- Almost three-in-five (57%) advisers cited further cuts to inheritance tax (IHT) breaks and allowances as clients’ biggest concern ahead of the upcoming Budget*
- Close to half (47%) said a potential cut to the maximum pension tax-free cash lump sum was concerning clients
- The introduction of a wealth tax (39%), hikes to income tax or National Insurance contributions (36%), and a reduction to pension tax relief (27%) made up the top five concerns
- As many as 87% of advisers said IHT threshold freezes and the inclusion of unused pensions in IHT from April 2027 were the biggest pain points for clients in the current environment
- Chancellor John Healey will deliver his inaugural Budget on 28 October, with potential hikes to capital gains tax (CGT) rates among the latest speculation
Rachel Vahey, head of public policy at AJ Bell, comments:
“Advisers have been straining to hold back a surging tax tide in recent years. Under successive governments, clients have been clobbered by cuts to tax-free allowances, hikes to tax rates and newfangled tax changes entrenching more complexity into an already creaking system.
“Unsurprisingly, further action on IHT is currently the biggest concern for advisers and clients ahead of the Budget. Since announcing at the 2024 Autumn Budget that unused pension funds would be included in IHT calculations, the government has drip-fed details of how the new process will work in practice. It’s becoming ever clearer it has settled on a route that causes admin distress and heaps mountains of pressure on personal representatives (PRs) after they lose a loved one.
“This is despite widespread condemnation of the chosen process from the pensions industry and elsewhere, as well as multiple suggestions of far better ways to administer the policy without subjecting PRs to more paperwork, more complexity and more cost at an already difficult time.
“The impact is already being felt by advisers and clients. The inclusion of unused pensions in IHT, alongside frozen IHT thresholds, was by far and away cited as the most painful tax change for clients, with just shy of nine-in-10 advisers saying it was hitting clients hard. A quarter said cuts to allowances and hikes to rates of CGT and dividend tax were painful, while a fifth lamented frozen income tax thresholds and a tenth called out the upcoming Cash ISA restrictions for under 65s and treatment of cash in non-cash ISAs from April 2027.
“Almost half of advisers said a cut to the maximum pension tax-free cash lump sum is a key fear among clients ahead of the Budget. The lead up to the past two Budgets saw months of fevered speculation around the fate of pension tax-free cash trigger around £14 billion in excess withdrawals in 2025 compared with pre-general election averages, according to AJ Bell analysis of FCA data. Advisers will have played a key role in helping clients to seriously consider their options, rather than making knee-jerk reactions based on pre-Budget rumours – but until the government commits not to alter pension tax-free cash, this trend is likely to continue.
“Beyond that, clients most fear the introduction of a wealth tax, higher income tax and National Insurance rates and a reduction of tax relief on pension contributions. It’s no wonder advisers and clients are taking a deep breath in fear of being submerged once again ahead of Healey’s inaugural Budget on 28 October. So far this year, the government seems to have mainly kept a lid on Budget rumours. But if the Labour Party Conference last week has taught us anything, it’s that Burnham and Healey certainly aren’t afraid to rip up the rulebook.
Financial advice more important than ever
“The reality is that financial advice has never been more important. But as with any Budget, it’s vital that advisers help clients to filter the noise and avoid knee-jerk reactions based purely on speculation.
“It may sometimes be the case that clients fear the tax changes that in practice may not affect them as badly as they think, if at all. Advisers will be instrumental in identifying the measures that will apply to each client, whilst supporting them to make good decisions in line with their long-term plans and objectives.
“An AJ Bell and Ad Lucem survey for the Great Wrapper Reset campaign found that almost nine-in-10 financial advisers and 86% of paraplanners believe that tax wrapper decisions have become more complex over the past three years**. On top of that, eight-in-10 said they would use a wrapper decision framework if one existed, with AJ Bell’s practical wrapper reset framework developed as part of the campaign among the support available.
“As we continue to creep closer towards April 2027 and its many tax changes, good financial advice will become increasingly coveted. No matter what John Healey unveils at the Budget on 28 October, it is crucial that advisers have all the tools and products required to design and implement the strategic long-term plans clients need.”
*Source: AJ Bell. Survey of 233 financial advisers attending AJ Bell’s Great Wrapper Reset Tour across 10 UK locations between 7 and 22 September 2026.
**Source: research conducted by Ad Lucem on behalf of AJ Bell. Based on a sample of 350 financial advisers and 150 paraplanners from the UK, carried out online in May 2026.
