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As speculation grows over what tax measures could feature in the Autumn Budget, Rathbones, one of the UK’s leading wealth and asset management groups, reports a surge in conversations with affluent clients concerned about the future direction of UK tax policy.
Rather than focusing on a single wealth tax, many are increasingly worried about the cumulative impact of possible changes affecting pensions, inheritance tax, capital gains tax and other areas of personal taxation.
Those concerns are reflected in new Rathbones research among 2,036 affluent UK adults with at least £250,000 of investable assets. The study found that 58% rank changes to tax rules affecting their retirement income among their leading retirement concerns, while 49% say uncertainty around pension policy makes them anxious and leaves them needing additional support when making financial decisions.
Faye Church, Chartered Financial Planner and Head of Rathbones Guildford Office, says: “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. Tax matters, but long-term objectives, family circumstances and financial wellbeing should remain the primary focus."
The growing tax burden
The concerns come against a backdrop of growing pressure on the UK's public finances. Government borrowing reached £18.3bn in August, almost 20% higher than a year earlier and £3.5bn above official forecasts, increasing speculation that the Chancellor could look for additional sources of revenue in the Autumn Budget.
At the same time, HMRC data shows Britain is becoming increasingly reliant on a relatively small group of taxpayers. The top 1% of Income Tax taxpayers received 12.4% of taxable income in 2023/24 but were liable for 27.2% of all Income Tax liabilities. Put another way, more than £1 in every £4 of Income Tax paid comes from just 1% of taxpayers.
The concentration of tax revenues among higher earners is also being amplified by fiscal drag.
Britain's tax advantage narrows at higher income levels
Rathbones' analysis also suggests the UK's tax advantage relative to much of Europe largely disappears at higher income levels.*
For average earners, the UK maintains a lower overall tax burden than many comparable European economies. However, calculations based on OECD data suggest the UK's tax wedge rises to around 50.2% for someone earning five times the average wage, broadly in line with the 50.4% average across comparable European countries.
This means Britain remains relatively competitive for average earners while relying more heavily on those further up the income spectrum.
Jay Lawrence, Investment Director at Rathbones, adds: “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. They recognise the pressure on the public finances and understand that governments need to raise revenue, but there is growing uncertainty about where that revenue will come from and who will ultimately bear the cost.
"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.”
