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It’s about this time of year when the Wren Sterling Marketing Team dusts down a well-used article talking about why it’s important to ignore pre-Budget speculation.
In recent years we’ve had intense speculation about abolishing tax-free cash (which didn’t happen) and the late staging of last year’s Budget at the end of November caused speculation to drag on for months, making everyone a bit twitchy.
The core principle is that we cannot advise based on speculation, and until changes have been made, there’s a good chance that decisions taken in a panic can leave you worse off. What’s more, major changes usually come with a window for implementation so proper planning can be undertaken.
This year, John Healey, the Chancellor of the Exchequer, will commend his Budget to the House of Commons on the 28th of October, so it’s a month earlier for a start. This is good news all round.
With recent speculation in mind, here are our top 4 mistakes to avoid before the 28th of October:
Selling now to deal with Capital Gains Tax changes
Andy Burnham has hinted that CGT rates could be raised on a par with Income Tax, but this doesn’t mean it will happen. Lord O’Neill of Gatley, who was a key ally of Mr Burnham in the lead up to his premiership starting, has declined the opportunity to serve in government and warned him that pushing up CGT rates could hit economic growth. It’s worth noting that CGT is payable on such a huge range of gains that a flat approach to raising it can have unintended consequences on enterprise and external investment, among others.
Crystallising gains now may not be the right decision for your investment portfolio, and could have other unintended consequences, so please speak to your Financial Planner.
Avoid rushing to alleviate IHT without proper advice
Similar to CGT, but the danger here is that there’s a perfect storm coming of a deadline to take action ahead of new IHT rules coming in (the start of the new tax year in April 2027) and potential rising IHT liability. Unfortunately, fear can make people vulnerable to schemes that might later be found by HMRC to avoid tax, which can lead to retrospective action.
Things could be even worse, with deliberately fraudulent schemes created, while moving family assets around without consulting your family can cause conflict there. Again, any conversations around IHT planning should involve your Financial Planner.
Considering taking tax free cash
This one might come up every year until there is a move to limit or scrap tax free cash, but the same principle remains: if you take your tax-free cash allowance early and you need the growth of that capital to support your retirement, it’s probably not the right decision because you wouldn’t get the benefit of keeping it invested for longer. What’s more, the situation cannot be reversed and as with anything around drawing funds for income, it can be easy to fall foul of other tax laws, so this is another one that needs to be discussed with your Financial Planner.
