As households brace for potential tax increases outlined in the upcoming Budget, many are turning to familiar strategies to safeguard their savings. A recent survey indicates a significant number of people are channeling funds into cash and investment ISAs, as well as pensions.

Some individuals are also boosting Junior ISAs or transferring money to family members to mitigate inheritance tax implications. However, the survey reveals that many were already engaging in these financial maneuvers independently of the Chancellor’s announcement scheduled for November 26.

Sarah Coles, head of personal finance at Hargreaves Lansdown, notes, “People often consider their financial strategies ahead of such announcements, but some may not follow through or may find their plans impractical.”

Coles adds that while intentions might be more optimistic than actions, the survey data provides insight into public sentiment and planning.

The survey conducted by Hargreaves Lansdown found that 10% of UK adults have redirected funds into cash ISAs in anticipation of the Budget, while another 27% have done so recently for unrelated reasons.

Concerns are mounting that Chancellor Rachel Reeves may reduce the cash ISA limit from £20,000 to £10,000. This move is expected to encourage savers to allocate more of their annual savings allowance into stocks and shares ISAs.

Budget on 26 November: Money experts suggest sticking to moves you are unlikely to regret whatever is announced by the Chancellor

Some 7 per cent say they have added money to Isa investments because of the Budget, and another 16 per cent say they did this lately anyway.

Speculation about more changes to pensions have been rife, after Reeves announced last year she would start making unused retirement pots liable for inheritance tax from April 2027.

Some 8 per cent of people surveyed say they have put more money into their pension to take advantage of tax relief now in case of a Budget clampdown, while 12 per cent are adding to their pots regardless of future changes.

Meanwhile, 7 per cent are giving money to family to avoid inheritance tax before the this year’s Budget, while 8 per cent say they were  doing this anyway.

Official figures for the last financial year and anecdotal reports from finance firms have suggested more people are withdrawing 25 per cent tax-free cash from pensions in case the £268,275 cap is reduced.

Hargreaves found 2 per cent of over-55s say they have done this recently because of concern about the Budget, and another 4 per cent say they did it because they wanted to anyway.

People aged under 55 face punitive tax penalties for making early pension withdrawals – with rare exceptions, for example if you have a terminal illness – so beware any attempt to encourage you to take this potentially ruinous action.

No legitimate firm will help you do this, only so-called ‘pension liberation’ scammers out to loot your savings. And even if you have already lost your entire pension to fraud, HMRC will still impose heavy tax charges on you.

Hargreaves surveyed 2,000 adults, weighted to be representative of the UK population, about their money decisions ahead of the Budget.

The majority say they are taking no action. Some 40 per cent say they are not giving away money to avoid inheritance tax, while 36 per cent say this doesn’t apply to them and 10 per cent don’t know.

Two thirds of people are not putting money in cash Isas, and around three quarters are swerving stocks and shares Isas.

Sarah Coles says: ‘Rumours around the changes that might be in the Budget have been circulating for so long that some people are feeling compelled to act.

‘The good news is that many of the things they’re doing will be the kinds of steps they’ll be grateful for, but some could come with a sting in the tail.

‘By far the most common answer was to open a cash Isa. This was followed by putting money into a stocks and shares Isa and contributing to a pension.

‘In some cases, they said they were doing this kind of thing anyway, as part of their annual tax planning. The more people earned, the more likely they were to be doing this tax planning anyway.’

Coles says when you break down the percentages of those who say they have taken action because of Budget rumours, the most common was giving money away to family, followed by paying into a Junior Isa and paying into a pension.

Making ‘no regrets’ moves ahead of the Budget

Sarah Coles of Hargreaves Lansdown offers the following tips to savers.

– Paying into a cash Isa is a great way to protect your savings interest from income tax. If you change your mind, and want to invest instead, you can just switch this into a stocks and shares Isa.

– Paying into a stocks and shares Isa is a highly sensible way for investors to protect themselves from potential hikes in capital gains tax or dividend tax,

– If you have assets outside an Isa or pension, it makes sense to realise gains within your £3,000 allowance each tax year, as you go along. You can use the Bed & Isa share exchange process to sell and buy the same assets immediately in an Isa – which protects them from capital gains tax too.

– Putting money into a Junior Isa enables families to put money away for young people, protecting growth from tax, and when they turn 18 the money will roll into an adult Isa.

– If you’ve got the spare cash, topping up your pension can boost your retirement resilience, with tax relief available at your highest marginal rate a compelling incentive. 

Potential rumours of a flat rate of relief – say 30 per cent across the board – could boost the savings of basic rate taxpayers in the future but would be bad news for higher and additional rate taxpayers.

– Taking tax free cash before the Budget to beat a potential raid can have serious repercussions, with the potential to rip money out of a very tax efficient environment and leave it exposed to taxes such as capital gains or dividend tax, missing out on investment growth and eaten away by inflation.

– Giving away cash to avoid inheritance tax needs to be approached with caution – you are doing it to spare your family a nasty tax bill, but you run the risk of giving away too much and leaving yourself short of cash later on.

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