The power of wealth management in uncertain times

On Thursday 4 July 2024, a new government came to power. The 30 October Autumn Statement approached, and the chancellor’s various statements regarding the inherited state of the country’s finances, highlighting unfunded commitments and a significant fiscal gap, a £22bn ‘black hole’, raised speculation that significant change could lie ahead. This translated into taxation measures intended to stabilise the country’s finances and deliver economic growth.

The question of whether pensions will form part of an estate for inheritance tax (IHT) purposes has now been answered in the affirmative. This was accompanied by increases to employer national insurance (NI) and capital gains tax (CGT) rates while caps were reduced on business property relief (BPR), agricultural property relief and AIM shares.

However, these measures do not equate to the silver bullet that is going to magically fix the problems highlighted by the government, as there are plenty of external factors that could further impact these in the short and medium term.  

The challenges of tightening global trade policies and ongoing international conflicts — notably between Ukraine and Russia, and more recently India and Pakistan — point to choppier waters before UK PLC is back on an even footing.

On the surface of the autumn statement, this could read like a disastrous development for investors who have, for many years, planned towards their goals based on a prescribed set of rules. Rules that now seem, on the surface, unceremoniously turned upside down.

Simply put, we can characterise the changes announced in the camp of things that will be, but also some are things that maybe.

For example, changes to employer national insurance can only be avoided if a business does not have any employees, otherwise this tax will be paid.

The maybe camp of tax increases includes capital gains, caps to business/ agricultural property relief and aim shares as well as unused pensions being included in estates for inheritance tax planning. The “maybe” here refers to whether the tax is paid, not whether it will come into existence, as you have a lot more control over how much tax you pay in this regard — or potentially you don’t pay any tax at all.

Whilst policy changes factor in assumptions around human inertia when forecasting revenue received, the reality can be vastly different, as the government may find. This has been aptly demonstrated in the decline in capital gains receipts for 2025 which can be explained by individuals simply keeping hold of the asset and not realising the tax-generating gain.

Whilst the point on whether to realise the gain or not may seem simple, taxation and investments are complex areas to consider and understand. There can be trade-offs that are hidden or overlooked. Knowing why decisions are made, and more importantly deciding when to make them, is where knowledge, experience and expertise comes into play.

Investors, unburdened by industry knowledge, could make decisions in haste. Increased tax-free cash withdrawal requests from retirement accounts post 30 October are growing evidence that sight of the long-term goal may be coming increasingly blurred. Added to this is the danger of a severely damaging event whereby funds are withdrawn during a market downturn — like we saw earlier this year following the announcement of “reciprocal” tariffs from the Trump administration. This could make a mis-timed withdrawal impossible to recover from, and derail long held future plans that have been painstakingly managed through the preceding years.

It is important that the horizon investors have originally set a course for remains at the forefront of their minds, and whilst the current climate may have drifted plans slightly off course, with insightful stewardship, they can be corrected.