investing. We've talked about them on Money Clinic before, namely VCTs, Venture Capital Trusts, and EIS, Enterprise Investment Schemes. Now tell us a little bit about what they are and then what the budget changes were. Yeah, so to be fair to Labour, I think the one part of it for me that was actually positive to their growth agenda was loosening the rules around enterprise investment schemes and venture capital trusts, which are a way for mums and dads or sophisticated investors, you have to pass a test, to fund early stage startups effectively.

16:52The gag is that you get all these tax advantages, for example, in upfront tax relief, tax relief on dividends, and you don't have to pay any tax when you exit. And the quid pro quo was always that these are very risky startup ventures. So you get some tax relief because it's risky and your capital's at risk. To my mind, what's very, very exciting is that they've broadened the scope to where this investment can happen. So from what they call startup to scale up, i.e., we'll be able to use these vehicles to fund or give capital to bigger companies, less risky companies. So even though they've cut the upfront tax relief a little bit, it seems very advantageous to me that I will get the same tax relief on an AIS investment, for example, but I will be able to invest in a lot, lot less risky company.

17:41So I think there'll start being some very, very clear, beautiful tax arbitrage opportunities where I can take my 30 % going in, I can take my money tax-free on the way out, I'm covered by if I lose all my money, I can also write it off against tax. And these companies will become less and less and less risky. So the chance of them going bust goes down. So I think something that everybody should start looking at if they can, given that the government is closing off all the other tricks to minimise tax, particularly enterprise investment schemes, which should be good for scale-up companies in the UK.

18:16I'm quite excited about it.

18:17Dan Neidle: This gives me a bad feeling. Really? We've seen many times before governments create a relief that they're bright-eyed and excited at how it's going to boost investment and they've got the best of intentions. But the reliefs are too good and they enable ways for people to get that relief without really taking risk. We saw it in particular with inheritance tax relief and AIM shares. And then the government scruggles around and they have to say, well, actually, only these companies that we think risky enough are going to qualify. And then maybe we'll narrow it to this and narrow it to that. So I think there's a risk here.

18:49Dan Neidle: People pile into stuff which looks like a fantastic tax wheeze, probably suffer quite high fees on the way in, and then the government changes the rules. Yes, because of course, in all of our reporting and FT money, and also when we've talked about VZTs, especially on the Money Client podcast before, the fees are really high. And that's something that every investor needs to consider. Now, quick fact before we move on. I had an email from Wealth Club this morning. They're the UK's largest broker of VCTs. Now, they have reported what they're calling a Black Friday rush of investors buying in. To what you say, Dan, over£2 million flowed into VCT funds on its platform the day after the budget.

19:30That's more than six times their average November day, they've said. So, you know, really keen interest in this before the tax benefits become less attractive next April. But these are, Tej, people investing in British startups, at least. I mean, while we're on that topic, the Chancellor's famously said that she wants to create a nation of investors. I mean, what are your views on the health of the UK economy right now? Because it's particularly UK firms and growing UK firms that she wants us to invest our money in. I mean, the irony of providing these incentives for startups and scale-ups is it kind of ignores the broader business environment the UK is in at the moment.

20:16The aim of this budget was to try and eliminate the uncertainty that has plagued the country over the last year or so. I don't think that's ended with this budget, as I said. But on top of that, from the last budget and onto this one, the business community has been facing this cumulative burden of costs. We've had two increases in the national minimum wage. We've had some contention around how much business rates relief there's going to be. Don't forget, businesses are still dealing with the employer's national insurance contributions from last time. So, you know, startups and scale up operate in an environment of other businesses and supply chains.

20:56And if the business community, from what all the surveys are telling us, are pretty low on confidence, they're not hiring as fast as they would like to be, and investment prospects are pretty low, then this doesn't really create a good backdrop for growth. What we've seen so far is a pretty low levels of economic activity, pretty much since the budget last year, in fact. And what really needed to happen with this one was businesses needed a shot in the arm, effectively. I think the approach was if we don't hurt them in an obvious way, then it's fine. It could have been worse. Yeah, but the reactions that we've had, actually, over the last two days have come straight from the business community.

21:42And I think the government have actually rode back on their legislations around day one workers' rights recently. And I think that was immediately because they saw that businesses are not liking this. So I think the growth backdrop isn't great based on the last two budgets and what Labour have done and the narrative that they have. I think one particular thing that I'm still trying to get my head around is this prioritization for working people without considering who working people work for. And I mean, very well put. And the business community is signaling this quite strongly that they can't really take much more in terms of cost.

22:27I do think having said that, there were smaller things, Stuart pointed out, in the budget for startups, scale-ups that were positive things. But it needs something more and they're going to have to follow up very quickly with something in the next six months. We all looked at the, I agree with all of that. We looked at the 10-year bond yield, for example, in the days after the announcement. But if you look at the equity market, in an environment where shares were going up all around the world this week, UK small cap index fell after the announcement compared to Tuesday night. Mid caps fell. FTSE 100 stocks went up.

23:00And of course, we all know that 80 % of FTSE 100 revenues come from abroad. They're very international. They're very, very international. But the mid-cap and smaller companies, which are more UK-focused, are actually, A, they fell in the days after the budget, and B, have underperformed the FTSE 100 by a factor of 50%. They're only up 11 % this year, as opposed to the FTSE 100 that's up 22%. So you can see in the smaller companies, which are geared into the UK, exactly what Ted was saying about the overall economy. And it's amazing. We're getting excited about 1.5 versus 1.75. I mean, these are numbers that we would have laughed at a decade ago.

23:35No, you're entirely right. Let me say a couple of things. Every Monday I attend Leader Conference with Tej and people like Martin Wolf and Gillian Tett, all the greats of the FT. And I mainly go there to learn and to listen. And one of the things that has been a really big theme of our debates this year is where is growth going to come from? Because especially the risks with this budget, you've got all of these big tax rises, as Dan has been saying, backloaded to the latter years of this parliament. A lot of upfront spending that's come in to placate the Labour backbenchers and other party members.

24:08But what we're seeing now is this real risk. If we don't get the magic ingredient of economic growth, are we really going to be able to raise the numbers that she wants to? And this is something that people are going nuts about on the iPad, FT readers. Anita Skipper, she says, is there anything, guys, in this budget which is positive for business? Tom Carter says, and this is a question that many others have asked in different ways, if the panel could have introduced one measure in the budget aimed at stimulating economic growth, what would it have been? My wise men, do you have any suggestions?

24:46I mean, just on what is there for growth, I mean, I think that the opening budget, which outlined lots of public investment in infrastructure, infrastructure that is their theory that this will kind of work its way through to the economy as building increases we've seen their planning reforms housing targets exactly but when we review those and see where we are a year on there's a lot of concern around the housing targets and also the planning reform has it gone far enough so then you look at what can they do in the here and now just to give you know business and earners a bit of a boost there wasn't much in this budget but what I would have done, I would have been a bit more radical around the capital allowances.

25:28I mean, we had full expensing introduced for business investment. I would have looked at ways to expand that. So encourage businesses to invest more, which is what they haven't been doing with all of the uncertainty building up before the budget. Precisely. And look, we know that they were short on money. And two things that I think they could have done just to improve margins, which they kind of already have done now with delaying this workers' rights legislation, is potentially not increasing the minimum wage even further, the above inflation rise. I know that's pretty controversial. But there has just been a big rise.

26:02Exactly. And we are now hearing that that minimum wage is jutting up against early graduate salaries as well. You could be on the minimum wage, the FT is reported in a few years' time, and you would be at or above the threshold at which you start repaying your student loan. So these are not graduate jobs who are going to be repaying the student loan. This is, you know, people doing any job. Exactly. What we discussed at the start around the 100k thresholds, I think, you know, that would have been a really good image boost to ambitious individuals that, you know, the tax system isn't going to get in your way.

26:38And removing those cliff edges, or at least signalling that we are going to start removing these cliff edges over the course of our term, would have been a good signal to send for growth.

26:47Dan Neidle: Why couldn't she have stood up and said, The Conservative government created these ridiculous high marginal rates, which we don't think are justified on high earners. We can't afford to reduce them now. We're going to look at ways of reducing it. Ideally, revenue neutral. And we pledge we're not going to create any new marginal rates. Furthermore, we're going to require the OPR, whenever there's a change in income tax, to certify what the highest marginal rate created by the rule is. Or something to give people some comfort that politicians care about this. Right now, it seems there's almost a tacit conspiracy.

27:17Dan Neidle: The Tories don't talk about it because it's their fault. And Labour doesn't talk about it because they don't want anyone to think they care about people earning 100 grand, which is, of course, beside the point. This isn't about caring about people earning 100 grand. It's about what is the impact of a tax system that deters work, deters growth. Well, and lots of people who've been emailing in to me this week and indeed are commenting on the iPad are saying, what chance is there that young people will stay in this country and build their careers if they want to be high on those? What's to stop them going to Dubai?

27:45Dan Neidle: This really worries me. There's so much discussion in the press about billionaires leaving. most of which is nonsense. A billionaire probably has five houses in five countries, maybe in five continents. Them leaving the UK probably means instead of spending 95 days here a year, they spend 85 days here a year. You know, big work. But on the other hand, if you've got a doctor, an accountant, even got help as a lawyer, and they decide that they're going to leave the UK, that has a real effect. And most of the tax changes introduced by the last government, and indeed this government, haven't actually affected billionaires one bit.

28:19Dan Neidle: They've been affecting people earning kind of at the 80 to 150 ,000 pound point. It's a very weird kind of socialism, which has a high rate of tax on those guys, but not on the 0.1%. I don't quite know how I've ended up here. Okay. Well, let's get Stuart now to give us his big mic drop moment. You've been making some rather dramatic moves with your investment portfolio. I should say, Stuart writes about his investments every week on the back page of the FT Money section in a column called Skin in the Game. Tell us a little bit about your column and then tell us a bit about what you have done. Yeah, so the idea of my column was that you should never listen to what anyone says about investing without actually knowing where their own money is.

29:02And anyone who tries to give you advice without saying what they actually do in practice is talking nonsense. So my idea was to show the readers my portfolio and therefore I would talk my book. And that's fine because you can actually see my book. And this is actually what is in your Your own self-invested personal pension. It's the only pot of money I've got after a divorce and being fired. So everybody can see exactly what I own. And for the last year or so, I've had a fair chunk of money in the UK, Japan, Asia, being the main three pots. And that's done very well. Famously, none in the US. But Japan and the UK have done extremely well.

29:39And I'm up sort of 23 % year to date. Well, in fact, I checked this morning and the FTSE 100 is up by more than the S &P 500 years to date. That's right. And particularly so in pounds, which I always say you need a big, strong allocation to where you're mostly spending your money. So it's been a good year. And I basically woke up a month ago and I've sold everything. Every single equity fund that I own. And I'm now 100 % cash, thereby breaking every single investment rule. I don't have anything 100 % cash. See that, Rachel? See? There is a future for cash. So I'm earning 5 % on my cash at the moment.

30:16And the point of the article I wrote today was, A, I'm being an incredible hypocrite because I've always recommended to investors that they have a broadly diversified portfolio. I've always said that you can't market time. It's impossible. Even if you can pick the top like I did, it's hard to know when to go back in. I've always said that the majority of the returns that you get as an equity investor happen on the rebound days. And there's like a dozen of them every so often. If you strip those out, it's almost impossible to decimate your returns. So I've done absolutely everything I've recommended that you shouldn't do.

30:47And yet I did it anyway. So I think the question on everybody's lips, therefore, is why? Yeah, because I think I'm a massive contrarian. And there was a period about a month ago when the markets were high, where everything was perfect, where AI was going to sort of give us this huge wealthy utopian future where Trump was signing peace deals everywhere. And I just felt, I felt the opposite of what I felt in March 2009, where you felt so stupid to buy. And it's always been my view with bubbles. And I've worked through a lot. I'm actually, I'm very old. When everything feels perfect, that's the time to sell.

31:24And when you feel absolutely moronically stupid to buy, that's usually the bottom. So I had that feeling wash over me a month ago and stupidly rushed over to my computer and pressed the sell button before I could talk myself out of it. Okay. Well, I mean, obviously, Stuart, this does give you lots of interesting angles to then go forward and write about in your FT column, which you are remunerated for. So this is a source of future creativity for you. I have to say, people watching who are thinking, should I follow Stuart and sell down my portfolio, it's certainly not something that I will be doing.

31:59I am admittedly a bit younger than you, but I have always followed the investment philosophy of little and often, pound costs averaging. I will keep ploughing on, as I did through the pandemic, making my investments predominantly in to my salary sacrifice pension arrangements, I have to say. And I'm thinking, okay, I'm not going to need to actually access this money for decades to come. But Tej, you're an investor too. We talk about investing in the office on the side. It's a hobby for both of us as well as the profession that we write about. What do you make of Stuart's move? I mean, to an extent, right now, it's very good to be sceptical of anyone who has conviction.

32:43I mean, if we look at the economic and political environment at the moment, anyone who can predict what's going to happen next should be, you should doubt a little bit what they're saying. The way I was looking at things was in April when we saw the tariffs increase, everyone is, you know, hitting the sell button, trying to get away from particularly anything too heavily exposed to the US. But I don't think anyone would have seen the kind of the jumps that we saw with AI and tech stocks. And then you've had this constant drumbeat of it's getting too concentrated. It's still getting too concentrated.

33:19This is going to spread to elsewhere. Then you have these new debt products coming out, AI companies selling to each other in these various intertwined supply chains. And I'm sitting there thinking, what's happening here? How do I avoid this? Because AI is just so omnipresent and everywhere. So, I mean, my view is perhaps not sell out of everything, but trying to stay as diversified as possible. because as much as you want to try and avoid something going potentially wrong, which could then filter quite dramatically down in the S &P 500, you do also want to stay a little bit exposed to it because that story seems to keep running and keep finding legs.

34:04So I've stayed diversified for now. Good. And of course, if the market drops and you're a regular monthly investor like I am, then you're buying more units, you're getting more bang for your buck. Rob Armstrong, the presenter of the FT's Unhedged podcast, memorably said a year ago on Money Clinic, you know, if you're young, you should be praying for a stock market crash. Then you can then hopefully ride the wave back off again. We've got quite a few questions on here from people who are watching who are quite dismayed about the level of complexity in the tax system. I'll just run through a couple of these.

34:40Eric says the tax code is becoming even more complex. Dan, is there any prospect of simplification? If not, I can see tax consultants' fees that will escalate quite dramatically. Well, he does have a point because lots of people feel like they can't do things like manage the 100k trap, for example, on their own. They are looking for a financial advisor or a wealth coach. That's been a real boom market in recent years to help hold their hands through this process.

35:09Dan Neidle: I would be so sceptical of all such people. I don't know what you guys think, but generally with tax, people who are looking to charge you money, unless they are nerdy accountant types charging you by the hour, it's still well clear. But in terms of the prospect of reducing complexity. So I did an exercise a while ago, looked at all the rules you'd have to go through if you were a US business setting up a UK subsidiary and wanting to fund it. And you had to go through eight series of different rules, which are overlapping. And really, we only need two of them, but we've got eight. And after I wrote that, I was inundated with letters from tax people saying, no, you've forgotten this rule or that rule or this rule.

35:46Dan Neidle: And I think they end up being about 15 different rules. So what parallel universe Rachel Reeves could have done is stand up and say, right, we are now appointing a junior minister who is going to be the minister for tax simplification. It's not going to be like the Office of Tax Simplification, which produced 200 page very learned papers. They're going to get a small team and identify rules that we can tear up that won't cost a penny in lost tax, but will save business time and trouble. And I think that would have been hugely welcome for business. Thus, boosting the growth agenda. Boosting the growth agenda.

36:15Dan Neidle: You could do it across all of tax. Everyone in tax knows where these rules are. HMRC holds onto them lovingly because they might sometime need this particular rule, but they don't. They could be shouted at and talked down. And you could do a lot of good without really spending any money. So I'd love to see a government do that. All it takes is political commitment. Okay. Well, staying with the UK economy, a lot of money listeners, it seems, are really worried about their future earnings power. Now, we've had a couple of questions come in. One from Sophie. What are the implications of the budget for the UK's already moribund jobs market, she says.

36:51Take it you're looking for a new role. And Jack asks, does the budget introduce any measures to improve job prospects for young people entering the workforce? Tej, would you...

37:03Dan Neidle: Tax lawyers, definitely. Well, okay, tax lawyers, become a tax lawyer. So if you, Tej, what would you add to this? Yeah, so the hiring market has been pretty tough. And this has been linked to employers' national insurance contributions increases and minimum wage rises. The worry about the budget, which maybe could lift somewhat now? The worry could potentially lift. I think what Rachel Reeves has done is introduced about double the headroom against her rules that she had last time. And I do think the market reaction and, you know, upset business reaction, but not outraged business reaction, is partly because they feel that they actually have a little bit of a window here before things might get panicky again.

37:47So I think you are hearing from some businesses that actually this gives us a little bit of wiggle room to start thinking about investment and planning for hiring. And yes, I guess you could argue that the measures she made around scale ups and various other incentives are supportive for new companies coming on the scene. And those are the ones that do rapidly increase their hiring as they grow. So I think there are definitely upsides to that picture. And one thing that I should say in all this, I know we've been quite, you know, morose and about the kind of business environment. But having said this, the labor market has been surprisingly resilient for a lot of people.

38:32I know unemployment has, you know, jumped slightly recently. But in the broader scheme of things, it's still a relatively strong market. and a lot of businesses, I think what's getting people a bit worried is all of these things kind of coming together, like the risk of AI replacing jobs and everything. That's created, I think, a bit too much of a negative environment than there actually is. For all those stories you see about businesses who are removing kind of administrative roles, they're still pretty much hiring into a booming market. Yeah, I think there's some definite board-level scepticism coming about how much more productive all of this expensive AI can really make your workforce.

39:16Stuart, are there any sectors of the UK economy in the future that you might be tempted to buy back in? Are there any areas that you think we're doing well in the UK? I mean, like life sciences is one area that people continually come back to. Yes, I owned a FTSE 250 fund until 28, 30 days ago. So I was betting on the UK economy, namely because the equities were cheap. And even for the FTSE 250, half of those revenues are generated abroad. But it's very interesting. We get a bit negative about the UK. But if you look at sort of UK small cap index and you look at some of the fancier metrics like return on invested capital and things like that, they're world leading.

40:02And that's from fintech to medtech to sort of interesting corners of technology and software. There are some absolutely spectacular companies out there. And a lot of work I did when I was an economist and a strategist in banking, companies, it's perverse. Companies don't mind a little bit of pain. Then they innovate. Then they invest. What you don't want is an easy, lazy way for them not to do anything or not to think. So when there were periods of no wage inflation, for example, management just took the easy way out and cut people and didn't give pay rises. But when there's a little bit of pain like wage growth or even higher tax, there's enough flex within companies to innovate and to change the way they operate.

40:47The killer, and that's why this budget and the previous budget was bad, is change. The number one thing when you're allocating capital as a company or deciding to hire or deciding to invest is just stability. that the best thing any government can do is to announce, no matter how bad in absolute terms, and then just get the hell out of the way. Otherwise, people will wait for the next one. I mean, one of the biggest changes in the employment market that I've noticed that's affecting my stepchildren, who are all in their 20s and early 30s, is the rise of the short-term contract. Now, it used to be, you know, you went for a job, that was it.

41:21You know, you got the job, you were in the company, things ticked along. But now it's like you'll be hired on a one-year term, a two-year term, a three-year term. And if you're trying to buy a house, get a mortgage, even sometimes rent a property, you know, this insecurity that's kind of creeping into the jobs market for young people. I mean, it's something that Isabel Bericol, working at NewsletterWriters, has written about. It's really tough for young people, Tej, isn't it? It is definitely tough. Look, the only optimistic thing that I can say around this. Yeah, give us some optimism. At the end of the day, the UK is still the heart of the professional services industry as world-class universities.

42:01I was looking through some of the pages in the budget, in the government document, and there was a lot of positivity around the ambition the government has around innovation and supporting the connection between startups, ups, universities and scale ups, there's a lot that the UK can do there. And I think the government is saying the right things in those areas around research and development and innovation and scale ups. And I feel like it won't take long for them to finally to get that right. Perhaps I'm just being incredibly hopeful. But I think there's a tendency in the UK to when we're talking about the change or the hit to our industries, we almost forget where we're starting from.

42:47We're starting from quite a strong, strong place to begin with. So there is a base there. There's a lot of ruin in a nation. OK, well, we've had some questions coming in on the iPad that I've been saving up for you guys about property. Now, of course, one of the big measures in the budget was this so-called mansion tax, although it won't just apply to mansions, could apply to some flats in London if they're worth more than£2 million. We've got a question from somebody asking, will the mansion tax levels be easy to assess on individual properties and will the changes raise more money than the actual valuation process will cost, which is a good question.

43:25But also lots of people saying, do you think it's worth considering becoming a landlord now? We've got these changes to council tax coming in. We've also got that tax on rental income that I mentioned earlier and quite a few anonymous commentators are clearly very disgruntled about this and the wider Renters' Rights Bill.

43:46Dan Neidle: I don't think this is the thing that makes being a landlord bad from a tax perspective. The main problem with being a landlord is you're not taxed on your income. You're taxed on your gross income with only a small credit allowed for your borrowing costs. And the Tories did that for reasons that were never entirely clear. And that means it's pretty easy to have an effective rate to over 100 % of your landlord. And certainly lots of landlords have got real problems with the renters' rights bill. I mean, I can see it from both sides. If you're renting, yes, you know, you don't want to have to be moving on every year.

44:19It's incredibly expensive, moving costs. Somebody who's moved house myself this year, I can attest to, only too well. But the problem is, if more and more landlords are selling up, and certainly the data shows that they are, this is reducing the availability of rental properties and it's pushing up rents at an absolute rate. The Office for Budget Responsibility said exactly this in their document when I was passing through it. They said there is a genuine risk that landlords who have been facing a rising burden over time, not just in this budget, you get to a stage where some might just leave the market, you reduce the supply of rentals and you raise the price and renting becomes harder.

44:59So I think this is one of those things where I think the government wants to do something to immediately try and show that it's being fair, but in the long run, it has unintended consequences that could make things worse. Well, I was at an event with a load of mortgage brokers before the budget last week, and somebody there said something that I really stored away of perhaps a future column looking at the future of Bitolet, and they said, like, Bitolet, it's not an investment anymore. It has to be a business. So they're talking about incorporating as a landlord, you generally need more than one property if you're going to go down the business route because it is quite expensive to set up.

45:38But the feeling in the room was that the more serious and organised portfolio landlords who are treating this as a business rather than as an investment on the side, as many have treated by to let in the past, they are the ones who could perhaps lean into any weakness in the property market and actually expand their portfolios. And from a tenant's point of view, if you've got a landlord who is very experienced, runs lots of properties, perhaps that would make them better at being your landlord.

46:06Dan Neidle: This was perhaps the justification for the George Osborne changes, that he wanted to discourage people from being accidental landlords, wanted to encourage professional landlords. Is there any actual evidence that's happened? I'm not sure. But yeah, the dynamic very much changes. My generation, people became deliberately accidental landlords and they made money just in the rising property market and thought they were geniuses. They weren't really caring that much about the business of being a landlord. The rental yield. The rental yield. Now, yeah, you have to. Yes, if you're not going to get much upside in property prices, then certainly that's something that people need to look at.

46:44Now, some final questions. Somebody called Joe says, what are the panel's thoughts on whether these changes that are mooted to salary sacrifice will discourage people from saving for their future retirement? There are 15 million people, absolutely correct, in this country who are not saving enough. Now, Dan, I'll put this to you because I guess the 15 million people who aren't saving enough into their pensions, or indeed in many cases not saving anything at all, they may not be people who can afford to squirrel extra money away through salary sacrifice schemes. The big gaps that we see in pension savings, I'm afraid to say, are women, many of whom are not earning enough over the auto-enrolment threshold, which is around£10 ,000, or maybe they've got two part-time jobs so they don't get over it even and they're overall payers.

47:33And then, of course, the self-employed. The self-employed are a black hole when it comes to pension saving. Now, as much as I don't like what the changes to salary sacrifice could mean for lots of our readers, we do have lots of self-employed readers too. And I feel like a really forward-thinking government that wanted to solve the retirement crisis would think about offering something for them to help them plan for their own future.

47:59Dan Neidle: I don't have stats in it, But I kind of expect that people who use salary sacrifice are people who have fairly decent pensions, because otherwise they wouldn't have an employer with the setup that enables them to do salary sacrifice. So I am doubtful there will be an adverse impact of that kind, but probably more for an economist than a tax lawyer. Yeah, I think the only thing that I can say on this is that the narrative that a move like this does isn't really great for a country that you're trying to encourage more people to save. And all of the other pensions speculation that we had in the lead up to the budget, like the fact that the tax-free lump sum, you know, there's lots of people who've needlessly taken money out of their pension where it could have been invested for a few more years.

48:39I mean, for the last 12 to 18 months, there's been constant rumours around different forms of pension and it makes planning very difficult, but it really doesn't help us develop this savings culture, but also a big element of our struggles with encouraging saving is complexity. People not understanding how I save and what the various different schemes are. And I just think various tweaks and fiddles that have been made, particularly in this budget, insofar as the pension salary sacrifice goes, isn't really going to help that for the government. OK, well, another question about ISAs. Now, the cash ISA being cut, this person, an anonymous accountant, they say, this carve out for the over 65s is quite unfair.

49:26This person is obviously younger because they say, what approach would you recommend for those using a lifetime ISA to save for their property deposit in the next couple of years? Now, I should say the lifetime ISA, you have to be under 40 to open one, although you can continue to save into one until you're 50. This is something buried in the budget documents that the Chancellor said she is going to have a look at with a review to replacing this product, which is this hybrid thing at the moment. You could either use it to save for your first property or you could use it to save for retirement and access after 60.

49:58Replacing it with a different thing that will help solely the first time buyer.

50:03Dan Neidle: This stuff makes me despair. All of the government tweaks of throwing more money into an overheated property market. How is that supposed to help? You're stimulating demand without increasing supply, as Tej has said before. Yeah, they just cannot resist. And every so often, the intermediating government actually looks at the evidence for whether these schemes work. A few years ago, they did it for the stamp duty, First-Time Buyers Relief, and find out there's in fact no evidence that it helps first-time buyers. So I really wish that they would stop doing this. I mean, I have to say with the lifetime ISERP in response to your question, if you are under 40, if you have a pound to spare, there could be an argument to say open the lifetime ISERP now before any changes.

50:48They're going to have this big review into it in 2026. And then at least you've got the option of being able to pay into one and get this 25 percent government bonus, which at the moment is until your 50th birthday. because what we've seen before when they've discontinued other ICAs, like the Help to Buy ICAs...

51:04Dan Neidle: They grandfather the old ones. They grandfather the old ones. So you're still able to use them and pay in. They become legacy products. They don't kill them off completely. Whereas if you get past the age of 40, you wouldn't be able to open one then. And I should say, I think their terrible policy should never have happened. But anyone who has the ability to use them, of course, should because it's in their personal interest, even if it's in the national interest, not to have any of them at all. Okay. Right. Well, I'm going to start saying some thank yous. If you want to keep in touch with us, you can always get hold of all of us on the money team using our email address, money at ft.com.

51:39I also have a special thank you to make to FT Flick, the FT's financial literacy and inclusion campaign. This is a charity, I'm a trustee for full disclosure, that we set up to boost financial education, both in schools and workplaces and amongst the population as a whole. We're currently raising money for our Seasonal Appeal. If you make a donation this Christmas season, Experian, the credit referencing agency, has very generously agreed to match fund any donations that FT readers make. So if you'd like to give us a donation, you can go to ft.com slash Seasonal Appeal to find out more and also about what more the charity is doing to boost financial literacy.

52:19Dan Neidle: And it's gift aid and tax deductible, I assume. Oh, Dan, it's just a pleasure to have you here. So thank you all for joining us. Do stay in touch and good luck with whatever financial decisions you're going to make in the future, no matter what the Chancellor throws at us.

52:38That's it for this special budget bonus edition of Money Clinic and Political Fix. And we hope you like what you've heard. If you want to find out how much the five-year freeze to tax thresholds could cost you, there's a free link to the FT's handy budget stealth tax calculator in today's show notes. And if you want to read my latest FT column about how to take advantage of salary sacrifice while you still can, there's a link to that in the show notes too. And just to repeat my earlier disclaimer, the opinions expressed by our expert commentators are not intended as financial, tax or investment advice.

53:14For that, you'll need to speak to an independent financial advisor who fully understands your individual circumstances. To get in touch with me, you can send an email to money at ft.com or follow me on Instagram and TikTok. I'm at Claire B. See you back here soon. Goodbye.