Tax rate increases are now the biggest concern among UK investors for the 2010 year, followed by the possibility of increases to the top-marginal personal tax rates, the recession, the chance of a stock-market crash, inflation, and a possible credit rating downgrade for the UK.

On March 23rd the Association of Investment Companies (AIC) released the AIC Investor Confidence Index report, highlighting the concerns of general public and active investors across the UK. Nearly 45 percent of the 1,311 private active high-net-worth (HNW) investors surveyed stated that tax increases were their primary financial concern, and an additional 21 percent of the general public shared this sentiment. For 22 percent of HNW investors the planned top personal marginal tax rate was the biggest threat, and another 22 percent are worried about the possibility of further tax increases following the upcoming general election. A recession was a key concern for 13 percent of the HNW respondents, while a stock market crash was cited by 9 percent of survey takers. Among general public investors, post-election tax hikes was the second most prominent worry, with 16 percent of respondents citing it as their key concern.

The uncertainty surrounding taxation levels has spurned a renewed interest in Individual Savings Account (ISA) allowances. ISA allowances are HMRC sanctioned savings accounts designed to encourage national public savings, which do not draw any tax obligation on income it earns. Nearly 72 percent of HNW investors and 38 percent of general public will utilize an ISA in 2010, compared to 66 percent and 31 percent in 2009.

Commenting on the significant concern surrounding taxation levels for UK investors Annabel Brodie-Smith, AIC Communications Director, said: “…with a general election on the horizon, it’s clear that investors consider the prospect of tax changes to be the biggest threat to their finances. It’s not surprising that more investors are planning to use their ISA allowance this year to avoid the clutches of the taxman.”

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