Don’t let change alter your course

How much will change with the Budget? | AFP via Getty Images

Back in the heady, carefree days of the General Election season, I wrote in the hallowed pages of Scotsman Money about making your finances politics-proof. That is to say, if you have a properly worked through financial plan – whether or not you pay someone to help you create and manage it – you would care not a jot about whether it ended up being Reeves and Starmer or Hunt and Sunak (both of which sound like really bad clothing stores; perhaps the kind where you can get suits bought for you if you’re a senior politician).

The gist was this: the biggest determinants of your wealth aren’t taxes, or your investment strategy (within reason; if you stuck it all on Truth Social shares you’re probably not so happy now, but then again you’ve got some losses to carry forward for Capital Gains Tax, so it’s not all bad, right?). They are the amount of money you put away, how long you put it away for, and how much you can avoid futzing with it along the way.

We’re a few months along the path with the new government now, and rumours abound about big changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT), and possibly even tax relief on pensions. Doubtless you’ll read analysis of the potential impacts of all those in Scotsman Money, and you should definitely be aware.

But the big question is: should you really be making any changes?Generally speaking, it’s a fool’s errand to make changes to a financial plan without knowing what’s what. If you’re lucky enough to have a proper plan, and a proper planner working with you, then guess what? They’ll be telling you not to build a castle on sand, or – if that metaphor seems a little stretched – at least not to plan a major extension of a castle on sand. The sand is the thing, basically. The main thing is to avoid being a tax-surfer.

Structuring your finances just to surf tax subsidies does two things: first, it makes you dependent on the generosity of the current government, and I’m not sure Chancellor Rachel Reeves is feeling all that generous –whatever your politics. Second, it opens you up to getting embroiled in more aggressive tax schemes and structures, most of which enrich the people running them more than the people using them, and all too often end in a court case and regret.

There are exceptions – one adviser told me about a client who had it planned down to the pound how much tax-free cash from their pension they needed to clear their mortgage – taking that now before any potential restrictions made sense and they would have been doing it in less than a year anyway. It was well thought through and just part of the plan.

Here’s the thing. Capital gains are currently taxed less than income. The worst that’s going to happen is that they’re equalised, and I don’t think they’ll go that far.

Generally, your investments outside an ISA or pension live either in the income tax regime (investment bonds), or the CGT regime (general investment accounts, shareholdings, buy-to-let, etc).You’re not going to be worse off than if you’d gone the other road (ignoring investment returns), so by all means take some gains if that was always part of the plan, but otherwise there isn’t much to be done.

IHT – which is paid on only 4 per cent of estates, by the way – is emotive, but when measured against the event which actually triggers the IHT, it’s surely not the main issue.

Pensions tax relief and tax-free cash is something we’ve got used to – I’ve seen arguments that politicians can’t change it because people understand it, which seems a very odd way to go about things. That doesn’t mean that if it changes you won’t still be being incentivised to save for retirement, and it doesn’t change the fact that you should be funding your retirement as heavily as you can without damaging your current standard of living too much. If it takes a buy-now-while-stocks-last tax-relief fire sale to do that then you’ve missed the point.

You can already see ambulance-chasers and what Billy Connolly called footpads and vagabonds limbering up to give you clever-clever ideas about tax.Influencers – who, saints defend us, get called “finfluencers” if they bang on about finance (and there has never been a better argument for setting fire to the English language than that) – are opining online, and a whole host of ne’er-do-wells are working out how to make extra fees from people who are grumpy about tax changes.

Whatever you do, don’t go down that road. Stick to the plan – you are building or have built wealth for a reason. Taxes change, governments change, but you as a person do not, and making sure your finances fit you rather than some subsidy or handout is the most important thing.