Affluent clients are concerned about the future direction of UK tax policy as the Autumn Budget approaches, warns Rathbones.
According to the wealth manager, many are increasingly worried about the cumulative impact of possible changes affecting pensions, inheritance tax, capital gains tax and other areas of personal taxation.
Almost three in five (58%) ranked changes to tax rules affecting their retirement income among their leading retirement concerns, while 49% said uncertainty around pension policy makes them anxious and leaves them needing additional support when making financial decisions.
Faye Church, chartered financial planner at Rathbones, said: “One of the clearest messages from clients is that uncertainty itself has become a challenge. People can generally adapt to tax changes when they understand them. What is much harder is making long-term decisions when the direction of policy feels unclear.
“For many clients, the question is not simply how much tax they might pay, but whether the plans they’ve spent years building will still achieve the same goals. We’re seeing people review pension strategies, reassess unrealised capital gains and revisit inheritance plans as they consider what future policy changes could mean for their retirement income, their families and the legacy they hope to leave behind.
“Rather than reacting to every Budget rumour, clients are looking for reassurance that their plans remain flexible.”
Rathbones research comes against mounting speculation that the Chancellor may look to raise taxes to ease the growing pressure on public finances. Government borrowing reached £18.3 billion in August, almost 20% higher than a year earlier.
At the same time, HM Revenue & Customs data shows Britain is becoming increasingly reliant on a relatively small group of taxpayers, with more than £1 out of every £4 of income tax paid coming from just 1% of taxpayers.
Jay Lawrence, investment director at Rathbones, said: “What we’re hearing from clients is not necessarily concern about a standalone wealth tax. The bigger worry is that a series of smaller changes across pensions, inheritance tax, property and investments could gradually increase the tax burden on wealth over time.
“Many clients describe it as a ‘death by a thousand cuts’ rather than one dramatic policy announcement.
“The Budget debate often focuses on how much more revenue can be raised from higher earners and wealthier households. An equally important question is how dependent the tax system is becoming on a relatively small group of taxpayers.”
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