Inheritance tax is dominating clients’ concerns ahead of the upcoming Budget, says AJ Bell.
New research from the investment platform found 57% of advisers cited further cuts to inheritance tax breaks and allowances as clients’ biggest concern.
Almost nine in 10 (87%) advisers said IHT threshold freezes and the inclusion of unused pensions in IHT from next April were the biggest pain points for clients in the current environment.
Rachel Vahey, head of public policy at AJ Bell, said: “Since announcing at the 2024 Autumn Budget that unused pension funds would be included in IHT calculations, the government has drip-fed details of how the new process will work in practice.
“It’s becoming ever clearer it has settled on a route that causes admin distress and heaps mountains of pressure on personal representatives after they lose a loved one.
“This is despite widespread condemnation of the chosen process from the pensions industry and elsewhere, as well as multiple suggestions of far better ways to administer the policy without subjecting personal representatives to more paperwork, more complexity and more cost at an already difficult time.”
Additionally, AJ Bell said almost half (47%) of advisers said a potential cut to the maximum pension tax-free cash lump sum was concerning clients. The lead up to the past two Budgets saw months of fevered speculation around pension tax free cash, triggering around £14 billion in excess withdrawals in 2025 as panicked pension savers accessed their pension pot.
Vahey continued: “Advisers will have played a key role in helping clients to seriously consider their options, rather than making knee-jerk reactions based on pre-Budget rumours – but until the government commits not to alter pension tax-free cash, this trend is likely to continue.”
Beyond pensions, AJ Bell said the introduction of a wealth tax was worrying clients (39%), as well as hikes to income tax or National Insurance contributions (36%) and a reduction to pension tax relief (27%).
Vahey added: “The reality is that financial advice has never been more important. But as with any Budget, it’s vital that advisers help clients to filter the noise and avoid knee-jerk reactions based purely on speculation.
“It may sometimes be the case that clients fear the tax changes that in practice may not affect them as badly as they think, if at all. Advisers will be instrumental in identifying the measures that will apply to each client, whilst supporting them to make good decisions in line with their long-term plans and objectives.”
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