Three panic moves households are making as Reeves’s tax raid looms

Britons are being urged not to make rash financial decisions before the Budget

Pensioners and savers are being urged to think twice before making any drastic financial decisions ahead of Labour’s Budget this week.
Radical changes to capital gains, pensions and inheritance tax are all tipped to be announced in the Chancellor’s efforts to plug a £22bn black hole in Britain’s finances.
But experts said households should “think long term” and avoid any “rash” moves after it emerged investors had sold off entire property portfolios over fears of a capital gains increase.
Chancellor Rachel Reeves was last month also urged to reassure savers after it emerged pensioners had raided lifetime savings in a panic.
Around 9,500 high-net-worth Britons are already set to exit Britain after Sir Keir Starmer announced non-dom changes in the lead-up to July’s election.
The number of savers maxing out their annual tax-free Isa allowance increased by over 300pc in the first two weeks of October according to investment platform Bestinvest. This has made them an attractive option for savers wanting to shield their cash from increases in capital gains tax (CGT).
However, James Norton, of fund group Vanguard Europe, warned last-minute decisions could also have “painful” consequences.
He said: “There is a high degree of uncertainty about tax changes ahead of the autumn Budget and we’ve been warned of some potentially painful outcomes for individuals.
“While this can feel daunting, savers and investors should not let speculation cloud their judgement – maintaining clear goals and a long-term investment perspective will continue to be crucial in setting you up for future success.”
Alice Haine of Bestinvest added: “People might be making panicked decisions that aren’t necessarily [right for them] – after all, until we hear what Rachel Reeves has to say, it’s unclear whether rash moves such as accessing a pension lump sum early are in an individual’s best interests.”
Fears of a rise in capital gains tax have prompted entrepreneurs to call time on their ventures. The number of voluntary liquidations of businesses rose above 1,600 in October, according to the UK’s official public record The Gazette. This is more than double the number recorded over the same period last year.
Laura Hayward, partner at tax firm Evelyn Partners, said: “In recent months we have been inundated with queries from business owners wanting to rush through business sales before October 30 given that the Chancellor is widely expected to make unfavourable changes to CGT.
“Our own experiences of working with clients is backed up by recent research we conducted among 500 business owners which showed that more have fast-tracked their exit plans in the past year compared to when we conducted similar research 18 months ago.”
Around 9,500 high-net-worth Britons are heading for the exit gates, with the European Union expected to gain 6,000 British millionaires by the end of the year, according to research carried out by consultancy Henley & Partners.
Stuart Wakeling, head of Henley & Partners’ UK office, said: “[We have seen a] 160pc increase in applications by UK-based investors for residence and citizenship by investment programmes over the six months to September 2024 compared to the previous six months.”
Nicola Saccardo, an expert in Italian taxation at law firm Charles Russell Speechlys, said: “By changing its non-dom policy and with [all of the speculation around] the Budget, the Government has given an impression of instability.
“It’s a shame, because the main group I have noticed relocating are people working in private equities – they tend to go to Milan, Italy’s financial hub. They generate lots of economic activity and business opportunities in the UK, so it’s a pity to lose them.”
Entrepreneur Martin Banbury, 67, who co-founded InsureandGo and marketing firm The Mission Group, which is valued at £16m, will incorporate his new business in the US if the Government presses ahead with a significant increase in capital gains tax.
Mr Banbury told Telegraph Money: “I need to raise money for my new business, and if the environment for investors becomes too hostile in the UK, I will have to move. I would love to stay in the UK and build the business here – I am really fighting the urge to leave.
“I think [a CGT rate of] 30pc would be the killer, not just for me, but I imagine a few others.”
Amid concerns that the Chancellor could lower the tax-free lump sum that savers can take from their pension when they reach the age of 55 – currently £268,275 – some have rushed to withdraw theirs ahead of the Budget.
Bestinvest said that the number of pension withdrawal requests had doubled in September this year compared to the same month in 2023 – a surge that it attributed primarily to people accessing their 25pc tax-free lump sum.
Ms Haine said: “Some already had plans to spend their lump sum on house renovations, clearing a mortgage or purchasing a new car so are speeding up accessing that money to fulfil those plans. Others have no immediate need for the money but are considering whether to withdraw it now to lock in the 25pc sum. 
“One client turned 55 earlier this month and immediately requested his pension lump sum to ensure he could access the full amount he wanted before the Budget.”
But keeping money in a pension means it benefits from a number of tax perks that savers forego by withdrawing a lump sum early, and a decision to do so for the wrong reasons can have disastrous ramifications, experts have warned.
Jason Hollands, managing director of wealth and accountancy firm Evelyn Partners, said: “Pulling out a quarter of your retirement fund in a panic, only to then leave it languishing in a cash savings account or investments that will be subject to tax – possibly increased tax in respect of capital gains and dividends – rather than leaving it to grow tax-efficiently within a pension, could prove a big mistake that you will come to regret.”
Helen Morrissey, head of retirement analysis at investment firm Hargreaves Lansdown, said: “Placing your pension lump sum in a bank account risks poor growth and its purchasing power being eroded over time by inflation. Even if you were to take the money, regret your decision and try to reinvest it back into your Sipp, you risk falling foul of recycling rules that could see you clobbered with a tax charge – the potential for poor outcomes is huge.”