City leaders call for ‘tax certainty’ from Rachel Reeves

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City grandees have warned that further tax increases could prompt more wealthy people to leave Britain and deter many individuals from saving for retirement, calling on the chancellor to provide “stability”.

Chairs, chief executives and founders of some of the UK’s largest wealth managers told the Financial Times that people needed “certainty” over taxation amid rising expectations that Rachel Reeves will raise taxes to plug a gap in the UK’s finances.

The chancellor will deliver her Mansion House speech on Tuesday, in which she is expected to outline her vision for Britain’s financial services industry and highlight the stability of the economy.

But parts of the City worry that Reeves could look to increase taxes in this year’s autumn Budget on the wealthy and the financial services sector to avoid breaking her fiscal rules. 

Paul Manduca, chair of St James’s Place, the UK’s largest wealth manager, said the focus of Mansion House was “rightly on growth and long-term reform”, although he noted that “many of us will also have one eye on the Budget”.

He added the chancellor faces “another fiscal balancing act” but urged her to focus on “tax certainty, particularly avoiding changes that could undermine public confidence in long-term financial planning, such as adjustments to pension tax relief that risk deterring retirement saving”.

Paul Geddes, chief executive officer of wealth manager Evelyn Partners, said that the chancellor faces “difficult choices” over the coming months to meet her fiscal rules, especially given recent U-turns on welfare reforms and the winter fuel payment that wiped out planned government savings.

But he warned that “a period of stability in the pensions tax regime . . . is now of paramount importance in order to retain confidence in private pensions”.

In her last Autumn Budget in October, Reeves said that unused pension pots would be subject to inheritance tax at 40 per cent from April 2027. Geddes said this “major” change was “upending people’s financial plans”.

Other entrepreneurs warned that increasing the tax burden on the rich could spur them to leave Britain.

Peter Hargreaves, co-founder of investment site Hargreaves Lansdown, said that there “is a certain level you can tax a country” before “people will either avoid it or leave”. 

“People are leaving [the UK] and these are people who pay a lot of tax,” said Hargreaves, a billionaire who has also donated to the Conservative party.

A number of wealthy individuals have left the UK following the government’s abolition of the non-dom tax regime, which had allowed British residents who declared their permanent home as being overseas to avoid paying UK tax on foreign income and gains.

Under Labour changes, those who have decided to stay could also see their worldwide assets potentially subject to UK inheritance tax at 40 per cent. 

Sir Nicholas Lyons, chair of Phoenix Group, said the government’s changes to the non-dom status and inheritance tax were the “straw that broke the camel’s back”. 

He recently told a capital markets conference at the London Stock Exchange that the UK was already “seeing thousands of millionaires leaving”.

“We have to put up a sign that we are open for business, not a sign that says ‘you are not welcome’,” he added.

Lord Michael Spencer, founder of ICAP and chair of Nutshell Asset Management, said the City had “become deeply sceptical” about Reeves’ support for the financial services sector, pointing to “talk of higher taxes, a possible bank levy and a potential wealth tax”.

Spencer, who is also a former treasurer of the Conservative party, added: “If she really wanted to show her support for the City in action rather than words, she should remove the 0.5 per cent stamp duty tax on share purchase without delay. Britain is the last major economy in the world that has this, and it is causing incalculable harm to London’s equities market.”