Investors increasingly withdraw funds from UK stocks amid tax speculation.
- A significant £300m has been pulled from UK equities over inheritance tax fears.
- September saw £30m withdrawn from mid-sized UK stocks, ending a streak of inflows.
- Concerns centre around changes to inheritance tax exemptions affecting investment strategies.
- Market experts observe a pronounced investor unease ahead of the upcoming Budget.
Amid rising concerns over potential tax changes, investors have pulled a substantial £300 million from UK stocks. This marks a stark increase from the £80 million withdrawal in August, highlighting growing apprehension over possible adjustments to inheritance tax in the forthcoming Budget.
In September, funds specialising in mid-sized UK stocks saw withdrawals totalling £30 million. This ended a consistent five-month period of inflows, reflecting uncertainty in the market landscape. Investors are keen to safeguard their assets against anticipated changes to inheritance tax exemptions.
Shares in smaller companies on Aim, the junior stock market, have traditionally been a strategic choice for wealthier investors looking to mitigate inheritance tax due to current business relief exemptions. However, fears of potential changes to this tax break are prompting divestments ahead of the Budget.
Neil Birrell, chief investment officer at Premier Miton, noted, “There’s very little liquidity around, and that’s pushing share prices down. Beyond that, there’s a general hesitation to invest in the UK ahead of the Budget.” This sentiment underlines the broader uncertainty dampening UK equity markets.
Market analyst Mark Preskett from Morningstar echoed these concerns, pointing out the increased nervousness among clients of financial advisers regarding potential tax changes. “Some clients are anxious about potential tax adjustments, leading to more redemptions in recent months,” he explained.
The pressure on smaller and mid-cap stocks, which are more directly linked to the UK economy, is particularly acute amidst the anticipation of the Budget, potentially affecting domestic markets considerably.
The effects of these investor movements are tangible, with fund managers such as Liontrust and Brooks Macdonald reporting significant outflows attributed to decreased investor confidence. Over the past quarter, Liontrust faced over £1 billion in net outflows, while Brooks Macdonald noted £100 million withdrawn.
The ongoing speculation regarding the Budget’s impact on inheritance tax continues to unsettle UK equity markets, driving strategic shifts among investors.
