As the Autumn Budget approaches, speculation regarding what it may include has started to intensify.
Tax rates, allowances, and pension rules are often the subject of rumours and predictions in the weeks leading up to a Budget, and for some, that can create a temptation to act before the chancellor has announced anything.
However, rumoured changes may never materialise or could be less significant than expected. Therefore, acting pre-emptively could mean you make a major financial decision based on a rumour, which could leave you worse off.
So, with the Autumn Budget just around the corner, here are three risks of making financial decisions based on speculation.
1. Taking too much from your pension
There are numerous rules surrounding pensions, and changes to tax relief, allowances, and withdrawals can have significant implications for your retirement income. Because of this, pensions are often the subject of Budget rumours.
For instance, the tax-free pension lump sum has been a particular focus of speculation in recent years. Ahead of both the 2024 and 2025 Budgets, there were widespread reports that the government might reduce the amount people can take from their pension tax-free.
Some savers responded by taking money out before any changes were announced. Figures reported by International Adviser show that £3.9 billion was withdrawn from defined contribution pensions as lump sums between the fourth quarter of 2024 and the third quarter of 2025. That was £868 million more than in the previous 12-month period.
Yet the widely anticipated cut to the tax-free lump sum did not happen, meaning many people were left with large amounts withdrawn from their pension.
Taking money from a pension is not necessarily a mistake, but once it’s been withdrawn, putting it back is not always simple and can lead to tax charges.
Money left invested has the potential to generate returns and benefit from compound growth over the long term. Once you withdraw it, you may hold it in cash, which may lose its purchasing power over time to inflation. Or if you eventually decide to reinvest the money, the investments may not have the same tax advantages as a pension.
So, before making a large withdrawal ahead of a Budget, it is worth considering whether the potential tax saving justifies the consequences of taking the money out early, and what the long-term consequences could be.
2. Bringing forward a business sale
Business Asset Disposal Relief (BADR) offers qualifying business owners a lower rate of Capital Gains Tax (CGT) when they dispose of certain business assets.
Ahead of the March 2020 Budget, there was considerable speculation that the relief could be abolished. Some business owners responded by bringing transactions forward or taking other steps to make use of the lifetime limit, which was £10 million at the time.
However, in the end, the relief was not abolished. Instead, the government reduced the lifetime limit for qualifying gains from £10 million to £1 million.
That was still a substantial change, but it was not the complete removal that some had anticipated. It was also estimated that fewer than 20% of people eligible for the relief would be affected.
For someone who had already decided to sell their business, bringing the transaction forward could potentially have made sense. But for someone who changed their plans solely because they expected the relief to disappear, the outcome could have been very different.
They might have accepted a lower offer to complete the sale quickly, sold assets they would otherwise have kept, or brought forward their exit before they were ready.
A potential tax saving is only one part of a business sale. The value of the business, the timing of the transaction, and your wider financial and personal circumstances all matter too.
3. Selling investments or other assets too quickly
In the weeks leading up to the 2024 Budget, there was widespread speculation that CGT rates could rise significantly, with some predictions suggesting they could be brought closer to Income Tax rates.
The speculation was followed by a sharp increase in capital gains reported for the 2024/25 tax year.
According to government data, £127 billion of capital gains were reported during the year, an 82% increase on the previous year. CGT liabilities also rose by 89%, reaching £24.2 billion.
In this case, the government did increase the main rates of CGT. The rate for basic-rate taxpayers increased from 10% to 18%, while the rate for higher- and additional-rate taxpayers increased from 20% to 24%.
However, some of the more dramatic predictions made before the Budget did not come to pass.
So, if you were already planning to sell an investment, you may have had good reason to complete the transaction before the Budget. However, if you were not already planning to sell and decided to dispose of an asset in a hurry, you might have accepted a lower offer or been rushed into giving up an investment you otherwise would have wanted to keep.
It’s important to wait for the facts
These examples highlight the difficulty of making significant financial decisions in response to Budget rumours.
While acting ahead of an announcement can sometimes work in your favour, it often relies on chance and can lead to rushed decisions that leave you worse off. As such, it’s typically best to wait for the facts before making a decision.
A financial planner can help you understand the confirmed changes and consider how they fit into your wider financial plans, rather than making a major decision based solely on what might happen.
If you would like help understanding how the Budget could affect your finances, get in touch.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
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.
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.
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.
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