- The Budget tax hike people are most worried about is higher income tax (16%), followed by rising VAT and council tax (9%).
- For higher rate taxpayers, income tax is an even bigger concern (for 25% of people).
- After that, their biggest worries for higher earners are about pensions – 9% are concerned about cuts in tax relief on pension contributions and 8% about rumours surrounding tax-free cash.
- One in four people are so confused by the speculation they say they don’t know what to be worried about (23%).
- You can take steps to protect yourself by making use of your allowances as well as those of your loved ones.
- Just make sure you have considered all your options before you take steps to gift away money or take tax-free cash.
Figures from a survey of 2,000 by Opinium for HL in October 2025
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“Your biggest tax fear is about to come true. Statistically, the tax you’re most likely to be worried about rising in the Budget is income tax, and thanks to frozen thresholds, this is nailed on. Unfortunately, the second biggest worry is VAT, and thanks to inflation, there’s every chance you’ll automatically be handing over more money to the taxman in VAT too. Other concerns also remain on the table, and worries around pensions have risen up the ranks for higher earners. So, it’s worth understanding what you can do about it.
Top 5 biggest tax fears in the Budget
| Overall | Higher rate taxpayers |
| Making people pay more income tax – 16% | Raising income tax – 25% |
| Rise in VAT – 9% | Removal of tax breaks on pension contributions – 9% |
| Boosting council tax – 9% | Changes to tax-free cash on pensions – 8% |
| Changes to inheritance tax allowances or exemptions – 7% | Higher rates of capital gains tax – 7% |
| Extending the freeze on income tax – 5% | Changes to inheritance tax allowances or exemptions – 7% |
The five biggest fears
- Income tax
Income tax is rightly a concern, because the government is expected to leave allowances and thresholds untouched. It means every inflation-linked pay rise will push more people into paying more tax, and more into paying higher rates. Fears go further than this though, because the most common worry is that income tax itself will rise. This was ruled out in the election manifesto, so it’s an indication of how concerned people are about the shortfall in the nation’s finances, and how worried they are that there might need to be a big solution to a serious problem.
What you can do to protect yourself
The best way to protect savings from income tax is to hold them in a cash ISA, and your allowance is £20,000 in the current tax year. If you have the money available now, it may make sense to open an ISA sooner rather than later, so you know where you stand.
You can also pay into a pension or a SIPP. The annual pension allowance is £60,000, and the fact you get tax relief at your highest marginal rate means higher earners in particular should look to take as much advantage as makes sense for their finances.
Meanwhile, if you’re married or in a civil partnership and your partner pays a lower rate of tax, you can transfer income-producing assets into their name, and both take advantage of your tax allowances. You can also use all the tax-efficient vehicles at your disposal, including your ISAs and pensions, as well as the Junior ISAs and Junior SIPPs of any qualifying children.
- VAT
Almost one in ten are worried about a potential rise in VAT. On the one hand, they’re right to be worried, because VAT is a percentage of spending, so inflation will automatically mean handing more cash over in VAT. However, the good news is that the VAT rate itself is highly unlikely to change after being ruled out during the election campaign. It wouldn’t stop the government making tweaks, but as we saw with the fiasco of the pasty tax in 2012, this can be tricky.
- Council tax
Around one in ten people are most worried about council tax. There have been suggestions from think tanks that there could be an extra charge on pricier homes, a national surcharge, or even wholesale reform. However, this remains very firmly in the realms of speculation. Sadly, it doesn’t mean council tax will remain the same, because it rises every year, and given how councils are wrestling with their finances, we may well see another 5% rise.
- Inheritance tax
Some 7% of people are worried about losing inheritance tax allowances or exemptions that save millions of estates from tax. It includes things like the nil rate bands that mean the first £325,000 of your estate, and £175,000 of property, can be left tax free (if the home is being left to a child or grandchild). It also includes the rule that anything left to a spouse or civil partner is tax free, and that if you leave everything to them, you also leave them your nil rate bands, so they can leave £1 million free of tax. These allowances and exemptions are so important to people that changes would be incredibly unpopular. However, these rules aren’t written in stone, so can’t be completely ruled out.
What you can do to protect yourself
If you’re worried about a potential inheritance tax change, you can give up to £3,000 away before the Budget, which will fall within your annual gift allowance. You can give away larger sums, and they will be outside of your estate after seven years. There’s a separate rule that means you can give away surplus income inheritance tax free too. If you were always planning on giving some money away, and you can afford to live without it, it may make sense to do it sooner rather than later.
- Extension of the freeze in income tax thresholds
This has been a common rumour, given that it has been such an effective stealth tax already and is seen as an opportunity to boost the tax take without falling foul of promises not to increase the rate of income tax.
Higher rate taxpayer worries
Capital gains tax
There have been questions over whether the rate could rise again, and there’s always the risk of a change to the rule that means CGT resets on death. Given that higher rate taxpayers are more likely to invest, it’s unsurprising that capital gains tax rises are more of a concern for this group of people.
It would add insult to injury for investors, who have already had to deal with the dramatic cuts to the tax-free allowance, and a hike to the rate on stocks and shares. This isn’t just a tax for the mega wealthy. The lower allowance now means someone on an average income who has invested carefully throughout their life can easily face a tax bill when they rebalance their portfolio or sell up to cover their costs later in life. In fact, cutting the allowance has hit smaller investors harder, because it used to cover a much larger proportion of their gains.
What you can do to protect yourself
To protect against CGT can use your annual allowance of £3,000 to realise gains gradually over the years. At the same time, you can use the Share Exchange (Bed & ISA) process to move the assets into a stocks and shares ISA, so you don’t have to worry about either dividend tax or CGT on these investments at any point.
You can also offset any losses against your gains and give assets to a spouse or civil partner so they can use their annual allowance too. You can also hold assets for life, and the tax will reset to zero on death. It just remains to be seen whether this will remain the case after the Budget.”
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:
Pensions tax relief
“The government encourages people to pay into their pensions with tax relief at the highest rate of income tax they pay – so higher rate taxpayers get 40% relief on their contributions and additional rate taxpayers 45%. Ever since the election campaign, there has been speculation this could be swapped for a flat rate.
Should a flat rate of 30% be adopted, this would be good news for basic rate taxpayers who would see the cost of that £100 pension contribution reduce from £80 to £70. However, if you are a higher or additional rate taxpayer you will see a big drop in this valuable incentive to save for your future.
What you can do to protect yourself
If pension tax relief on contributions is a worry, you can still use the time between now and the Budget to pay extra into your pension if you can afford it. This means you can get higher relief while you know where you stand. Even if this change does not happen you’ve taken the no-regret move of boosting your long-term financial resilience.
Pensions tax-free cash
This is a rumour that first gathered pace in the run up to the last Budget. Such speculation is worrying but it’s really important not to make knee jerk reactions that you may come to regret. Taking the money out now will remove it from a really tax efficient environment and leave it open to taxes that it may otherwise not have been such as capital gain and dividend taxes. You also run the risk of parking it in a cash savings account where its purchasing power can be eroded over time by inflation.
The decision to take tax-free cash should be done so as part of your long-term plan – for instance, you may be using it to pay off your mortgage. Taking it with no plan or in response to short term speculation could leave you counting the cost for a long time to come.
Five top tips to protect yourself.
- Use your allowances – make use of ISAs and SIPPs to protect your money from tax and boost your long-term financial resilience.
- Use all the tax-efficient vehicles at your disposal – check if you can contribute to your partner’s ISAs and SIPPs if you have used your allowances and have spare cash. This includes the Junior ISAs and Junior SIPPs of any qualifying children.
- If you’re married or in a civil partnership and your partner pays a lower rate of tax, you can transfer income-producing assets into their name, and both take advantage of your tax allowances.
- Think about gifts to reduce an inheritance tax bill – just don’t give away too much too early as you could leave yourself struggling.
- Look before you leap – taking knee jerk reaction to speculation around tax free cash could leave you with regret. Any move to take tax-free cash should be taken as part of a considered long-term plan.”
