Savers urged to stuff pensions and Isas before Labour’s October tax grab

Savers are being told to make full use of tax reliefs to bolster their pension pots ahead of a Labour tax raid in next month’s Budget.

Financial advisers are telling clients to maximise tax-free allowances before Rachel Reeves’s first fiscal statement on October 30.

The Chancellor is expected to unveil a raft of tax raising measures to fill a £22bn “black hole” Labour claims the Tories left in the nation’s finances.

Pensions tax relief and capital gains tax are areas where the Chancellor could look to raise revenues for the Treasury, experts have predicted.

Advisers said some clients have sold assets to save on capital gains tax, and then put £60,000 – the maximum amount you can save tax-free a year – into their pensions.

Gary Smith, financial planner at Evelyn Partners, said: “People want to lock in their capital gains now and they have been using some of that cash to fund pensions and Isa allowances.

“People are worried about capital gains tax increasing and we are making our clients aware of the unrealised gains they have in their portfolio,” he said.

Investing a large sum of money into a pension now could help shield savings of high earners from increased taxes on pension contributions under Labour.

Ms Reeves was told by Goldman Sachs in a report last week that she could raise £15bn by imposing a flat rate of 20pc tax relief on pension contributions.

This would abolish the 40pc tax relief currently enjoyed by higher rate taxpayers. Ms Reeves has previously said she supports a 33pc flat rate of pension tax relief.

She also has the option of equalising capital gains tax with income tax, a move that would raise £1.5bn in additional revenue for the Exchequer, according to Treasury analysis.

Capital gains tax is currently either 10pc or 18pc for basic rate taxpayers and 20pc or 24pc for higher and additional rate payers respectively.

The thresholds could be increased in the Budget to match income tax rates, and wealthy savers have been urged to bring forward capital gains, which could be triggered by the sale of property, before any changes into effect.

Sean McCann, a financial adviser at NFU Mutual, said: “We are advising people to take advantage of the tax allowances that are there at the moment.

“If people are planning on maximising their pensions they should do it before the Budget. We are advising people that allowances are pretty healthy at the moment so if you are planning to use them do it before now.”