Spectre of another Labour tax raid haunts savers

Reeves has indicated she will make vast ISA reforms later this year. — Reeves has called for regulators to be more pro-growth

UK households are wary that the government might hike taxes again in 2025, a survey from AJ Bell suggests, as the firm urged the Chancellor to rule out “damaging” changes to the pensions system.

A total of 83 per cent of the 1,530 customers surveyed by the retail investment platform said they were either very concerned or somewhat concerned about tax increases in 2025.

Chancellor Rachel Reeves announced tax rises worth £40bn in October’s Budget, with the burden falling mainly on businesses.

Although Reeves ruled out further tax rises at an event in the weeks following the Budget, she has refused to repeat that commitment more recently.

“No Chancellor is going to write five years worth of Budget in their first five months…but what I can say is that we will never have to deliver a Budget like that again,” she said last month in response to a question on the possibility of further tax hikes.

Economists like Paul Johnson, director of the Institute for Fiscal Studies, predict that Reeves will have to raise taxes again in this parliament unless there’s strong economic growth.

However, AJ Bell warned that even the prospect of tax rises could be enough to put a brake on growth.

“The spectre of further tax rises would likely impact on consumer confidence, which has taken a huge knock in recent months due to Labour’s gloomy economic messaging,” the firm said.

The investment platform urged the government to rule out any further changes to the taxation of pensions. This would avoid “another period of damaging rumours”, it added.

In the run-up to the Budget there were frequent reports that the Treasury was planning a raid on pensions, including by limiting the tax-free lump sum.

“If Labour is ever going to realise its central ambition of turbocharging economic growth, it needs to ensure the British public feel secure enough about their personal finances to start spending and investing,” Laith Khalaf, head of investment analysis at AJ Bell, said.

“Until the government provides some reassurance and stability in terms of the tax on long-term savings, they can’t expect retirement savings in the UK to flourish,” Kalaf added.