Financial advisers believe that changes to capital gains tax (CGT) are the most likely tax reform that the government will target in the Budget on 30 October, research from Royal London has found.

An increase in CGT was expected by 78 per cent of advisers, while half (50 per cent) predicted there would be changes to pensions tax relief.

More than a third (38 per cent) felt that the Chancellor would introduce income tax on defined contribution (DC) death benefits for someone who dies before the age of 75.

A quarter (25 per cent) forecast a change to salary sacrifice for employer contributions, while just 8 per cent thought the Chancellor would make changes to ISA limits.

Royal London asked advisers what they would do if they were Chancellor and had to save money on pensions, with 57 per cent saying they would reduce tax relief on contributions, 22 per cent would make changes to national insurance, and only 8 per cent would reduce the level of tax-free cash to £100,000.

More than a third (36 per cent) of respondents had been proactively contacting clients about the Budget, while over 80 per cent of advisers had seen an increase in the number of clients contacting them about taking action in relation to their pensions.

Of those getting in touch, 94 per cent of clients who had not taken a tax-free lump sum from their pension were asking about taking it all ahead of the Budget.

Furthermore, 40 per cent of advisers had clients who had planned to take tax-free cash in stages and move the rest to drawdown or UFPLS, but now wanted to take the full amount.

While most advisers predicted a change to CGT, they had seen a smaller proportion of clients (41 per cent) getting in touch to take action in relation to assets that might be subject to CGT.

“Every fiscal event comes with its fair share of speculation, but this one is shaping up to be the most talked about Budget for years, with most commentators now expecting a range of tax changes to be announced,” said Royal London director of policy, Jamie Jenkins.

“At this stage, most advisers are fully expecting changes that will affect their clients and the advice they provide to them, but the speculation is shifting on a daily basis, leaving advisers in a difficult position.

“Meantime, it’s clear that clients are getting anxious about possible changes that may affect their finances, and some are bringing forward elements of their retirement plans.”

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