On 30 October 2024, chancellor Rachel Reeves became the first woman in history to deliver a Budget to the UK parliament.
In the lead up to the announcement, there was much speculation in the media about which taxes would increase and how this might affect your financial plan. You might have been concerned about the effect that the Budget could have on markets too, and whether it could influence the value of your portfolio.
After the announcement, you may still be unclear about which changes are relevant to you and whether you need to take any action.
It’s natural to feel apprehensive before and after a significant event such as a Budget or an election. Our relationship with our clients is more important than ever during these periods of uncertainty.
Read on to learn about three benefits of working with a financial adviser demonstrated by the recent Budget.
1. We can help you remain calm and prevent emotional decision-making
Prior to the Budget, fears about an increase in Capital Gains Tax (CGT) caused many investors to rapidly sell shares.
On 29 October 2024, City AM reported that, over the last quarter, the net sales of shares by investors reached £515.6 million. In comparison, net sales were just £95.1 million in the first quarter of 2024.
In some cases, selling these assets may have been the most suitable choice for an investor’s financial plan. However, certain individuals could have made a reactionary decision to sell shares because of concerns about rising CGT.
If you did the same and cashed out investments prematurely, you could have missed out on potential growth in the future, making it more difficult to achieve your financial goals.
Also, while the rumours about CGT increases turned out to be accurate, many of the media’s predictions – such as changes to pension tax relief – didn’t happen.
Yet, some of our clients were concerned and considered taking tax-free cash from their pensions before the Budget to potentially circumvent any changes. Had we not reassured these clients, they may have used their tax-free pension lump sum earlier than necessary.
Ultimately, this could have meant they had fewer opportunities for tax planning in the future, meaning their attempts to mitigate tax may have ended up leaving them with a larger bill.
That’s why it’s important to avoid letting emotion guide your decisions, and instead make rational choices based on all the information and your own financial goals.
Our support could help you take a more pragmatic view of your financial plan during a period of uncertainty.
Statistics show that the reassurance we offer clients is one of the biggest benefits of professional advice.
Indeed, according to Royal London:
- 34% of people felt financial expertise gave them more confidence in their financial plans.
- 34% of people felt that receiving professional financial advice helped them feel in control of their finances.
- 32% of people felt having contact with a financial adviser gave them peace of mind.
These emotional benefits of financial advice are particularly important around events such as the Budget because our reassurance can prevent any pre-emptive or reactionary decision-making.
As a result, you can continue working towards your long-term goals, despite any short-term changes to your financial plan.
2. We can explain how any changes in legislation might affect your unique financial plan
It’s easy to panic when you see countless news stories about how much extra tax you’re going to pay after the Budget. However, everybody has their own unique financial situation.
As such, changes in the Budget affect everybody differently. It’s important to ignore any “noise” from the media and focus on how the Budget announcements might affect your ability to work towards your specific goals.
Additionally, many people misunderstand certain tax rules, meaning they can’t effectively consider how legislative changes might affect them.
For instance, Tax Policy Associates ran a poll asking how much additional Income Tax somebody earning £50,270 a year would be liable for if they received a pay increase of £1.
Surprisingly, 50% incorrectly answered “a substantial amount of extra tax” because they believed that moving into the higher-rate tax band meant the person’s entire income would be taxed at 40%.
Another crucial benefit of working with a financial adviser is that we can explain various financial issues in a clear and simple way. As a result, you can understand precisely how events such as the Budget will affect you and make decisions accordingly.
3. We can explore different ways to potentially mitigate a large tax bill
You may benefit from working with an adviser because we provide reassurance and understanding about changes announced in the Budget. We can also give you practical solutions to help you adapt to new developments.
For example, Rachel Reeves announced that pensions would no longer be exempt from Inheritance Tax (IHT) after April 2027. This could make it more difficult to mitigate IHT and pass more wealth to your loved ones.
Fortunately, we could help you explore options such as lifetime gifting or trusts to help you reduce the IHT your family pays.
Alternatively, you might be concerned about paying an increased rate of CGT after the Budget. In this case, we could explore how you could mitigate a large bill by investing through a Stocks and Shares ISA.
You may also benefit from being strategic with your Annual Exempt Amount – the amount of capital gains you can earn each year without paying CGT.
These are just some examples of how we could help you adapt to recent changes announced in the Budget. Consequently, you may be more likely to achieve your long-term goals, despite any short-term changes.
Get in touch
If you are concerned about how the Budget could affect your financial plan, we are here to support you.
Email enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, tax planning, or trusts.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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