Britons with pensions, property and investment portfolios are being urged to act now, amid growing expectations that Chancellor Rachel Reeves will target wealth and asset-based taxes to plug a projected £50 billion gap in the public finances.
The shortfall follows a government U-turn on welfare, combined with higher borrowing costs and sluggish economic growth. The National Institute of Economic and Social Research (NIESR) now estimates a £41.2 billion deficit, meaning Reeves will need to find £51.1 billion by 2029 to meet her self-imposed fiscal rules and maintain a budget buffer.
Nigel Green, CEO of the deVere Group, said: “The question is no longer if taxes will rise in the UK, but how quickly and how sharply.” He expects “real, very targeted moves” on capital gains tax, dividend income, inheritance thresholds, portfolios, business assets and property.
With Labour having pledged not to raise income tax on “working people”, economists believe asset-based taxes are the most likely area for reform. Reeves has been careful with her language, leaving scope for what Green calls “significant moves on so-called ‘wealth loopholes’.”
He added: “When governments feel cornered, they move fast. The people who protect their wealth are the ones who plan early.”
NIESR’s deputy director for macroeconomics, Stephen Millard, told the BBC that raising one of the UK’s major taxes may be unavoidable: “If she wants to raise £40 billion, one of the big taxes is going to have to be increased – even if it breaks Labour’s promise about not raising taxes on working people.”
A Treasury spokesperson said: “The best way to strengthen public finances is by growing the economy, which is our focus.”
Not all experts agree that tax rises are inevitable. Arjun Kumar, CEO of Taxd and former PwC adviser, argued that “the idea Labour’s only option is to hike taxes is simply not true.” He suggested a comprehensive spending review could address the deficit, avoiding punitive measures that could “drive entrepreneurs and investment abroad”.
Kumar warned: “Punishing hardworking people with higher taxes won’t fix the economy; it will kill the growth we desperately need.”
With targeted reforms to capital gains, inheritance and dividend taxes potentially on the table ahead of the autumn Budget, financial planners are advising individuals with significant savings, investments or property holdings to seek advice now to protect their assets.
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Rachel Reeves tipped to target pensions, property and investments in bid to plug £50bn fiscal gap