Angela Rayner's tax raid memo signals 'major shift in wealth tax' hitting pensioners and savers

Claire Trott, Head of Advice at St James’s Place: "Any changes to allowances, tax rates or tax reliefs can cause a real headache for those who have built long-term financial plans around them. Individuals would need to reassess and potentially revise their strategies to remain as tax-efficient as possible."

The Deputy Prime Minister's proposals include reinstating the pensions lifetime allowance, which had placed a limit of just above £1 million on pension savings before higher tax charges would apply.

The memo also suggests removing dividend allowances entirely, which have already been cut from £5,000 to £500 in recent years. Financial experts warn these measures could harm investment in UK businesses and disrupt long-term financial planning.

The two-and-a-half page memo was stamped "official" and submitted by Rayner's team to the Treasury in mid-March, before Chancellor Rachel Reeves delivered her Spring Statement. Rayner is understood to have personally signed off the proposals.

Jason Hollands, Managing Director at Evelyn Partners, described the proposals as "a tax-hikers' wish list rather than a coherent plan".

He warned that reinstating the pensions Lifetime Allowance would be "deeply regressive, undermining confidence in pensions" and particularly impacting the public sector.

Hollands cautioned that removing the dividend allowance entirely "would compound upon the impression that the UK has become increasingly hostile to savers, investors and business owners" and could drive entrepreneurs overseas, reducing a valuable source of funding for growth companies.

He said: "Removing it would also be a blow to retirees relying on a small amount of dividend income each year and who have not migrated their shareholdings into ISAs.

"If you own listed company shares in a taxable environment, it is wise to move these into ISAs by selling them and repurchasing them within an ISA where future dividends and gains will be free of tax. But in doing so, take care not to trigger a capital gains tax liability, if possible."

Amisha Chohan, head of small cap strategy at Quilter Cheviot, warned: "If implemented, these proposals would mark a clear tightening of the tax environment for savers and business owners.

"The dividend allowance has already been slashed from £5,000 to £500 in recent years, and any further increase in dividend tax rates would be a blow to retail investors who rely on investment income, as well as small business owners who pay themselves via dividends."

She added that those planning for retirement "should watch closely" as this could represent "a major shift in how wealth is taxed in the UK."

Professor Joe Nellis, economic adviser at MHA, said the memo signalled "underlying tensions at the heart of Government" and concerns from Labour's Left about the Chancellor's preference for spending cuts over tax increases.

"The Chancellor has boxed herself into a corner with her fiscal rules, leaving her only two options to balance the books: either cut spending still further or tax more," he said.

Nellis warned that while the Government "desperately needs corporate investment to reignite the economy and drive growth, a higher tax burden will not help this."

Mel Stride, the Conservative shadow chancellor, responded to the leaked memo saying: "This confirms that we are still living with the Labour Party of Jeremy Corbyn. At the very highest level, Labour ministers are debating which taxes to increase next."

He added: "The Chancellor has repeatedly refused to rule out another tax raid in the autumn and now we know why - Labour's top brass, including the Deputy Prime Minister, want to come back for more."

There continues to be speculation that Reeves will find it impossible to avoid raising taxes once again in her Budget this autumn.