Here’s how to protect your savings as Reeves considers a household tax crackdown

There is a lot of speculation about changes in Rachel Reeves’ first budget, with possible changes to capital gains tax, ISAs and pensions already proposed.

Many are worried about their savings, especially now that the best deals have already collapsed, triggered by forecasts that the Bank of England will cut interest rates in November.

For those worried about the future of your nest egg: I spoke to experts to reveal ways you can ensure your finances are protected and protected from any changes the Chancellor may make on October 30th.

Increase in capital gains tax

Is she likely to increase it?

While the Prime Minister has described speculation that the top rates of capital gains tax (CGT) could be raised to 39 per cent as “far from the mark”, there are still concerns that increases will occur.

Jason Hollands, managing director of Evelyn Partners, said: “Capital gains tax is expected to rise as sources report that while gains tax on second properties will not rise, tax on share gains will increase by ‘a few percentage points’.”

What do I need to do to protect my savings?

You may have to pay CGT if you make a profit selling shares or other investments.

Those who own shares outside tax packages such as ISAs and pensions could consider selling them before the Budget, Mr Hollands said, if the exemption falls through.

This is to both make use of the £3,000 annual tax exemption and to ensure that any taxable profits are made at the current rates of 10 per cent for basic rate taxpayers and 20 per cent for higher and additional rate taxpayers.

He added: “Before we do this, there are a few points to consider. Firstly, if you are married or in a civil partnership, you could consider transferring some or all of the shares to your spouse before selling to benefit from two sets of annual tax exemptions of £3,000.

“If the profit still exceeds these values ​​and a tax liability arises, you may still be able to reduce the tax burden by making the taxable profit on behalf of the partner, who may be subject to a lower rate of income tax.

“These transfers are referred to as ‘intermarital transfers’. Such transfers of ownership are easy to effect and do not trigger a taxable event (unlike a transfer between unmarried partners).”

Once you’ve identified the gain and want to reinvest in the same stocks outside of an ISA or pension, you’ll need to wait at least 30 days before doing so.

If you reinvest after 30 days, the base cost of the shares will be reset to the current market level for future capital gains tax calculations.

If you’re really financially savvy, you might also consider buying back the shares or funds sold as part of an ISA or pension scheme, where future returns on both capital gains and dividends are protected from tax, Mr Hollands advised.

These transactions are known as “Bed & ISA” or “Bed & Pension”. For example, in a Bed & ISA transaction you sell existing investments and use the proceeds to open or top up an ISA account. You can then buy back the same investments, choose different investments or simply keep the money in your ISA.

This means you can use your tax-free ISA allowance even if you don’t have any new money to invest. You don’t have to wait 30 days for this either.

The controversial inheritance tax

What could she do with this tax?

Inheritance tax has become a victim of the rumor mill in recent weeks. Experts believe Ms Reeves could make cuts to zero rates, cut business and agricultural relief and tax pension amounts.

The Chancellor is also reportedly considering changing the seven-year rule for gifts.

The rules, which have been in place for almost 50 years, mean that gifts made to people seven years before their death are not subject to inheritance tax (IHT).

Ms Reeves is considering extending the rule to ten years, meaning more people would be eligible for the payment.

Am I too late to protect myself from these potential gift rule changes?

In short, according to Shaun Moore, tax and financial planning expert at Quilter, no.

He said: “At the very least you should make sure you use your £3,000 annual gift allowance to children or grandchildren, which is immediately tax-free and not subject to the seven-year rule.”

“The ‘gift from income’ exemption can indeed be an effective tool for reducing your IHT liability, particularly for those with significant income.”

This exemption allows you to make regular gifts from your excess income, as long as these gifts do not affect your standard of living.

In the case of married couples, both partners receive individual allowances within the scope of this exemption, i.e.

Mr Moore added: “It is important to understand that these donations will only be eligible if they are made from income and not capital. Income includes salaries, pensions, dividends, rental income and savings interest.

“This will potentially reduce the size of your estate and therefore its IHT liability.”

ISA changes

What possible changes could the government make to ISAs?

The government may consider reducing the ISA allowance by £20,000, the total amount you can currently save in one or more accounts.

How to protect your money

It could make sense to make the most of your ISA allowance now, experts warn.

Charlene Young, pensions and savings expert at AJ Bell, said: “Over-18s receive a generous £20,000 per tax year, which they can pay across different types of ISAs.” Everything in your ISA is then protected from capital gains and income tax .

“For those whose investments are held outside an ISA, now may be the time to consider placing them within the ISA wrapper.

“You need to check how much ISA allowance you have left this tax year to ensure you don’t exceed the £20,000 annual limit.

“There is even a Junior ISA for under-18s, which comes with its own allowance of £9,000 a year and the same tax benefits.

“But remember that Junior ISAs are locked until the child turns 18 and it is converted into an ISA in their own name.”

Make the most of your concessions

Despite all the rumours, we won’t really know what’s in Ms Reeves’ red box until she gets up to present her budget next week.

However, there are some financial measures you can take to put yourself in a position to cope with any changes announced on that day and beyond.

Choose the best savings accounts and pay attention to your allowance

In addition to hidden income and wage taxes, frozen tax limits and allowances also affect savers.

If a saver is moved to the next tax bracket, their tax-free Personal Savings Allowance (PSA) will be halved or lost altogether if they fall into the additional tax bracket.

The PSA protects many people from paying tax on their savings interest outside an ISA, but has also fallen victim to the major freeze on allowances, which have remained at current levels since it was introduced more than eight years ago. The PSA is currently £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.

Therefore, it is important to decide where to invest your money.

Ms Young said: “For cash savers, the good news is that Cash ISA rates have moved closer to standard savings rates in recent years, meaning savers can potentially hold their cash tax-free and still make a decent return.”

Make the most of your pension contributions

The annual pension allowance for most people is £60,000 per tax year. Not only do contributions receive tax relief when paid in, but a pension cover also protects cash and investments from taxes.

Regarding pension contributions, Ms Young told i: “Remember that you will typically not be able to access them until you are 55 at the earliest.”

“A particularly clever trick is to use pension contributions to reduce the income tax bracket. If you contribute to a pension such as a SIPP (a self-invested personal pension), the gross value of the contribution will result in your basic tax rate being expanded.

“This is a particularly useful trick if you have just moved to the next tax bracket and a small pension contribution would put you below the threshold.”

Ms Young says pension contributions also help reduce your income for testing against other allowances and thresholds.

The two most common are the £60,000 high income child benefit limit, where child benefit ceases, and the £100,000 limit, above which you lose your tax-free allowance.

She added: “A reduction in taxable income tested against these limits may mean you get back all or part of the child benefit or personal allowance that would otherwise have been lost.”