Here we go again.
After much speculation about what would be included in last year’s 2024 Budget, recent reports suggest significant changes await us in this year’s Budget.
If you believe what you read, the changes could affect anything from capital gains tax, inheritance tax, pensions and maybe even ISAs.
While investors are left wondering whether they should act now or wait, the good news is we’ve been here before. Last year, we faced similar uncertainty and widespread speculation about dramatic pension reforms, inheritance tax overhauls, and sweeping allowance reductions.
Our guidance was simple: wait for facts, not speculation.
How did that work out? Some feared changes didn't materialise, and others were less dramatic than predicted.
Capital gains tax rates increased from 10%/20% to 18%/24%. Stamp duty surcharges increased from 3% to 5%. But the biggest actual change - pensions entering inheritance tax from 2027 - wasn't even widely predicted.
Investors who avoided hasty decisions based on speculation were better positioned than those who reacted to every rumour.
This Year's Speculation
Current reports suggest the Treasury will be looking to find an extra £30 billion in tax rises.
The chancellor will be incentivised not to breach any manifesto pledges, and therefore income tax, VAT, and National Insurance appear to be safe from reforms.
This leaves room to generate the necessary revenue through adjustments to capital gains tax rates, pension reforms, changes to inheritance tax rules, restructuring of the ISA allowance, and various property tax adjustments. However, even this narrowed-down list does not provide enough information to base any firm recommendations on.
The same problem, therefore, remains. We don't know the details, timing, or even whether these changes will happen. Speculation often misses the mark while creating unnecessary anxiety. Political and economic realities change quickly.
Why "Wait and See" Is Still Sensible
Last year proved that reacting to speculation rather than facts typically leads to poor decisions. Waiting for official announcements means you can base decisions on actual proposals, understand the real impact on your situation, and avoid unnecessary complications.
For now, our recommendation is to focus on what you can control. Review your current arrangements to ensure you're using existing allowances and reliefs. Above all, we suggest avoiding significant changes based solely on media rumours.
Last year's patience served our clients well. This year, despite more intense speculation, the same principle applies.
When the budget is announced, we'll have facts to work with. Until then, patience beats panic, and facts beat speculation.
As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.
Yours sincerely,
Graham Ponting CFP Chartered MCSI
Managing Partner
