Steps to take ahead of the Budget
A national journalist is looking for insights on actionable steps people can take now, ahead of potential Budget changes, in the following areas:
- Pensions
- ISAs and other savings accounts
- Taxes
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- Make pension contributions prior to the end of the month as any income tax relief on pension contributions could take place immediately.
- Any assets a client plans to sell in the near future should be sold prior to the end of the month given the high probability of CGT increasing immediately which is likely to affect profits on non-ISA wrapped stocks and property
- If approaching pension age, consider maximising the tax free cash lump sum drawdown as this could be scrapped following the budget.
The most important point to note is to never make a decision based on tax incentives alone. Any of the action taken above should also fit with lifestyle, affordability and longer term financial planning
- Any assets a client plans to sell in the near future should be sold prior to the end of the month given the high probability of CGT increasing immediately which is likely to affect profits on non-ISA wrapped stocks and property
- If approaching pension age, consider maximising the tax free cash lump sum drawdown as this could be scrapped following the budget.
The most important point to note is to never make a decision based on tax incentives alone. Any of the action taken above should also fit with lifestyle, affordability and longer term financial planning
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With the budget countdown ticking ominously, astute savers are racing against time to fortify their financial fortresses against a potential siege. After the government's ominous rhetoric of "tough decisions" ahead, individuals should be on high alert and attempt to budget-proof their wealth before it’s too late. Pension reform looms large, with whispers of a cap on tax-free withdrawals so those nearing retirement should accelerate withdrawals before the guillotine falls. Furthermore, taxpayers with higher and additional rates should maximise contributions while the current generous tax relief remains. Additionally, rumours of ISA caps are circulating, so prudent savers should consider maxing out their allowances before any changes occur. CGT is also a prime target, so investors should realising gains now, before a possible band uplifts. As the budget countdown begins, the message is clear, act now or potentially pay later, with the window for financial manoeuvring rapidly closing.
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Stay calm and do not rush into any decisions on pensions, ISAs or taxes in general. Mistakes can be costly and hard to unwind, especially with pensions, as you can’t get the money back until retirement. Your number one priority should be to ensure you have a decent cash buffer.
Having said that, if you’ve got surplus cash, consider topping up your pension if you haven’t already, in case there are dramatic restrictions announced in the Budget.
Before doing so, it’s important to check how much you’ve already contributed – and if you are part of a workplace scheme, how much you will contribute over the course of the whole tax year, including what your employer pays. The annual limit is £60,000, or your gross salary, whichever is lower, and you’ll have to pay back any tax relief if you exceed the annual allowance.
Remember, however, that doing nothing is also fine. Rushing to optimise for tax changes that may or may not happen is never a good idea.
Having said that, if you’ve got surplus cash, consider topping up your pension if you haven’t already, in case there are dramatic restrictions announced in the Budget.
Before doing so, it’s important to check how much you’ve already contributed – and if you are part of a workplace scheme, how much you will contribute over the course of the whole tax year, including what your employer pays. The annual limit is £60,000, or your gross salary, whichever is lower, and you’ll have to pay back any tax relief if you exceed the annual allowance.
Remember, however, that doing nothing is also fine. Rushing to optimise for tax changes that may or may not happen is never a good idea.
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In regards to Mortgage applications, there has already been movement on Swap Rates in anticipation of the budget and clients should be aware that until an application is submitted their rate often isn't locked in.