Wealth advisers battle client fears as Budget tax speculation grows

Wealth advisers are being hit with an influx of questions over tax changes as speculation over what may be announced in next month’s Autumn Budget continues to grow.

Wealth and asset managers across the City are reporting a surge in conversations with affluent clients who are becoming worried about potential tax changes which could affect pensions, inheritance tax and capital gains tax.

Nearly 50 per cent of wealthy clients surveyed by Rathbones with at least £250,000 in assets admitted uncertainty surrounding pension policy has made them anxious and left them asking for additional support to make financial decisions.

Meanwhile, 58 per cent said changes to tax rules affecting their retirement income was a leading concern.

Rising fears come amid a growing burden on UK public finances. Government borrowing rocketed to £18.3bn in August, a near 20 per cent rise compared to the prior year, and £3.5bn above official forecasts. 

The rising pressure has led to increased speculation over what chancellor John Healey could do to secure additional sources of revenue.

Speculation has, ironically, been heightened by minimal leaks from the Treasury, unlike under Healey’s predecessor Rachel Reeves, leaving taxpayers with little information over which taxes could be hiked.

The widest shoulders

Brits are already bracing for a shake-up to the inheritance tax regime in April 2027. 

Pensions will be pulled into the scope of the tax for the first time, meaning more middle-earners who are being dragged into higher bands by frozen thresholds, will be affected. 

But wealth managers advising high net-worth clients are also becoming increasingly concerned over their clients shouldering an increased burden.

Ian Dyall, head of estate planning at Evelyn Partners, said: “In terms of our client base, most have got inheritance tax liability already so it’ll obviously increase…significantly in some cases.

“Some of our clients have got millions in pensions.”

The possible series of small changes across personal tax policy has also left wealth managers facing concerns of how to manage multiple policy alterations.

Jay Lawrence, investment director at Rathbones, said: “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.”

Preparing advisers

Many firms are now working to prepare advisers to deal with both the increased questioning and the looming changes to client portfolios in 2027.

Royal London has launched a new estate and inheritance planning framework, designed to help advisers identify clients who may be affected and what approach is best to take in individual circumstances.

“The proportion of an adviser’s clients impacted is likely to be much more significant because many have built up substantial pension wealth alongside other assets subject to IHT,” said Ken Scott, lead proposition actuary at Royal London.

“For advisers, this means identifying clients who may be affected… and helping families understand the practical implications of these changes. It’s also likely many advisers will assume a more active role in record-keeping and the subsequent estate calculation upon the death of a client.”

Budget clarity

Dyall added that Evelyn Partners also has plans in place to prepare advisers, completing “technical calls” to ensure they are “up to speed” with changes, alongside post-Budget analysis to ensure all advisers are aware of what was announced.

Meanwhile, St James’s Place has held a number of “technical training events” since the IHT announcement for advisers and is reviewing client wishes, as it anticipates the fallout of the overhaul of the regime to be “dramatic”.

Advisers and wealth managers are now calling on Healey to provide clarity over what can be expected in the Budget and not implement further changes to pension policy, arguing it’s involvement in IHT has already caused enough concern.

Jamie Jenkins, director of policy at Royal London, said: “Recent Budgets have attracted a great deal of speculation about further changes to pensions tax, in many cases leading to people taking regrettable actions in the absence of certainty. People need certainty to plan for their retirement, so a commitment not to make further tax changes to pensions at this Budget would be very welcome.”