With the Autumn Budget this week, more people have been taking action to prepare their finances before any big changes.
While rumours are coming in thick and fast, it’s important not to let Budget anxiety force you into something that’s not right for you.
Instead, it’s worth focusing on steps you can take now that will benefit your finances, no matter what comes out of the Budget. You could consider bringing forward any contributions you have already planned.
Here are five moves HL clients have been making this tax year and ahead of the Budget.
This isn’t personal advice. ISA, pension and tax rules can change, and their benefits depend on your circumstances. Scottish tax rates and bands are also different. If you’re not sure what’s right for you, ask for financial advice.
Remember, unlike cash, all investments and any income from them can rise and fall in value so you could get back less than you invest. Inflation reduces the future spending power of your money.
Open a Cash ISA
Almost one in five people we surveyed said opening or adding money into a Cash ISA is on their to-do list because they’re worried about the Budget*.
They’re keen to make sure they don’t have to pay income tax on their savings – regardless of what happens in the Budget.
The Cash ISA market grew by nearly £50bn in 2023.
It was the biggest movement into Cash ISAs in a calendar year since they were created in 1999, and 100x more growth than 2022.
And it doesn’t look like growth is slowing. According to analysis by Paragon Bank, savers have ploughed an extra £42bn into Cash ISAs in the first six months of 2024.
*Survey of 2,000 people by Opinium for Hargreaves Lansdown in September 2024.
Pay into a Stocks and Shares ISA
Just under a fifth of people we surveyed have been spurred to open a Stocks and Shares ISA by rumours of potential tax rises in the Budget.
Speculation around hikes to capital gains tax has been rife, and investments in a Stocks and Shares ISA are sheltered from this.
When it comes to HL clients, the number of people paying in is at the highest level we’ve seen since a post-pandemic peak in 2022.
If you have investments outside a Stocks and Shares ISA, you can use the Share Exchange (Bed & ISA) process to move them into an ISA.
If you have shares in an HL Fund and Share account, you can use the Share Exchange (Bed & ISA) process to sell them outside an ISA, move the cash into the ISA wrapper and buy back the same shares again, all in one instruction. You have to stick to your overall £20,000 ISA allowance though.
But when your investments are in an ISA, you won’t have to worry about UK dividend tax or CGT.
Also, don’t forget about your £3,000 CGT allowance when you’re selling investments to move into an ISA.
Pay extra into a pension
One in six people we asked are doing this because of Budget concerns.
Recent reports have suggested we might not get any changes to pensions tax relief at this stage, but people aren’t taking any chances.
It reflects the fact that the number of people maxing out their HL Self-Invested Personal Pension (SIPP) this tax year is the highest in the last 10 years. It’s still not something more typical pension investors can consider in a normal year. We also don’t know this has all been specifically driven by Budget expectations, but it’s certainly a major factor.
Remember, you can only usually access money in a pension from age 55 (rising to 57 in 2028).
Pay into a Junior ISA for a family member
Just under one in six people have been persuaded to take this approach to protect themselves from potential Budget changes according to our survey.
Junior ISAs (JISAs) grow free of income tax, capital gains tax and dividend tax – and they’re useful if you’re worried about inheritance tax (IHT). That’s because the money counts as being handed over immediately for IHT purposes, but will be tied up until they’re old enough to make sensible choices with it.
The number of HL clients paying into Junior ISAs is at the highest level we’ve seen in six years.
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Gifts to family
More than one in seven people have told us they’ve been spurred on to give money away by rumours of Budget IHT hikes.
Gifts can be incredibly valuable – both for the recipient and the person giving the money away.
You can currently give away up to £3,000, which will fall within your annual gift allowance. A couple could combine their exemptions.
You can also give away larger sums as potentially exempt transfers (PETs) and they will be outside of your estate after seven years.
There’s currently no limit to how much you can gift as a PET, however the value of the gift would only be exempt from IHT if you survive for seven years after it’s made.
However, not every last-minute move is such a great idea.
One in six people surveyed told us they’re taking money out of their pension purely because of Budget rumours about a possible limit on tax-free cash.
Ripping tax-free cash from your pension is risky business.
If you put it in a cash account, it could lose value after inflation. If you move it out of a tax-efficient account, like the SIPP, and into one where you’ll pay tax, it could bring a tax headache.
Meanwhile, if you’re planning to take a percentage of your pension in drawdown, or use the remainder to buy an annuity, you’re potentially cutting the income you can take later in retirement.
It means that while smart moves at the 11th hour could leave you substantially better off, you shouldn’t feel rushed into making a mistake that could do more harm than good.
The government’s Pension Wise service can help if you’re over 50 and need guidance. You can also get personalised financial advice if you need it.
If you think you could benefit from getting expert financial advice from a professional, get in touch with our advisory team today. You won't get personal advice on the call, but they'll talk you through the advice service we offer, including charges and connect you with an adviser if you'd like to go ahead.
Our advisers can recommend how you can make the most of your tax allowances through financial planning. But if you need complex tax calculations, your adviser might recommend you speak to an accountant to complement their advice.
The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.