2 days Ago
Budget on 30 October: Many people feel they need to take action now, but some moves can backfire Sarah Coles is head of personal finance and Helen Morrissey is head of retirement analysis at Hargreaves Lansdown. Endless speculation has persuaded an many people they need to take action now, to protect themselves from whatever the Budget on 30 October holds in store. Capital gains tax threats, tax on pensions and inheritance tax concerns have all thrown people into a state of panic, and there's a risk they'll rush into things that come back to bite them.
There are some eminently sensible steps you can take now – like paying into a pension or moving assets into an Isa. However, there are also ten steps that could seriously backfire - some of them leaving you far worse off than if you'd left things as they were. 1.
Taking tax-free cash out of your pension Rumours are swirling about whether pensions are in the Chancellor's sights, with suggestions that she might look to trim back the amount of tax-free cash people can take from their pension. Ripping this out of your pension now to avoid a tax grab may seem like a good idea, but it's something you may come to regret. If you are going to take your tax-free cash, you need to have a plan for what you're going to do with it.
Simply taking it and putting it in a bank account paying a low interest rate means that money misses the potential for further investment growth in the pension. Investments within a pension also grow free of tax, and unless you're taking £20,000 or less, and putting it in an Isa, you'll lose that protection against tax. It's also worth saying that under current rules, money in a pension is usually free of inheritance tax.
This is not the case with money in Isas or bank accounts so there's also the chance that taking your tax-free cash now could land your family with a nasty tax bill in future. 2. Taking income you don't need out of your pension Deciding to take an income earlier than you.
.. Sarah Coles , Helen Morrissey.
