Seven ways to protect your money NOW from Andy Burnham’s expected cash grab as PM-in-waiting to take reins on Monday

ANDY BURNHAM is set to be confirmed as the next prime minister on Monday, and households across Britain are already bracing for what it could mean for their finances. The “King of the North” has hinted he wants to target wealth and assets rather than wages, meaning your pay packet could be safe from income tax and national insurance hikes but your savings, property and investments might not be. It’s still not clear exactly what policies Burnham will introduce once he gets the keys to Number 10, so experts are urging people not to panic but to start taking sensible steps now. Here are seven ways you can protect your money before any changes land. Sign up for the Money newsletter Thank you! Maximise your pension Your pension remains one of the most powerful tax-saving tools available to workers, yet millions are not making full use of it. When you pay into a workplace pension, the government tops up your contribution with the tax you would otherwise have paid, meaning free cash goes straight into your pot. A basic-rate taxpayer who puts in £80 automatically sees it topped up to £100, while higher-rate taxpayers can effectively make a £100 contribution for just £60 once relief is claimed back. Paying more into your pension can also help you avoid being pushed into a higher tax bracket, because contributions are deducted from your income before tax is worked out. For example, if you earn just over £50,270 and tip into the 40% higher-rate band, boosting your pension contributions could bring your taxable income back below that threshold, meaning more of your salary is taxed at the lower 20% rate instead. The same trick can help higher earners protect their tax-free personal allowance, which starts being withdrawn once income passes £100,000, and can even help parents keep hold of child benefit payments that are clawed back above certain income levels. Most read in Money Boosting your contributions now could help shield more of your money before any new taxes come in. Try salary sacrifice Salary sacrifice schemes work by lowering your official salary on paper, cutting the amount of income tax and national insurance you pay. You accept a reduced wage while your employer uses the difference to fund a benefit instead, such as extra pension contributions, an electric car or a bike for commuting. Because HMRC can only tax your reduced salary, this can also help protect your tax-free personal allowance of £12,570, which starts being clawed back once you earn over £100,000. It can also be used to help keep your income below the higher-rate tax threshold of £50,270, meaning less of your salary is taxed at the steeper 40% rate. For parents, sacrificing part of your salary can be especially useful if you earn just over £60,000, as it can help you avoid losing some or all of your child benefit payments, which start being clawed back once income passes that level. Use your ISA An ISA acts as a tax-free shield around your savings and investments, protecting any interest, dividends or growth from being taxed. You can put up to £20,000 a year into an ISA, and unlike normal savings accounts, it does not eat into your Personal Savings Allowance. Plus, if your money is sitting in a General Investment Account instead, you could be taxed twice over, first through income tax on any interest or dividends you earn, and then through capital gains tax when you eventually sell. Capital gains tax is only ever paid by investors when they sell an asset for more than they bought it for, meaning you won’t be taxed on paper gains, only on profits you actually cash in. The first £3,000 of gains each year is tax-free, but after that you pay 18% if you’re a basic-rate taxpayer or 24% if you’re in a higher tax band. Wes Streeting, one of the frontrunners to become chancellor, has previously called for capital gains tax to be aligned with income tax rates, which could mean paying as much as 40% or 45% on your investment profits instead. If you already have investments sitting outside an ISA, it may be worth moving them across through a process called Bed & ISA, where you sell and immediately rebuy inside the tax-free wrapper. Just bear in mind that selling investments to make this switch could trigger a capital gains tax bill in itself, so it’s worth doing this gradually and sticking within your annual £3,000 allowance to avoid an unexpected charge. Once your money is safely inside an ISA, any future growth is protected from capital gains tax for good, shielding you from further hikes down the line. Protect your mortgage Experts fear mortgage rates could climb if Mr Burnham chooses to increase government borrowing to fund defence spending, something he has already hinted at supporting. Government borrowing is largely funded by selling bonds known as gilts, which investors buy in return for regular interest payments. If markets worry that the government is borrowing more than it can comfortably pay back, they demand higher interest rates to compensate for the added risk, meaning gilt yields rise. Because banks use these gilt yields as a benchmark when pricing their fixed-rate mortgage deals, any jump can quickly filter through to what homeowners are offered on the high street. Ian Futcher, financial planner at Quilter, warned: “Even relatively small increases in rates can translate into hundreds of pounds more per month for those coming off fixed deals.” This is exactly what happened during the mini-Budget crisis in 2022, when a loss of market confidence sent gilt yields soaring and forced lenders to pull hundreds of mortgage deals overnight. If your fixed deal is coming to an end, it’s worth locking in a new rate as early as possible, as you can usually switch to a cheaper deal later if one comes along before you complete. Plan ahead for inheritance tax Usually, when a person passes away and leaves money or property to their family, the government charges a tax on it called inheritance tax. However, it is vital to remember that every single person in the UK automatically gets a standard tax-free allowance of £325,000, meaning the first chunk of their wealth is never taxed regardless of what they own. This is known as the nil-rate band, and it can rise to £500,000 if you’re leaving your main home to children or grandchildren, thanks to an extra allowance called the residence nil-rate band. Married couples and civil partners can also pass any unused allowance to each other, meaning a surviving spouse could potentially shield up to £1million from inheritance tax before a penny is owed. Anything above these thresholds is currently taxed at a hefty 40%, which is why many families look for legitimate ways to reduce the size of their estate while they’re still alive. Mr Burnham has previously floated scrapping inheritance tax altogether in favour of a “national care levy,” a flat 10% charge on all estates to fund free social care. Jason Hollands, managing director at BestInvest, warned any overhaul “risks catching families off guard, particularly those who have built up property wealth over time but do not see themselves as wealthy.” Gradually gifting money to loved ones now, rather than waiting to leave it in your will, can help bring down the value of your estate in a controlled way. Larger gifts, known as potentially exempt transfers, fall outside your estate after seven years, so starting the clock ticking sooner rather than later could make a real difference. If you die within those seven years, the amount of tax due tapers down the longer you survive, known as “taper relief,” meaning even gifts made just a few years before death can reduce the eventual bill. You can also gift money completely tax-free straight away by using your annual exemption, which lets you give away up to £3,000 each tax year without it ever counting towards your estate, and this can be doubled up if you didn’t use the previous year’s allowance. Alongside this, there is a lesser-known rule allowing you to gift any amount from your surplus income, rather than your savings or assets, provided the gifts are regular, genuinely come from money left over after your normal living costs, and don’t reduce your standard of living. This can be particularly useful for wealthier retirees with a comfortable pension income, as regular payments to children or grandchildren immediately fall outside the estate with no need to wait seven years. Setting up a trust is another option many families use, as it allows you to pass on assets while retaining some control over how and when beneficiaries receive them, and can be especially useful for protecting money for children or grandchildren who are still too young to manage a large sum responsibly. Some people also choose to take out a life insurance policy written in trust, which pays out a lump sum on death specifically to cover any inheritance tax bill, meaning loved ones aren’t forced to sell the family home or other assets just to settle the tax owed. Experts stress that whichever route you choose, it’s vital to keep clear records of who you have gifted money to and when, as HMRC will scrutinise this closely when calculating any tax due after death. Give to charity Higher and additional rate taxpayers can reduce their income tax bill through Gift Aid donations. When you donate and tick the Gift Aid box, the charity claims back basic-rate tax at 20%, but if you pay tax at 40% you can personally claim back the extra 20% difference. On a £100 donation, that means £25 back in your pocket, effectively cutting the cost of your gift to just £75. Watch your property bill Mr Burnham has long supported scrapping council tax and stamp duty in favour of a Proportional Property Tax, which would see homeowners pay a flat 0.48% charge on their property’s current value. Campaign group Fairer Share claims 77% of households would benefit and save an average of £556, but critics warn it could hit older homeowners and those in London and the South East hardest. Alternative plans championed by Burnham include a land value tax, which new modelling suggests could hit thousands of homeowners with eye-watering bills. However, Robert Salter, director at Blick Rothenberg, said such a system “would realistically be quite difficult to introduce” and is unlikely to happen overnight, but it’s worth keeping an eye on if you’re planning to buy or sell. Comment now