UK investors withdrew £1.6 billion from stock market funds in July, the highest level since October and November last year, as fears over potential tax rises under Prime Minister Andy Burnham rattled confidence ahead of the Autumn Budget.
Data from fund network Calastone showed equity fund withdrawals reached their highest level since late 2025, when investors rushed to reduce their exposure ahead of the previous Autumn Budget. The July exodus marks the fifth-worst month for equity fund withdrawals in the past 11 years and brings the total pulled from investment funds over the last 12 months to a record £13.9 billion.
Speculation and uncertainty
Calastone said speculation surrounding potential wealth taxes under the new Burnham administration had unsettled investors, with uncertainty over future fiscal policy appearing to weigh heavily on confidence.
Edward Glyn, head of global markets at Calastone, said: "Tax rises – and even speculation about tax rises – change investor behaviour. The evidence increasingly suggests that policy unpredictability is unnerving investors almost as much as the tax measures themselves."
Before becoming Prime Minister last month, Burnham warned that "difficult" decisions would be needed to repair the UK's public finances and suggested the Government may have to ask taxpayers to contribute more.
Wealth tax debate
Concerns have also intensified after Matthew McGregor, Burnham's chief political strategist, previously backed a 2% annual wealth tax on the ultra-rich, arguing it could raise around £24 billion to fund public spending. The debate has fuelled speculation that Chancellor John Healey could unveil measures targeting wealth, capital gains or pensions when he delivers his first Budget on October 28.
Mr Glyn said uncertainty over the Government's direction was already influencing investment decisions. "Speculation that the Burnham-Healey Government could further target wealth – including through higher capital gains tax, changes to pension allowances or even an exit tax – may be prompting investors to take precautionary action," he said. "Investor confidence is being eroded by fear of the unknown. Even as the new Government begins to outline its fiscal agenda, investors are still weighing what it could mean for capital gains, pensions and wider wealth taxation."
Impact on funds
UK equity funds accounted for £948 million of July's withdrawals, while active investment funds recorded their third-worst month on record. Multi-asset funds, which combine investments across shares, bonds and other assets, also suffered their worst month since 2022.
Calastone said previously announced tax changes were also continuing to influence investor behaviour, including last year's decision to bring pensions within the scope of inheritance tax. According to the firm, wealth managers have reported that some savers are withdrawing money from pension funds as they reassess their long-term tax position.
The figures come just days after Citigroup chief executive Dame Jane Fraser warned the Government against increasing taxes on banks, arguing that further levies could undermine the UK's competitiveness as a global financial centre. She said higher taxes would make Britain an increasingly expensive place to do business, noting that major European financial hubs such as Frankfurt and Paris now offer lower tax burdens for banks.
The latest investment figures highlight growing nervousness in financial markets as investors await the Government's first Budget and further details of its plans for taxation and public spending.
