This is your window of opportunity to get in ahead of the budget, with sensible moves that take advantage of the tax rules as they are right now. We just need to be careful not to panic, smash the window, and damage ourselves and our finances clambering through it.

This is your window of opportunity to get in ahead of the budget, with sensible moves that take advantage of the tax rules as they are right now. We just need to be careful not to panic, smash the window, and damage ourselves and our finances clambering through it.

Pay into a pension

Pension allowances provide a powerful incentive to save for the future and we’ve seen a surge in people maxing out their SIPPs so far this year in response to rumours that the Chancellor might have the annual allowance or tax relief in her sights.

As a higher or additional rate taxpayer, you're benefiting enormously from tax relief that would see a £60,000 contribution cost just £36,000 for a higher rate taxpayer and £33,000 for someone paying additional rate tax. 

If you haven’t been in a position to contribute much to a pension in recent years, then you can scoop up any remaining allowances from the previous three years through carry forward. This has the potential to turbo charge your contribution up to a maximum of £200,000 this tax year (provided you earn at least that much per year).

Don’t worry if you don’t have enormous sums to put away though, as even more modest sums will still benefit from tax relief, and time in the market will see it grow and build your retirement resilience. If you’ve got a bit of extra money to invest now that the children have left home or that the mortgage is paid off, a contribution to your SIPP can be a great idea. It’s also worth saying that pensions are not liable to capital gains or dividend tax either, so they remain a hugely tax efficient way to save.

Pay into an ISA

HL clients are snapping up stocks and shares ISAs ahead of the budget, and more are maxing them out as rumours of potential changes to capital gains tax do the rounds. The number putting their full £20,000 allowance into stocks and shares ISAs so far this tax year is up 31% compared to a year earlier.

It’s a straightforward step that can make a big difference. By investing through a stocks and shares ISA, you can avoid CGT completely, both when you sell up and cash out and whenever you rebalance your portfolio as you go along. Even the fact that you don’t have to worry about putting gains on these investments into your tax return can be lifechanging. You also protect your investments from dividend tax.

There are also concerns that the government could cut the ISA allowance. This would be a retrograde step. When people are considering branching out into investment, they already have to get to grips with a whole new world, so the last thing they need is for tax to become another blocker – and another thing to get their head around. If the ISA allowance is cut, it would send the wrong signal, risking more potential investors closing the door to these opportunities. However, if this is a concern, you have the money available, and were planning to invest, you can do so sooner rather than later, ahead of the Budget.

Take out a Junior Isa for a child

The number of HL clients maxing out their Junior ISA has shot up by 40% in the current tax year, as they secure the allowance while they have certainty, and protect the investments from tax.

JISAs offer a triple tax bonus. They grow free of capital gains tax and dividend tax, which might not be a major concern for an infant, but could make an enormous difference as they get older. They also fall outside the rule that money invested by parents for their child will be treated as theirs for tax purposes when it produces more than £100 of income a year.

They also come in handy for anyone who is concerned about inheritance tax. You may be keen to give money away, but not want to entrust it to someone at a young age. A stocks and shares Junior ISA for a child under 18 will count as being handed over immediately for IHT purposes, but will be tied up until they’re old enough to make sensible choices with it. 

Some people will wrestle with the fact that the money belongs to the child at the age of 18. However, the vast majority of HL JISA clients remain invested a year after their 18^th birthday. You also have to ask whether it’s any riskier to give young adults a lump sum they could make a mistake with, than it is to leave them to make mistakes with nothing to fall back on.

Use share exchange (Bed and ISA) for existing investment

ISAs aren’t just useful for brand new investments. If you have assets outside an ISA or pension, you can use the share exchange (Bed & ISA) process to sell assets outside an ISA – within your £3,000 CGT allowance – and move them into the ISA wrapper.

This process has a ridiculous name, but is an eminently sensible approach for those with portfolios stretching beyond ISAs. It effectively allows you to sell assets and buy the same ones immediately within the ISA wrapper. That way you don’t have to worry about either dividend tax or CGT on these investments at any point.

Use your CGT allowance on share gains

You can often choose when to take a capital gain, so you can do so this tax year and make £3,000 of gains tax free. You won’t regret realising your gains gradually, and spreading them over a number of years to keep your tax bill down. To reset the CGT, you can either sell and buy back within an ISA immediately (Bed & ISA), stay out of the market for 30 days and buy the same assets again, or consider new investments and buy back in straight away.

You might want to realise more while you know where you stand in tax terms. However, this isn’t guaranteed to save tax – it just means you can choose to realise the gains when you have certainty over what they will cost. it’s vital not to rush into any decisions, or allow the tax to force you into decisions you wouldn’t otherwise take.

Transfer assets to a spouse

If you’re married or in a civil partnership, you can transfer the ownership of some assets to your spouse or civil partner and there’s no CGT to pay on the transfer. This doesn’t reset the tax to zero. However, they have their own allowances to take advantage of, so they can use their annual CGT allowance to cut the tax bill. If they pay a lower rate of income tax, they’ll also pay at least some of the CGT at a lower rate too.

They can also wrap investments in their annual ISA and pension allowances, to ensure as much of your collective wealth is invested as tax efficiently as possible.

Use your gift allowances

You can give away up to £3,000 a year under the current rules and it’ll come out of your estate immediately for inheritance tax purposes. Giving with a warm hand is better than giving with a cold one. Not only is there an opportunity to save inheritance tax, but you will also be around to see your family benefit from your gift, and can help ensure the money is put to the best possible use.

And one you may come to regret…

One of the budget rumours being bandied about is that there could be some sort of change to tax-free cash on pensions. There have been no indications from the government that this could be in the frame, but there’s still a risk it could spark people to withdraw tax free cash, which they could end up sorely regretting. 

They could end up exposing themselves to needless tax, because they’re removing assets from a pension, where they grow tax-free, and putting them into a taxable environment. If they switch into savings, they’re seriously hampering its growth potential in the coming years.

They could also devastate their income plans for later. Whether they’re planning to buy an annuity or draw a percentage of the pot, the more they take as cash, the lower their ongoing pension income will be. Then there’s inheritance tax. Money kept within a SIPP or pension is usually not subject to inheritance tax. Taking it from this environment and putting it into an ISA or bank account could potentially leave their family with a nasty surprise bill.

Even if there was a tweak to tax free cash, which would seem unlikely, it’s highly unlikely to be an immediate change, giving people time to consider the full pros and cons before taking any action.

This article was co-written by Sarah Coles, head of personal finance and Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.