AJ Bell Money & Markets Deep Dive #1: How to protect your money from the rising tax tide
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Feb 17, 2025 Carl Emmerson, Deputy Director of the Institute for Fiscal Studies, and Tom Selby, Director of Public Policy at AJ Bell, delve into the UK’s escalating tax burden, projected to hit 38.2% of GDP. They explore practical strategies for individuals to safeguard their finances from rising taxes, highlighting the merits of ISAs and the value of pension schemes. The duo also addresses the potential risks of over-investing in cash ISAs and offers insights into tax-efficient options like VCTs, ensuring listeners are equipped to navigate the intricacies of personal finance.
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Capital Gains Tax Changes
- Capital gains tax (CGT) rates rose and the allowance was cut, impacting profits from asset sales.
- Be mindful of CGT when making investment decisions.
Fiscal Drag
- Frozen personal tax thresholds, combined with wage increases, mean individuals are pushed into higher tax brackets.
- This "fiscal drag" effect increases the tax burden without raising tax rates explicitly.
Factors Behind High Taxes
- The UK's record tax burden is a result of long-term pressures like an aging population and rising healthcare costs.
- It's also influenced by pandemic borrowing, the energy crisis, and weak economic growth.