Almost all advisers (99%) have seen a surge in clients approaching them with questions prompted by worries over Labour’s upcoming Budget, according to research by AJ Bell.
Chancellor Rachel Reeves is set to deliver the news many fear on 30 October, with a number of investment harming measures under consideration. According to reports, they may include a rise in capital gains tax (CGT), removal of some pensions reliefs and inheritance tax (IHT) rule changes.
While potential changes are being floated in the media, very little has been confirmed. This is creating significant uncertainty and prompting clients to take pre-emptive action.
Fears over cuts to taking pension cash tax-free have meant 33% of advisers have clients doing this early, while 16% of had clients increasing pension contributions, AJ Bell found.
CGT queries are also increasing, with over a quarter (27%) of advisers seeing a rise in, and a fifth (19%) seeing a corresponding increase in the number of clients looking to sell assets to realise gains before the Budget.
The researchers also found other wealth protection measures have also become more common, with new gifting reported by 10% of advisers. Moving assets to an Isa (8%) or Sipp (5%), increasing Isa subscriptions (4%) and moving unwrapped assets into investment bonds (4%) also mentioned.
See also: AJ Bell warns capital gains reset upon death and IHT reliefs at risk in the Budget
Rachel Vahey, head of public policy at AJ Bell, said: “The wait for Labour’s first Budget following July’s election has felt almost as long as the proceeding 14 years since the late Alistair Darling held the post of chancellor when the party was last in government.
“Speculation and rumour have clouded any sense of optimism that Reeves and Starmer have tried to inject into the state of the country’s finances in recent weeks, and this has had a direct impact on the decisions savers and investors are making ahead of 30 October.”
“What’s clear is that the level of uncertainty created ahead of the Budget has real-world consequences.”
In response to all this, AJ Bell is calling on the government to commit to a ‘Pensions Tax Lock’ to avoid further damaging speculation.
See also: Government’s ‘AIM-pocalypse’ would go far beyond inheritances – Wealth Club
Chief executive Michael Summersgill, said: “The chancellor should resist a short-sighted tax grab from the nation’s long-term savings system.
“Instead, a public commitment to a Pensions Tax Lock, promising not to tinker with the fundamentals of the pension tax system in this parliament, would deliver confidence for savers and signal that this government is serious about supporting long-term prosperity.
“Workers who set money aside decades before retirement, taking responsibility for providing for themselves once they stop working, should not be subject to endless speculation about how their own money may or may not be taxed.
“Individuals are expected to spend their entire working life building a retirement pot based on a pension tax pact with the government. A commitment is made in good faith that they will be rewarded for making sacrifices today to provide for themselves tomorrow.”
