Uncertainty around tax rises makes investors feel unprepared

Uncertainty around tax rises makes investors feel unprepared

Speculation around potential tax rises is adding to investors’ concerns that they may not be prepared for them, Jason Hollands has said.

The managing director at Tilney, said the “white noise” that confronts the public around where potential tax rises might come from was compounding a feeling of being unprepared.

He said: “You pick up a newspaper every week and there’s another speculative story about what may or may not happen. 

“Some of these stories are kite flying exercises fed to the media to test out how potential reforms would go down, some come from think tanks and others are just perennial worries.”

His comments come as research from Barclays Wealth released today (September 17) showed a third of adults felt unprepared for tax changes.

In a survey conducted in July, among 2,000 respondents over the age of 18, 30 per cent said they felt unprepared for post-pandemic tax changes, rising to 39 per cent for millennials (those between 25 and 40 years old).

Just 16 per cent of those surveyed said they had planned ahead and felt prepared for any tax changes the government might implement to help with pandemic recovery.

The research showed 37 per cent were worried about changes to income tax affecting their savings and investment goals, with a further 23 per cent worried that a capital gains tax would impact their investment goals.

Anthony Ward, head of wealth planning at Barclays Wealth, said: “As the UK battles with increasing national debt due to the pandemic, further tax increases seem likely, making financial planning more important than ever.”

Ward said the ‘golden rules’ for financial planning were understanding a person's financial goals by imagining their life ten years from now and establishing how much capital they might need to achieve this, as well as writing a will which could ultimately allow them to reduce their inheritance tax liability.

Topping up pensions was another tip, and Ward highlighted the basic rate of tax relief at 20 per cent. Finally, he recommended considering tax diversification.  

He said: “For example, a self-invested personal pension is very tax efficient, however, it would be unwise to hold all your investable assets in any one product or structure. Instead, you can achieve tax diversification by using various different structures thus giving you the flexibility to adapt to changes in tax policy or unknown life events.”

Ben Yearsley, investment consultant at Fairview Investing, said for his clients it was business as usual - for now.

“There isn't much apart from the usual [clients] can do. [There] doesn't seem to be much concern from clients at this stage though...probably as it's all in the future!”

Are tax rises on the horizon?

All eyes are on Rishi Sunak’s budget next month for tax changes after a surprise increase in National Insurance contributions was voted through last week.

The policy will place a 1.25 percentage point increase on National Insurance contributions alongside a 1.25 per cent dividend tax, in order to pay for a social care cost cap.