UK Budget: “Masterclass in disincentivising saving and investing”
The UK Budget is a “masterclass in disincentivising saving and investing”, warns the CEO of one of the world’s largest independent financial advisory organisations.
The warning from Nigel Green of deVere Group comes as chancellor Rachel Reeves’ Budget set out how tax rates on savings, property income and dividends will rise by 2 percentage points.
The Treasury’s new tables show that from 2027 savers and landlords will face a straight rate increase of two percentage points across interest, rental and dividend income. For basic, higher and additional-rate taxpayers this pushes tax on saving income to 22, 42 and 47%.
Rental income and interest will face the same treatment. Dividend tax rates rise to 10.75% for basic-rate taxpayers, and 35.75% at higher bands.
The additional revenue – projected at £500m annually from savings and property income and another £1.2bn from dividends – comes at a steep cost to investor confidence.
Nigel Green, CEO of deVere Group, says the message this sends is deeply counter-productive. “When you raise the cost of holding income-producing investments, people will of course reconsider how and where they invest.
“You end up penalising patient capital and rewarding cash withdrawal. This is the opposite of building a thriving stock market.”
For decades the London market has attracted income-orientated investors precisely because of its broad catalogue of dividend-paying, blue-chip companies. Many households rely on that income – often outside ISAs or SIPPs.
The new tax regime hits those investors hardest, making long-term ownership less attractive and encouraging early cash-outs. Rather than hold for dividends, investors may sell shares immediately after the next payout, or shift their holdings to more favourable jurisdictions. The signal is clear: if you want growth and yield, UK equities may no longer offer value once the tax drag begins.
Nigel Green notes the irony. “The government says it wants to rebuild the pension and savings culture, yet it imposes fresh barriers on anyone who actually saves or invests,” he says.
“That sends a simple message that locked-up capital is subject to stealth extraction. Why would someone tie money into UK equities under those rules when other markets reward income rather than punish it?”
The impact extends beyond dividends and savings. Rental property investors now see diminished returns, making buy-to-let schemes much less attractive. That could lead to reduced investment in the private rental sector at a time when housing supply is desperately needed. The broader economy will feel the squeeze as less capital chases property, less cash flows into markets and confidence in UK assets declines.
Moreover, the tax increase arrives against a backdrop of rising inflation, high living costs and mounting financial pressures.
“Many savers already face low real interest rates. With interest income now facing heavier taxation, returns after tax may be negligible or negative. For retirees or those relying on interest to preserve capital, this compounds the squeeze. When saving becomes unprofitable, people look elsewhere – and often overseas,” says Nigel Green.
The global context makes the decision even more alarming. Attractive tax regimes in other jurisdictions compete aggressively for internationally mobile capital. Countries offering lower or zero tax on investment income now look more appealing.
For investors with the choice, locking money into a high-tax, uncertain UK setting becomes irrational. Capital flows will follow the path of least resistance and greatest return. The new UK rules tilt that balance decisively away.
Nigel Green warns the consequences may play out slowly but decisively. “If you weaken incentives to save, invest and own property, you drain the lifeblood of wealth creation,” he says.
“You don’t just discourage new money. You encourage old money to move elsewhere.” Over time, that could drain capital from equity markets, property, pensions and long-term investment in the UK.
The UK risks losing not only savings and investment, but its appeal to the global capital that once saw the country as a gateway to innovation, growth and wealth preservation.
The deVere Group CEO concludes with a stark warning. “When you make saving, investing and owning property more expensive, you don’t build prosperity. You drive it away.
“History will teach us that Reeves’ second – and critical – Budget was a masterclass in disincentivising saving and investing.”