Financial advisers warn of mounting anxiety as investors brace for potential "stealth taxes."
They say uncertainty is fuelling defensive moves across portfolios.
Investors are growing increasingly anxious as the Autumn Budget approaches, with widespread fears about potential government raids on retirement savings and investment vehicles.
Concerns over possible "stealth taxes", which could significantly impact pension wealth through regulatory changes, are fuelling the stress being felt ahead of the budget by many.
The prospect of reduced tax-free lump sum allowances has emerged as a primary worry among savers, alongside potential reforms to inheritance tax rules that could affect wealth transfer planning.
Investment account holders are also expressing alarm about possible cuts to ISA contribution limits - a move would restrict their ability to shelter returns from taxation.
These apprehensions reflect broader uncertainty about the government's fiscal strategy, with investors seeking clarity on how long-term planning might be affected by measures targeting savings and pensions.
Neil Wilson, an investment strategist at Saxo UK, said: "Investors are increasingly concerned about potential 'stealth taxes' through changes to pension rules, particularly cuts to the tax-free lump sum, further inheritance tax reforms, or higher capital gains tax."
Investors are panicking about proposed fiscal changes damaging their investments.
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He highlighted that "a major concern is possible reductions to ISA allowances." Many clients are seeking guidance on whether they can continue accessing stable, low-risk returns through their Stocks & Shares ISAs.
This uncertainty has sparked increased demand for money market funds, with investors searching for cash-equivalent returns within tax-advantaged accounts.
Wilson's observations reveal a pattern of defensive positioning among investors.
Many are preparing for potentially significant policy shifts.
ISA reform is still on the cards
| GETTY/GBNEWSFinancial experts are urging caution against knee-jerk reactions to speculation, particularly regarding pensions.
Wilson emphasised that investors should "avoid making hasty withdrawals" from retirement funds.
The danger of panic-driven pension draw-downs lies in their tax implications.
Withdrawing substantial amounts in a single tax year risks pushing individuals into higher income tax bands, reducing the net value of their savings.
"The first thing is to avoid making hasty withdrawals. Taking large sums in one go can push you into a higher income tax bracket, eroding pension value and, in extreme cases, depleting funds too quickly. Careful planning around withdrawals is essential."
In severe cases, impulsive actions could exhaust pension pots far earlier than planned, with strategic withdrawal planning crucial to preserving retirement wealth.
Concerns also extend to broader investment strategies, potential limits on salary sacrifice schemes are causing unease.
Wilson noted that clients fear these arrangements, which enhance both pension contributions and ISA funding, could face restrictions. This would compel investors to redirect more funds into pensions or self-invested personal pensions.
Additional threats loom over investment taxation - possible reductions to capital gains tax thresholds are already creating anxiety among portfolio holders.
The possible elimination of dividend allowances is another significant worry.
Meanwhile, the frozen Personal Savings Allowance continues to erode tax-free interest earnings as rates remain elevated.
These pressures are forcing investors to reconsider their allocation strategies ahead of the Budget as investment professionals are counselling clients to resist panic selling.
Leaving money to charity is completely free from inheritance tax | GETTYWilson stressed: "Markets can recover, and remaining invested helps capture long-term growth." He urged investors to maintain positions through potential volatility.
Possible inheritance tax changes, including lifetime gift caps, might prompt premature wealth transfers; such moves could compromise donors' financial security.
Rather than rushing into decisions, investors are exploring ways to maximise existing tax-efficient vehicles, as the focus has shifted to optimising current ISA holdings and portfolios.
Wilson reported clients are increasingly interested in "actively selecting funds and stocks that offer reliable income and dividend growth within tax-efficient wrappers."
They are seeking to extract maximum value while navigating an uncertain regulatory landscape.