Investors have been told to exercise caution when taking actions ahead of the Autumn Budget, with Hargreaves Lansdown outlining planning moves that investors could come to regret.

“Endless speculation about the Budget has persuaded an awful lot of people they need to take action now, to protect themselves from whatever the Budget holds in store,” commented Hargreaves Lansdown head of personal finance, Sarah Coles.

“Capital gains tax (CGT) threats, tax on pensions and inheritance tax concerns have all thrown people into a state of panic, and there’s a risk they’ll rush into things that come back to bite them.

“There are some eminently sensible steps you can take now – like paying into a pension or moving assets into an ISA. However, there are also 10 steps that could seriously backfire - some of them leaving you far worse off than if you’d left things as they were.”

The consultancy warned that taking tax-free cash out of a pension in anticipation of changes to the tax-free lump sum could damage future income and reduce any inheritance left to a family.

Furthermore, flexibly accessing pensions will trigger the money purchase annual allowance, which could reduce the amount savers can pay into their pension from up to £60,000 to as low as £10,000.

Investors looking at potential CGT changes could be considering realising capital gains beyond their annual allowance, but this “comes with a risk” because it could result in paying more tax than needed.

“The Budget is likely to keep an annual CGT allowance, so investors with stocks and shares would still be able to realise gains slowly over the years and pay no tax at all.

“Alternatively, you might find that the CGT rate doesn’t rise in the way you expect, so you’ll have paid the extra tax for nothing. It’s why you need to think very carefully before signing up to paying a tax you may never need to fork out for.”

Investors may have assets that have gained a large amount, tempting them to sell off to use their CGT allowance, and others that have made a loss that they want to retain until they can get more of a tax benefit from their losses.

However, if the investment that is rising has far better fundamentals and the one that’s on the slide is in terminal decline, they risk ending up saving tax but losing money overall.

Other actions investors may come to regret included: Not calculating CGT on Bed & ISA, selling and buying the same assets within 30 days, putting property into trust for inheritance tax purposes, gifting money when they cannot afford to, and taking equity release out on a property.

Furthermore, rumours that inheritance tax could rise has led to some people to worry they need to take action to protect some of their assets from the tax service after they die, Coles stated.

“Some might consider signing their property over to their children in the hope it won’t be counted for inheritance tax purposes,” she continued.

“If you give it away and move out, and never see any benefit from it, then under the current rules, if you live for seven years, it will pass out of your estate for tax purposes.

“However, if you get any benefit from it, then it’s considered as a ‘gift with reservation of benefits’, so it’s not counted as having been given away at all.

“This can happen if you continue to live there without paying a market rent, if you give it away with conditions attached – like them not being able to sell, or you get any benefit from it.

“This might apply if you give away a holiday home but keep the right to stay there without paying rent. It means you could pay all the legal costs for a transfer, and not get any tax benefit from it at all.”

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