Chancellor urged to back long-term prosperity in upcoming Budget
A leading UK wealth manager has urged Chancellor Rachel Reeves’ to back wealthy individuals focused on building wealth and increasing UK investment in the November Budget.
Rathbones has called on the government to offer support to wealthier Brits in this month’s Budget in order to drive long-term, sustainable investment and end the cycle of weak growth and rising taxes that have plagued the UK economy in recent years.
Camilla Stowell, chief executive of wealth at Rathbones, said: “Our clients are the people whose ambition and success underpins the prosperity of businesses, organisations and communities across the UK.
“If they aspire and succeed in their professional lives, businesses and personal decisions, the whole country stands again. But many now feel anxious about the future.”
Taxing high earners
Speculation surrounding increased taxation on high earners and businesses has gained speed in recent weeks, as the Treasury looks to fill an estimated £20bn fiscal hole.
Potential policy decisions included a ‘mansion tax’ which would see owners of properties worth £2m or more face a charge of 1 per cent on anything over that amount, and a wealth tax, which could place a 2 per cent levy on individual assets above £10m.
Rathbones called on the Chancellor to ignore the “siren song” of a wealth tax on high earners, estimating that £100bn could leave the UK or move into less productive assets, such as gold, in order to avoid increased taxation.
However, according to the Institute for Government, a wealth tax is estimated to raise £24bn a year.
The Treasury has pivoted to taxes that affect businesses and high earners as it reiterates its “iron clad” commitment to its fiscal rules, including not raising VAT, income tax or national insurance.
Earlier efforts to raise finances including plans to scrap the winter fuel payment and reduce welfare spending, but both failed following public backlash.
Proposed policy changes
The wealth management firm has urged the Chancellor to strengthen incentives for pension saving, as the Treasury reportedly considers removing the higher rate tax relief on contributions and re-introducing the lifetime allowance.
It estimates that reductions to tax relief could reduce pension savings from higher-rate taxpayers by over £50bn over five years, as the frozen tax threshold pulls more people into higher bands.
Rathbones also called for more generous capital allowances and reformed business rates, as well as prioritising public investments into regions and sectors that need it the most, particularly investment and infrastructure.
Oliver Jones, head of asset allocation at Rathbones, said: “Short term fixes like cutting pension tax relief or introducing a wealth tax risk draining the capital from the very businesses and individuals who drive growth.
“The government should focus on creating a stable , predictable environment that encourages people to save, invest and build for the future.”
The firm hailed fresh wealth taxes as a “major disincentive” for businesses and professionals who are looking to set up or keep their companies in the UK.
The firm also echoed calls of other industry figures in encouraging Reeves’ to abolish stamp duty land tax, blaming it for “suffocating activity” in the housing market, and discouraging private investment and spending.
Stowell said: “It’s not our role to resolve every economic challenge, but as one of the
UK’s leading providers of wealth management… We urge the Chancellor to focus on policies that encourage aspiration, investment and growth.”