UK investors live in fear of tax increases

TAX increases are the biggest threat to UK investors’ finances in 2010, according to research by the Association of Investment Companies (AIC).

A survey by the body has revealed that 45 per cent of investors and 21 per cent of the general public view changes in the tax rates as their major worry.

In order to avoid possible tax increases, the number of investors choosing to use their full ISA allowance has increased.

Annabel Brodie-Smith, communications director of AIC, 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.”

Investor confidence in the stock market has taken a tumble with 40 per cent saying they will increase their equity investments this year, down from 50 per cent in March 2009. Although investors appetite for emerging markets has picked up with 13 per cent looking to invest in the region compared to six per cent last year.

“Investor confidence amongst active investors is slightly down on last year, indicating that investors are now a bit more cautious having seen such an impressive market recovery,” Brodie-Smith added. However, an increasing number of active investors are favouring emerging markets indicating an increasing appetite for risk and the popularity of this sector.

According to AIC, 45 per cent of investors expect the stock market to outperform the property market. Confidence in the housing market fell to two per cent in spring last year leading AIC to comment that the UK’s love affair with property is officially dead. Other concerns for active investors were the recession, a possible stock market crash, inflation, and the possibility of Britain’s AAA credit rating being downgraded.