More than eight in 10 (83%) customers are either ‘very concerned’ or ‘somewhat concerned’ about tax increases from the government in 2025, says AJ Bell.
Despite Chancellor Rachel Reeves claiming at November’s CBI conference that there would be no more tax rises in 2025 akin to those announced in her October Budget, the failure of the Prime Minister to make similar promises has led to concerns that the Labour party will unveil further tax changes in the coming year.
Laith Khalaf, head of investment analysis at AJ Bell, warned that further tax rises would likely impact consumer confidence, which has taken a huge knock in recent months due to Labour’s “gloomy economic messaging”.
Khalaf said: “The economic tightrope that Rachel Reeves has been attempting to walk over the past six months is undoubtedly tough, and she is in no enviable position. But if Labour is ever going to realise its central ambition of turbocharging economic growth, it needs to ensure the British public feel secure enough about their personal finances to start spending and investing. This is particularly pressing in light of recent revisions to GDP data from the ONS, which revealed a more stagnant picture for growth than previously thought, with zero growth recorded for Q3 of 2024.
“The full economic effect of the measures announced in the Budget remain to be seen, but we already know that there was considerable damage to people’s personal finances spurred by the press briefing and speculation ahead of Budget day, especially in the sphere of pensions where many people across different providers accessed their pension tax-free cash and increased their pension contributions.”
AJ Bell is calling upon the government to commit to a “Pensions Tax Lock” for the remainder of this parliament, which would take changes to pensions taxation including tax-free cash and tax relief on pension contributions out of consideration at future fiscal events.
“Until the government provides some reassurance and stability in terms of the tax on long-term savings, they can’t expect retirement savings in the UK to flourish,” added Khalaf.
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