This month, our advice and compliance director, Fiona Tait, addresses some of your concerns about potential tax changes that may be included in the Budget.
We have received several queries regarding Labour’s plans to amend taxation in the next Budget, which will be on 30 October 2024.
Amendments to legislation are to be expected whenever a new government comes into power, and in this case, we have been given some strong hints that Labour intends to make changes to the current tax rules.
The difficulty, as always, is that until these amendments are formally announced, we only have speculation to guide us. So, we can’t be sure.
Generally, I do not recommend making any decisions based on “what might be”. Instead, we advise you to stick to your long-term financial plan.
If you have a specific requirement for taking additional lump sums or income from your pensions and investments, then you may wish to make withdrawals ahead of the upcoming budget on 30 October.
I would also caution against taking action based purely on potential tax legislation.
Historically, when any changes to legislation have come into force, existing savings have been “protected” and only funds built up after the change have been subject to the new rules. While there is no guarantee that future changes will be applied in the same way, this might provide some reassurance.
It’s also worth remembering that every action has a reaction. You could find that trying to pre-empt future tax changes leads to an alternative tax charge – which might have a similar effect on your wealth.
For example, if you decide to take your pension commencement lump sum (often known as “tax-free cash”) from your pension and re-invest it, you could find that the money is then treated as a capital asset. This could in turn result in a future Capital Gains Tax liability and/or Inheritance Tax for you family. You would also lose out on the tax-efficient growth of your investments within the pension fund.
In other words, trying to pre-empt a tax change that is by no means guaranteed could potentially cost you more in other ways.
If you would like to discuss this further, please get in touch with your Intelligent Pensions financial planner.
However, we’ll likely need to wait until after the Budget before we can provide more definitive advice. At the end of the day, we must base our advice on the rules as they stand at present.
We will of course be updating all our clients as soon as we can after the Budget.
Get in touch
If you’d like to speak to us about your pre-Budget concerns, please email us at hello@intelligentpensions.com or call 0800 077 8807.
