Published by Global Banking & Finance Review®
Posted on November 26, 2025
3 min readLast updated: January 20, 2026
Add as preferred source on GoogleThe UK budget introduces tax hikes affecting savers and the wealthy, aiming to bolster government finances and encourage stock market investments.
By Naomi Rovnick, Kirstin Ridley and Iain Withers
LONDON (Reuters) -British money managers hit out at a raft of tax increases on pensions, savers and investors in Wednesday's budget, saying it risked damaging people's appetite to save.
Finance minister Rachel Reeves unveiled more than 26 billion pounds ($34.4 billion) of fresh tax hikes to prop up government finances, with several falling on pension savers and the wealthy.
The broad sweep would take total public sector receipts to 1.5 trillion pounds and 42.4% of GDP by 2030-31 and will raise the tax burden to a post-war high, official forecasters said, in large part by dragging more people into higher tax brackets.
Stock and government bonds reacted positively to the budget, however, with the initial reading that Reeves' budget had bolstered UK fiscal credibility.
STEALTH TAX RISES AND SYMBOLIC MEASURES
"Chancellor Rachel Reeves opted for stealth tax rises and symbolic measures targeting wealth and property, while avoiding the inflationary consequences of new business taxes," said Tim Service, an investment manager at Jupiter Asset Management.
Among the measures, tax benefits will be cut for salary-sacrificed pension contributions and taxes hiked on dividends, property and savings income, raising a combined 7 billion pounds according to Office for Budget Responsibility forecasts.
The tax-free limit on cash savings accounts known as 'ISAs' will also be cut to 12,000 pounds from 20,000 pounds for under-65s from 2027, part of a government effort to encourage savers to invest in Britain's stock markets instead.
Shares in money managers rose on hopes they could benefit from savers switching to investments to hold on to tax benefits, although some cautioned that Britain had a less established investing culture than the United States.
St James Place's shares rose 5.3%, Aberdeen's by 2.6% and AJ Bell's by 3.2%. IG Group soared 10.3%.
Other new taxes - including one on homes worth more than 2 million pounds - would take time to bed in to see their full effect, wealth firms said.
"I think what we'll see is a lot of postponed investment decisions," said Jim Brown at Blick Rothenberg, a tax and accounting firm.
PENSION SAVERS HIT
One of the most criticised measures by investors was the reduction of tax benefits for salary-sacrificed pensions from 2029, which official forecasters estimated would raise a bigger-than-expected 4.7 billion pounds in 2029/30.
Under salary sacrifice schemes, individuals can put some of their pre-tax earnings into their pension. Both employer and employee avoid having to pay tax on it.
That perk will now be removed for any contributions above 2,000 pounds a year, a move that hits employers of the biggest earners and the highest paid hardest, since they put more into their pensions.
"Any step that disincentivises people saving is unhelpful," said Simeon Willis, chief investment officer at pensions consultancy XPS.
The lag before the policy is implemented could cause problems for the government, said former pensions minister and Lane Clark & Peacock partner Steve Webb.
"Three years to prepare is incredible and they just won't get the money ... Unpicking salary-sacrifice is messy," Webb said, noting some top-paid staff could opt for pay cuts and have their pension fully paid by their employer instead.
($1 = 0.7568 pounds)
(Editing by Tommy Reggiori Wilkes, Kirsten Donovan)
A pension is a retirement plan that provides income after an individual stops working, typically funded by contributions from the employee, employer, or both.
A tax bracket is a range of income levels that are taxed at a specific rate, meaning higher income levels are taxed at higher rates.
A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits.
An Individual Savings Account (ISA) is a tax-free savings account in the UK that allows individuals to save or invest without paying tax on the interest or gains.
Salary sacrifice is an arrangement where an employee agrees to give up part of their salary in exchange for non-cash benefits, such as increased pension contributions.
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