Tax uncertainty is hurting Financial Planning

The uncertainty around future tax changes is taking a toll on financial confidence, according to new research.

Nearly eight in ten people (78%) said the uncertainty affects their Financial Planning or investment decisions.

The survey of customers at wealth manager Quilter found that one in three (33%) reckon tax uncertainty significantly impacts their decisions, while a further 45% said it affects them slightly.

Only 18% said it has no impact at all. The findings come ahead of the highly-anticipated November Budget which is expected to include a raft of tax changes.

Inheritance tax (46%) and income tax (41%) ranked as the taxes causing the greatest concern among respondents. Following Rachel Reeves’ unusual pre-budget speech the fear could well be now be heightened further.

Despite the complexity of the tax policy landscape, respondents sent a clear message about the need for transparency. Nearly half (48%) said they would prefer any future tax rises to come through explicit rate changes, rather than stealthier measures like extending frozen thresholds or reducing allowances.

The survey also highlighted the risk of behavioural shifts if current tax incentives are altered. If the government were to reduce or remove the tax benefits of salary sacrifice arrangements when it comes to pensions, one in four respondents (25%) said they would stop using it altogether, while nearly one in five (19%) said they would contribute less.

Views were similarly divided on other potential reforms. Almost half (46%) opposed aligning capital gains tax with income tax rates, while the same proportion resisted replacing the current seven-year inheritance gifting rule with a lifetime cap on tax-free gifts.

Rachael Griffin, tax and financial planning expert at Quilter, said: “These findings underline just how sensitive Financial Planning has become to the constant swirl of budget speculation. People crave stability and clear communication, but the cycle of rumour and reform is fuelling anxiety and indecision.

“The fact that nearly eight in ten people say tax uncertainty is influencing their investment or other Financial Planning shows just how important clarity has become. Many are trying to make long-term decisions in an environment where the rules could change with little notice. That makes the role of professional advice even more vital in helping people stay focused on their goals rather than reacting to every headline.”

• The survey of 267 Quilter customers was conducted in October.