Posted on by Sheena Gillett

30th October 2024

Budget changes will be hard felt by retail investors and the Government must now prioritise stability to build investor confidence

Headline changes to the rate of capital gains tax and inheritance tax announced in today’s Budget risk stymying future investment and introducing unwanted confusion for personal financial planning, PIMFA, the trade association for wealth management, investment services and the financial advice and planning industry warned.

High amongst the concerns is the decision to increase the rate of Capital Gains Tax to 18% and 24%, respectively, which could have a detrimental impact on consumer willingness to save and invest in the UK. This is particularly so given the fact that substantial increases in the headline rate have not been accompanied by a change in the threshold, which has been eroded substantially over the previous 5 years.

Whilst PIMFA supports the Government’s decision to freeze the inheritance tax threshold until 2030, it notes that substantive changes to reliefs associated with this regime risk introducing additional complexity into the financial planning process as well as the potential to diminish the value of previous estate planning, specifically related to pensions.

Accepting that difficult decisions have had to be made, PIMFA has strongly urged the Government to ensure that these substantive changes are not likely to be further changed over the course of this Parliament. Whilst the changes are unwelcome, the Government needs to ensure it now prioritises stability in the taxation framework and guard against making tweaks in the future in pursuit of making up fiscal shortfalls.

Commenting on today’s Budget, Simon Harrington, Head of Public Affairs at PIMFA said: “Savers and investors will draw little consolation from the fact that measures announced in the Budget by the Chancellor today could have been worse.”

“We accept that the Chancellor has sought not to place a burden on working people (however this government chooses to define them), but in targeting Capital Gains Tax (CGT) in particular, this government risks stymying the very investment it seeks to stimulate economic growth. The government’s desire to utilise capital from pension funds to aid this has been much discussed, and we urge them not to needlessly erect further barriers for retail investors who can also play a crucial role in delivering growth.”

“Whilst we welcome the government’s extension of the inheritance tax threshold, the decision to change reliefs associated with it as well as the decision to bring pensions in scope will impact the effectiveness of people’s financial plans across the country and – in some cases, it may introduce doubts about the value of previous estate planning advice – specifically advice related to pensions. The value of financial advice is the certainty of outcome it can provide, and the confidence consumers can draw from that as a result. Constant tinkering with this regime diminishes the perceived value of holistic financial planning in particular.”

‘Going forward, the Government should prioritise stability over future changes. We have been very clear that the government should adopt a taxation roadmap for personal taxation similar to the approach outlined for businesses in this Budget. Doing so would be enormously helpful and reassure savers and investors who need the confidence to know how their wealth will be treated both in accumulation and decumulation.”

<ENDS>

NOTES TO EDITORS

About PIMFA – the Personal Investment Management & Financial Advice Association

  • PIMFA is the trade association for firms that provide wealth management, investment services and the investment and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
  • The sector currently looks after £1.65 trillion in private savings and investments and employs over 63,000 people.
  • PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families to charities and pension funds, all the way to trusts and companies.  Associate members provide professional services to the PIMFA community.
  • PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
  • PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
  • Further information can be found at pimfa.co.uk

Contact

For further information on this release or other press matters please contact:

Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk,
+44 (0)20 7011 9869 / +44 (0)7979 493225.