How to prepare your finances for the 2024 Autumn Budget

As we approach the 30th October 2024 Autumn Budget, many business owners and company directors are wondering what changes may be on the horizon for taxation, pensions, and capital gains. With Chancellor Rachel Reeves hinting at "difficult decisions," it's likely that adjustments in the financial landscape are imminent. Whether it's capital gains tax (CGT) or inheritance tax (IHT), making smart financial moves ahead of the Budget can help protect your personal wealth and investments. Here’s what you can do now to stay prepared.

1. Avoid Making Impulsive Decisions

It’s easy to get caught up in speculation about upcoming tax changes, but rash decisions based on fear could leave you worse off in the long run. Financial experts, such as Christine Ross from Handelsbanken Wealth, advise sticking to your long-term financial plan, rather than acting hastily on assumptions. Stay calm and review your situation carefully before taking action.

2. Review Capital Gains Tax (CGT) Exposure

CGT is one area where changes are expected, potentially aligning the rates more closely with income tax. With the tax-free allowance currently at ￡3,000 per year and possibly under threat, now may be a good time to crystallize gains on assets that have appreciated. If you are planning on disposing of assets like shares, consider selling them under the current tax regime before any CGT hikes are announced.

• Tip: If married or in a civil partnership, transfer assets to your spouse to benefit from both of your CGT allowances. This can double the available allowance to ￡6,000 before the higher CGT rates apply.

3. Make Full Use of Tax-Wrappers (ISAs and Pensions)

Utilising tax-efficient vehicles such as ISAs and pensions before the Budget may help you secure your gains under the current rules. For instance, selling and rebuying assets within an ISA or Self-Invested Personal Pension (SIPP) protects your future growth from CGT. Consider using any unused pension allowance from the previous three years if you have extra funds available, especially since changes to pension tax relief are also possible.

4. Consider Inheritance and Lifetime Gifting

The inheritance tax regime may also be tweaked, including reductions to gifting allowances or applying IHT to pensions. If you're already considering passing assets to the next generation, the Budget may be a good prompt to accelerate those plans. For example, consider making lifetime gifts under the current tax regime, especially if you are planning to pass on assets like shares or personal property.

• Tip: You can also support younger generations by making contributions to their pension plans, helping them benefit from tax relief.

5. Keep an Eye on Pensions

With pensions enjoying generous tax reliefs, they could be a target for reform. Some experts predict that higher-rate taxpayers may lose the ability to claim 40% relief, as the government could introduce a flat rate for everyone. If you're a higher-rate taxpayer, maximising your pension contributions now could help you benefit from the current system.

Final Thoughts

While it’s impossible to predict the exact outcomes of the 2024 Autumn Budget, careful planning can help protect your investments and minimise your tax liabilities. Be cautious of making impulsive decisions and instead focus on strategic moves, such as utilising tax-efficient wrappers and reviewing your CGT and inheritance planning options. As always, consult with a financial adviser to tailor these strategies to your specific circumstances.

Taking action now could save you significant amounts in tax, and with a little planning, you can position yourself for whatever changes the Chancellor announces later this month.

This article is for informational purposes only and does not constitute financial or investment advice. The content is based on current legislation and market conditions, which may be subject to change. All financial decisions should be made in consultation with a qualified financial adviser who is authorised and regulated by the Financial Conduct Authority (FCA). Past performance is not indicative of future results, and the value of investments can go down as well as up. Tax treatment depends on individual circumstances and may change in the future. Always ensure that you seek professional guidance tailored to your specific financial situation before making any major decisions.