The Tories are demanding Rachel Reeves "rule out more taxes" amid concerns millions of British investors could be slapped with additional levies.
The refusal comes as corporate sentiment plummets to unprecedented depths and Chancellor Rachel Reeves grapples with a funding shortfall of £9.3billion stemming from reversals on welfare policy.
The opposition has cautioned that potential measures under consideration might include eliminating the £500 annual tax-free dividend threshold and removing inheritance tax concessions for Alternative Investment Market securities.
These changes could generate substantial revenue from the estimated 14 million UK residents who hold equities.
The Chancellor is under pressure from the Tories
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The timing proves particularly sensitive given that the Institute of Directors' Economic Confidence Index registered minus 72 in July 2025, marking its worst reading since the metric's inception in 2016.
Andrew Griffith, the Shadow Business and Trade Secretary, has sharply criticised the government's stance, stating: "The Conservatives gave Labour the chance to rule out more taxes on investors - but Labour had failed to do so."
He warned that "This will send a shiver down the spine of business leaders, investors and wealth creators".
The shadow minister attributed the fiscal pressures to the Chancellor's decisions, asserting: "Rachel Reeves created a black hole in the public finances by failing to tackle unsustainable welfare spending - now she's again looking at business and working people to pay the price with higher taxes."
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Griffith concluded by positioning his party's alternative approach: "Only the Conservatives under new leadership believe in lower taxes and sound money."
Internal correspondence revealed by The Daily Telegraph indicates that Deputy Prime Minister Angela Rayner has proposed abolishing the £500 dividend threshold entirely, a move that Treasury estimates suggest would generate £325million annually.
The leaked memorandum also advocates completely removing inheritance tax concessions for AIM-listed securities, potentially yielding between £100million and £1billion yearly.
Currently, shareholders receive their first £500 in dividends tax-free, whilst AIM investments benefit from a 50 per cent reduction in inheritance tax (IHT) liability.
Reeves reduced this relief from full exemption during last Autumn's Budget.
Additionally, Rayner's proposals include aligning dividend taxation with income tax bands, which would see higher-rate taxpayers facing an increase from 33.75 per cent to 40 per cent, and additional-rate payers seeing their levy rise from 39.35 per cent to 45 per cent.
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Investors are afraid on a potential tax raid
| GETTYTreasury analysis indicates that eliminating the dividend threshold would affect approximately 5.22 million shareholders who currently avoid taxation on their investment income. With 3.6 million individuals already paying dividend levies, the removal would substantially expand the taxpayer base.
The proposed inheritance tax changes on AIM holdings would impact roughly 240,000 investors, according to government estimates from the autumn fiscal statement.
These shareholders, representing 0.3 per cent of estates annually, would face full 40 per cent death duties on their portfolios rather than the current 20 per cent rate.
Should dividend taxation match income tax levels, the additional burden on shareholders could reach approximately £5.1 billion, based on current revenue figures of £17.8 billion from dividend levies in 2024-25.