Investors cashed in £4.2 billion from equities before the 2024 Autumn Budget. Should you have?

Ahead of the Autumn Budget, held on 30 October 2024, you might have been concerned about your Capital Gains Tax (CGT) bill rising.

Some forecasters expected the chancellor, Rachel Reeves, to raise CGT rates in line with Income Tax, which would ultimately serve to impose harsher taxes on investors.

Perhaps you were even one of the UK equity investors who pulled a total of £4.2 billion from the market in October, largely in anticipation of Reeves’ “tax raid”. MoneyWeek reports that UK and global equities were most affected here.

The chancellor did raise CGT in the Budget, although not as steeply as many predicted, bringing non-property rates in line with property rates and reducing certain reliefs available to business investors.

Read more: Will you pay more CGT as a result of the 2024 Autumn Budget?

You might be wondering: “Was it wise to cash in ahead of the Autumn Budget?”

Keep reading to explore this topic and find out more.

Investors who sold assets pre-Budget might have crystallised losses

There will always be events on the horizon that might make you nervous as an investor. From political elections to geopolitical conflict, markets react to all sorts of changes, and it’s easy to read headlines about these happenings and worry about what might happen to your wealth.

But if you had not planned to dispose of assets in 2024, yet did so anyway in a panic after reading about potential tax uplifts in the Budget, you might now regret your actions.

The below graph shows the performance of the UK FTSE All-Share index during the month of October 2024.

Source: London Stock Exchange

As you can see, there was plenty of volatility within such a short time period. Depending on the time you had chosen to cash in your FTSE All-Share investments, you might have experienced a loss on some of your holdings. This is especially true if you had done so between 26 and 30 October.

Indeed, panic-selling often results in the crystallisation of losses. If your holdings had experienced a downturn that month, week, or day, you’d solidify those losses by selling, rather than remaining invested and giving your assets time to recover and grow according to your long-term goals.

After an initial reaction to the 2024 Autumn Budget, UK markets quickly stabilised

While UK markets evidently dipped in the lead up to and the aftermath of the 2024 Autumn Budget, this downturn didn’t last long.

As you can see below, the FTSE All-Share quickly recovered during November 2024. If you had sold your shares in October, your portfolio would have missed out on this recovery.

Source: London Stock Exchange

It’s important to remember that, in the wake of volatility, remaining invested and seeking professional investment guidance could be the most appropriate option.

Chopping and changing your investments based on headlines, rather than staying the course, might only serve to weaken the growth of your portfolio over time.

Missing out on the market’s good days could harm your portfolio over time

You might be thinking: “Surely investors who cashed in equities ahead of the Budget can just reinvest the money afterwards?”

This is true – they can, and it’s likely that many have done so. Yet it’s important to understand just how detrimental missing market upticks – even a few days’ worth – could be to your wealth.

Take this study, conducted and published by Visual Capitalist in 2023.

Visual Capitalist simulated a $10,000 investment in the US S&P 500 over the period between January 2003 and December 2022. The research discovered that:

• If the investor had stayed the course for the entire time frame, their investment would have grown to $64,844.
• If they had missed just 10 of the market’s best days due to selling shares (equal to disposing of assets approximately once every two years) the investment would have grown to $29,708, which is $35,136 short of its full growth potential.
• Missing 60 of the market’s best days would have incurred a loss, leaving the investor with just $4,205.

As you can see from this data, each and every time you sell due to fear and panic, you’re potentially harming your portfolio’s growth potential by thousands of pounds.

Bespoke financial planning can help you manage your tax liability and achieve your goals

We fully understand that you might be concerned about rising CGT bills, among other fiscal policy changes announced in the Budget. Business owners and investors may be particularly affected by these announcements.

Read more: Your Autumn Budget update – the key news from the chancellor’s statements

Our financial planners can:

• Review potential CGT bills you might incur when disposing of assets, in light of the chancellor’s announcements
• Look at your overall tax liability and find ways to reduce it, where possible
• Offer bespoke investment advice over a period of many years
• Help you form a strategy for a successful future, including retirement and estate planning.

Reach out today to discuss anything you’ve read here. We can help.

Email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.

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