The importance of remaining calm is often something that’s talked about when discussing investment market volatility. But there are other factors outside of your control that might lead to emotional decision-making, including uncertainty about the upcoming Autumn Budget.
Chancellor Rachel Reeves is expected to deliver an Autumn Budget at the end of October. Despite being weeks away, there’s already speculation about higher taxes and allowances being slashed.
With rumours featuring in the headlines, it can feel like you should be doing something to prepare for the potential changes. However, making knee-jerk decisions before changes are confirmed could harm your long-term financial plan.
For example, ahead of the 2024 Autumn Budget, there were attention-grabbing headlines suggesting the pension tax-free allowance would be scrapped. It led to some people taking a lump sum from their pension, even when it hadn’t been part of their financial plan. When the announcement didn’t materialise, some were unable to cancel the withdrawal or place the money back in their pension.
As pensions provide a tax-efficient way to invest, those who acted on speculation may pay more tax overall or find their pension now falls short when planning for retirement.
So, read on to discover some tips for remaining calm in the run up to the Autumn Budget.
1. Tune out the noise
It’s easier said than done, but try tuning out the noise in the lead-up to the Budget.
Reducing how much you’re exposed to speculation could reduce stress and mean you’re less likely to make decisions that could harm your long-term financial plan based on rumours.
That doesn’t mean you have to turn off the news completely. Simply being mindful of where the updates are coming from or only reading the headlines once a day could minimise the pressure you might feel.
2. Check where your news is coming from
Sometimes updates can make it seem as though a rumour is confirmed, particularly if you’re getting your news from social media.
So, before you respond to news or even worry, take some time to fact-check the source and understand if the reported change is speculation.
3. Consider what changes could mean for your financial plan
Headlines about changes may sound like they’ll affect everyone, or use average figures to highlight the potential implications. However, as financial circumstances and goals vary significantly, taking some time to understand what it means for you could be important; you might find an announcement won’t affect your long-term financial plan at all.
For instance, there are suggestions that the amount you could place into a Cash ISA may be reduced. That might seem like something you should worry about, but if you use your ISA to invest, it may have little effect.
Similarly, headlines might read that changes to Inheritance Tax (IHT) mean the average bill will increase by 10%. Yet, your estate might not be liable for IHT, or your existing estate plan could mitigate the effects.
Your financial planner is here to help you understand what speculation and confirmed changes could mean for you.
4. Remember, changes often don’t come into effect immediately
Often, an Autumn Budget announcement isn’t implemented immediately.
For example, in the 2022 Autumn Budget, it was announced that the Capital Gains Tax annual exempt amount would be reduced from £12,300 to £3,000. It fell to £6,000 in April 2023, and then to £3,000 in April 2024.
As a result, you usually have time to understand what the changes mean for you and carefully consider how you’ll respond before they come into force.
This isn’t always the case, and sometimes changes, including tax hikes, may be implemented right away. When this happens, it can feel like you need to act immediately. However, taking a step back to weigh up your options and speak to your financial planner, rather than making a snap decision, is often still valuable.
5. Contact your financial planner
If you’re tempted to make changes to your financial plan because of speculation, your financial planner could help you assess if it’s the right decision for you.
Remember, we’ll be here to help you navigate Autumn Budget announcements that might affect your financial plan. If changes happen, we can work with you to review and update your long-term plan to ensure it continues to reflect current legislation and your circumstances. Please get in touch if you’d like to talk to one of our team.
Please note:
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. 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.