Regardless of which political party is in power, UK taxation levels are heading inexorably upwards. Before the financial crash, taxation was around 33% of GDP but it is rising rapidly towards 38%. Higher taxes mean your money has to work as hard as possible to achieve the best returns.

The UK’s bewildering patchwork of taxation policies has always been complex and inefficient. But there is now increasing pressure on future governments, of whatever complexion, to simplify the tax system and to increase taxation on wealth.

This could affect pensions and inheritance tax and might lead to higher tax rates on dividends and capital gains. Nothing is certain, but good financial planning means preparing for the worst while hoping for the best.

Be prepared

‘Be prepared’, the motto of the Scout and Guide movement, serves as invaluable advice for individuals seeking resilience and stability in their financial affairs during times of volatility.

Trying to predict exactly how the tax landscape may change is almost impossible, but taking sensible precautionary steps to minimise any impacts is eminently doable.

A well thought out and proactive tax planning strategy can anticipate many of the likely scenarios with a view to preserving and enhancing your wealth.

Understanding potential areas of impact

Certain key areas of personal finance are very much in the spotlight these days. Changes in tax policy are likely to affect income tax, capital gains tax (CGT) and inheritance tax (IHT).  A range of influential think tanks are calling on government to raise taxes on wealth and higher earners.

For instance, a decision to equalise CGT with income tax could raise more than £15 billion a year for the Exchequer from high-net-worth individuals (HNWIs). This comes as the CGT allowance has been reduced to just £3,000 per person in the current tax year 2024/25.

Speculation has also centred on changes to IHT. The prolonged boom in high-end residential property has seen many more people cross the threshold for paying IHT, which has not moved since 2009.

According to the Institute of Fiscal Studies (IFS), one in eight people will be liable for IHT by 2032. Despite speculation, the abolition of IHT is unlikely.

Changes to income tax is a perennial political issue. Some parties have mooted policies that include raising income tax to 50p on incomes above £125,000 and ending marriage tax allowances.