The four things to do with your money before the Budget, according to experts

With just a few weeks to go until the Budget, speculation is mounting over what the Chancellor could have in store – from tax rises and changes to inheritance rules. In the past, speculation has prompted people to make significant financial decisions in the weeks before a fiscal event, sometimes with costly consequences. Ahead of the last two Budgets, for example, some pension savers brought forward plans to take tax-free lump sums amid fears that the rules could be tightened. Shorts No such changes were ultimately announced. Jason Hollands, managing director of Evelyn Partners, said he had “no doubt that many of these people will now deeply regret their decisions”. Ahead of the next Budget, any financial move made now should make sense on its own merits, rather than being driven by speculation about what John Healey might announce. Here, we look at what you need to consider about your finances before the Chancellor makes his speech. Make the most of allowances While no new changes to pensions or ISAs are expected this time around, experts are urging people to make the most of the allowances available to them now. Both ISAs and pensions are tax-efficient ways to shelter money from capital gains tax (CGT), income tax and dividend tax. For the 2026-27 tax year, you can put up to £20,000 into ISAs and £60,000 into pensions, subject to the relevant pension rules. For cash ISAs, this limit falls to £12,000 for those under 65 from April next year. Camilla Esmund, head of investor campaigns at interactive investor, said: “Anything you can reasonably and sustainably afford to put in is going to be able to grow tax-free.” Hollands agreed, saying: “Whether you are a cash saver or investor, utilising your tax-free ISA allowance is a sensible thing to do.” He added that while many people leave using their allowances until the end of the tax year, there is little reason to wait if the money is available. “In most years, markets tend to rise rather than fall, so the earlier you invest, it usually works out better because you will benefit from the effects of compound growth.” Review your financial plan Now is a good time to look at your financial toolkit as a whole to ensure your money is safe and growing. Take a look at whether your money could benefit from being moved into a higher-interest savings account or invested in stocks with better growth potential. Financial advisor David Stirling emphasised the importance of making sure your pension nominations are current – essentially, you know where your money is going if you pass – and understanding how your retirement savings fit into your wider estate planning. He also suggested that individuals consider household protection. He explained: “Rising living costs mean many families are carrying larger mortgages and higher monthly commitments than ever. “Ensuring life insurance, critical illness cover and income protection remain fit for purpose can be just as valuable as chasing the latest tax-saving opportunity.” Start investing Esmund suggested people look into getting a stocks & shares ISA if they do not have one already. She said: “Investing in the markets over the long term is more effective than holding cash over the same time period when it comes to growing your wealth. “Remember that investing always comes with risk so carefully consider your goals, stage of life, and risk tolerance. If you make sure you’re sufficiently diversified across asset classes, sectors, and regions, that’ll help spread risk. “There are educational tools to help you do that, as well as managed ISAs on the market that can do it for you. The value of cash, by contrast, erodes over time – so although cash is certainly helpful for shorter-term goals or buffers, it won’t be working hard enough for you over time.” Make use of capital gains tax exemption CGT – a tax on the profit you make when you sell an asset that has increased in value – remains one of the areas most frequently linked with possible Budget changes. Unlike income tax, VAT and employee national insurance, it is not covered by the Government’s commitment on taxes on working people so it is one area experts think changes could be made. Rates could be increased; the annual exempt amount of £3,000 – how much you can make in profit without being taxed – could be cut or there may be changes could be made to reliefs such as business asset disposal relief (BADR) and investors’ relief. Hollands said: “The previous Conservative government sharply reduced the annual exemption – down from £12,300 per annum in 2022-23 to £3,000 currently, and Rachel Reeves increased the rates of CGT in the Autumn 2024 Budget from 10 per cent to 18 per cent for basic rate taxpayers and from 20 per cent to 24 per cent at the higher and additional rates. “That has made it even more important to carefully manage exposure to CGT. However, the annual CGT exemption is often overlooked. “If you own shares or investments outside of ISAs – and haven’t used your current ISA allowance – then it might be worth considering selling your investment, making use of your CGT exemption, and then using the proceeds to fund an ISA. “This will ensure future returns are free from both CGT and tax on dividends. This process is often referred to as ‘Bed & ISA’, but the same process could also be used to fund a pension contribution.” It should be noted that when Reeves raised CGT in her 2024 Budget, the increase came into effect for any gains crystallised on Budget day onwards. This will have caught some by surprise as changes to tax rates typically come into effect at the start of the next tax year.