Budget 2024: what to do about potential CGT, IHT and pension changes

Steps you can take now to shield your pensions, savings, investments and assets from a potential tax raid in next month's Budget.

Tax hikes are coming in the Autumn Budget – but what can you do to help keep your wealth out of reach of Chancellor Rachel Reeves?

The fact we don’t know exactly where she’ll focus her attention means it is tricky to make any life-changing financial decisions now.

But there are a few sensible financial planning moves you can make to protect your wealth from some of the most highly anticipated changes expected in October.

Ready to invest but want to shield your returns from the taxman? Open a Stocks & Shares ISA with Hargreaves Lansdown now.

Capital Gains Tax 

Changes to CGT could be coming. If it’s hiked to match Income Tax, it would mean a rise of 100% for Higher Rate taxpayers investing in stocks and shares – and 125% for Additional Rate taxpayers.

You can protect savings from Income Tax and investments from Dividend Tax and CGT by holding them in an ISA, according to Sarah Coles, head of personal finance at Hargreaves Lansdown.

“You can protect up to £20,000 in the current tax year,” she said.

“If you have the money available now, it may make sense to invest sooner rather than later, so you know where you stand.” 

You can also move existing investments via Bed and ISA.

This means selling investments you’re holding outside of an ISA and then buying the same ones within your ISA.

Separately, if you’re married or in a civil partnership and your partner pays a lower rate of tax, you can transfer income-producing assets into their name. 

“It means you can both take advantage of your tax allowances,” added Coles.

“You can also use all the tax-efficient vehicles at your disposal, including your ISAs and pensions, as well as the Junior ISAs and Junior SIPPs of any qualifying children.”

Potential CGT changes may also affect landlords.

Given the large sums of money involved it obviously wouldn't be worth making any drastic changes.

But, if you were already planning to sell your Buy To Let property, then it might be worth completing the transaction as soon as possible.

Pensions

This is another area that could see changes in the Budget.

For example, there have been suggestions the Government could limit the amount of tax-free cash people can take from pensions to less than the current 25%. 

There’s a real risk this rumour could encourage people to panic and take tax-free cash that leaves them in a worse position financially, according to Sarah Coles.

“Switching into cash savings and removing money from a tax-efficient environment could devastate the returns they need later in retirement,” she warned.

As no one knows for sure what’s likely to happen to pensions, it makes sense to continue putting the money away.

“The annual pension allowance is now £60,000,” added Coles.

“The fact you get tax relief at your highest marginal rate at the moment means higher earners in particular should look to take as much advantage as makes sense for their finances.”

Ready to invest but want to shield your returns from the taxman? Open a Stocks & Shares ISA with Hargreaves Lansdown now.

Inheritance Tax 

It’s already a lucrative source of revenue but there are suggestions of tweaks being made to Inheritance Tax rules. This could include cutting specific reliefs or hiking the rates.

The questions surrounding the future of Inheritance Tax could encourage people to consider giving gifts during their lifetime. 

Sarah Coles believes this also gives you more control over how the money is used, such as helping to build a future nest egg for your offspring.

“You could put it into a stocks and shares Junior ISA for a child under 18, so you know the money will be invested carefully and tied up until they’re old enough to make sensible choices with it,” she said.

What NOT to do before the Budget

While the above covers some of the sensible steps you can take to shield your wealth from a potential tax raid, it's important you don't make any rash decisions and ensure the benefits of any change you make will outweigh any potential pitfalls. 

Indeed, there are many financial moves you could make that'd actually leave you worse off, which is what we cover in detail here: 10 things you MUSTN'T do before the Budget. 

The information included in this article does not constitute regulated financial advice. You should seek independent, professional financial advice before making any investment decision.

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