How to protect your wealth ahead of the 2024 Autumn Budget

Last week in our series of articles in the lead up to the 2024 Autumn Budget, we considered some of the investment opportunities that might arise in and around it. And while the impact on investment portfolios may be relatively modest with the right level of diversification, there could be larger implications for your tax strategy and broader financial plan. 

With that in mind, there are wealth protection strategies that you may want to consider ahead of the 30 October 2024 Autumn Budget announcement. Of course, it’s important to ensure these are prudent decisions, given the lack of information we have right now. This is also not an exhaustive list, and you should seek personal financial advice for a comprehensive wealth protection strategy that’s tailored to you.

There are many rumours circulating about a potential increase to the rate of capital gains tax (CGT). If you’re concerned about a potential CGT increase, now is the time to consider your current gains position.

It may be prudent to consider realising gains now, while you know what the exemption and tax rate will be. However, you should only do this if the investment case makes sense and there is time to complete the transaction.

While this doesn’t necessarily mean you’ll pay less tax, it’s a wealth protection tactic to consider should any rise to CGT take place immediately from 30 October.

Married couples or civil partners can also review their ownership share of the household assets, potentially using the interspousal transfer to transfer some or all their assets from the higher earning partner to the lower earning one.

This allows married couples and civil partners to transfer assets between themselves without triggering a CGT event.

Qualifying couples can make use of two sets of annual capital gains exemptions (currently £3,000 each). If the gains made are likely to exceed this combined amount (£6,000), couples can hold a larger percentage of the assets in the name of the partner in the lower tax band, if relevant.

A word of caution when selling assets for tax purposes. If you intend to reinvest in the same shares or funds that you have sold to realise gains, you must wait for a period of at least 30 days before doing so, or the sale and re-purchase will be effectively ignored for CGT purposes under ‘share matching’ rules. This doesn’t apply to a Bed and ISA or Bed and Pension, where the assets are being repurchased in a tax-free account.

ISAs are one of the most attractive tax-effective accounts for investors. They offer tax-free capital gains, dividend income and interest, as well as tax-free withdrawals. Should there be any changes to these accounts to make contribution limits lower or more restrictive, it could be a big blow to many financial plans. This information is based on the current ISA tax treatment, which may change in the future.

With that in mind, it may be prudent to bring forward any planned contributions into ISA wrappers, in case there is a change to the current £20,000 annual allowance after 30 October 2024. Remember, as with all investments, investing in a stocks and shares ISA comes with risk and you may get back less than invested.

This strategy could also be used in conjunction with any CGT strategy as outlined above. In this instance, it’s possible to sell an asset to realise the current gains, before transferring those funds into an ISA wrapper to take advantage of tax-free future gains. This process is often referred to as a ‘Bed and ISA'. There are a number of aspects to consider before completing a Bed and ISA, and you can read more about the details here.

Does an ISA transfer count towards your ISA allowance?

No, ISA transfers don’t count towards your annual ISA allowance. This opens up an additional wealth protection strategy to consider for any cash you hold in savings accounts.

If you have unused ISA allowance, you can transfer this cash into a cash ISA. From there, the funds can remain in cash for as long as you wish, without any additional risk over a regular savings account.

However, if you decide in the future that you would like to increase your investments into higher risk options which can go down in value as well as up, such as stocks or managed funds, you can transfer this cash to a stocks and shares ISA without using any more of your annual ISA allowance. You should also ensure that you have sufficient cash easily accessible as an emergency fund.

There’s speculation that there could be some changes to pension legislation. This could include reductions on the amount of tax relief that is available for higher and additional rate taxpayers.

Higher earners who make regular monthly pension contributions and have sufficient cash available, might consider stopping these, and instead making a single, larger lump sum payment equal to the total amount planned to be contributed over the rest of the year.

Any contributions must still be within the current pension annual allowance of £60,000, up to 100% of earnings. If you choose this option, remember to start up the monthly contributions again for the following year if you wish to continue contributing to a pension.

It’s important to keep in mind that pension investments can go down in value as well as up, and you will not be able to access contributed funds until you reach the qualifying age (currently 55 and rising to 57 in 2028).

It may also make sense to consider using the carry forward rules to make contributions for any unused pension allowance in the past three years, though this requires an earned income to match the proposed level of contribution. 

At Evelyn Partners, we believe in the principle of combined wealth management. It’s about both your financial plan and your investment strategy being tailored towards your goals and objectives. Having the right partners on both sides of the coin is an important aspect of both wealth protection and wealth creation.
  
There are likely to be many changes to consider once the Autumn Budget arrives. If you have any questions about your own financial plan or investment strategy, speak to your usual Evelyn Partners contact, book an initial consultation online or call 020 7189 2400.