Ahead of last week’s Autumn Budget, many rushed to sell assets to avoid a potential capital gains tax (CGT) hike; others took tax-free cash out of their pension in case it was reduced. Both moves were based on speculation. If the first turned out well because CGT rates were effectively increased, the second was not so effective – those people will now have a big sum sitting in a less tax-efficient environment.
It goes to show that playing with financial planning without knowing all the facts is risky. But now that we broadly know what is coming, we can start to adapt our behaviours – with caution.
For starters, if you were intent on saving as much as possible into your pension as a tool to minimise inheritance tax (IHT), you may well now want to rethink your approach. If you live beyond March 2027, your pensions will form part of your estate, and if the estate’s overall value is above the tax-free threshold, IHT will apply, including on your pension pots.