Advisers call on Chancellor to put growth ahead of tax hikes – Aegon

Financial advisers are calling for the Chancellor to focus on initiatives to boost economic growth in his March Budget, according to new research by Aegon.

With pandemic related spending causing government borrowing to climb close to all-time highs, the pension and investment provider suggested there is intense speculation about how Rishi Sunak will seek to balance the UK’s books in his March Budget.

Aegon’s study found that a majority of financial advisers (82%) believe the focus of the Budget should be on stimulus and growth measures, with 78% suggesting that tax rises at this stage would risk harming the nation’s economic recovery from the pandemic – echoing similar recent findings from the Institute for Fiscal Studies (IFS).

By contrast just 37% of 202 surveyed advisers believed that urgent action was needed to balance the book at this point.

“The Chancellor was no doubt hoping that by March the nation would have come through the worst of the pandemic, and while the vaccination programme gives reasons for optimism, it’s only once the way out of current lockdown restrictions are in place that the full economic impact will become clearer,” commented Aegon pensions director, Steven Cameron.

“It’s for this reason that advisers have cautioned against tax hikes at a point where the economy is still fragile and they believe that revenue raising measures now could be harmful.

“While advisers believe the focus for the time being should be on stimulus measures, it’s clear that as the economy strengthens, calls will grow to recoup some of the huge amounts of spending on supporting jobs and businesses.”
While Aegon’s findings showed that advisers were generally unsupportive of any tax rises now, the closest they came to agreeing an area the government could raise funds from was through Capital Gains Tax (CGT).

Last year, a report from the Office of Tax Simplification report highlighted areas for possible reform of CGT, including an increase in rates to match Income Tax and lowering the Annual Exempt Amount.

Aegon’s research found that 43% of advisers would support an increase in the rates of CGT and 23% a reduction in exempt amounts. This was ahead of support for other areas such as increases to Income Tax rates for higher and additional rate tax payers (33%), or the introduction of a health and social care levy (27%).

“While no one ‘likes’ tax increases, it looks like CGT is one area where there is a greater support for reform,” Cameron added.

“But even this is not without its controversies as while the tax is typically paid by the wealthiest individuals, it could also affect small business entrepreneurs who the government is keen to encourage. When it comes to tax increases, there are rarely easy wins for the Chancellor.”

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