38% of advisers say their clients fear wealth tax

Thirty-eight per cent of advisers have suggested their clients would least like to see a one-off wealth tax in 2021, a new study by AJ Bell has revealed.

However, the investment platform also found that 62% of advisers had said their clients are fearing other tax changes more, with Capital Gains Tax (CGT) rises (19%) and a withdrawal of higher rate tax relief (19%) also high up the list.

The research, based on a survey of over 400 financial advisers, quizzed them about the tax changes their clients would least like to see in 2021, ahead of Rishi Sunak’s Budget this week.

The findings also revealed that 13% of adviser’s clients would least like to see a reduction in the Inheritance Tax (IHT) threshold, while 11% would least like to see a 1% rise in Income Tax for all taxpayers.

Financial analyst at the investment platform, Laith Khalaf, commented: “As we approach the Budget, it’s not surprising to learn that many advisory customers wouldn’t welcome a one-off wealth tax, as they are likely to be directly in the firing line. What is remarkable is that the majority of advisers thought that other tax rises would be even less popular with their clients than a wealth tax.

“This suggests that while a wealth tax may not be exactly popular with those who have sought financial advice, other tax rises are cause for significant concern too. Whether the Chancellor uses the Budget, or a fiscal event later in the year, to repair government finances, we all know tax rises are in the post.

“A wealth tax seems an outside bet at the moment, but CGT looks like low hanging fruit, seeing as the Office for Tax Simplification has specifically recommended that it be brought in line with income tax rates.”

AJ Bell’s study also found that more than two-thirds of advisers think tax rises will lead to more people seeking financial advice.

Khalaf added: “Advisers do largely think that tax rises will lead to more people seeking financial advice, which makes sense seeing as tax planning is a cornerstone of the value that financial advisers can offer to their customers.

“However, over the course of the pandemic, advisers said quite clearly that investments were the area where customers were looking for help the most, as market turmoil created both threats and opportunities.”

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