Labour Tax Reforms Trigger Cash Hoarding Among UK Savers
Britain's unpredictable tax landscape is compelling households to build substantial war chests of cash rather than investing in assets like stocks and bonds, according to the chief executive of the UK's largest savings platform. Flagstone boss Arman Tahmassebi delivered this stark assessment, dealing a significant blow to government initiatives aimed at encouraging retail investing.
Fiscal Uncertainty Outweighs Market Fears
Tahmassebi explained that his clients are increasing their cash savings at an unprecedented rate, primarily driven by fears of sudden government changes to wealth taxes affecting other asset classes. These concerns include potential adjustments to capital gains tax or inheritance tax rules. He emphasized that this fiscal uncertainty has become a more powerful motivator than traditional fears of stock market crashes or debt crises.
"Our clients, looking at their recent behaviour, are actually more sensitive to risks in fiscal policy – and how taxes might affect those assets," Tahmassebi told City AM in an exclusive interview. "We see a lot of people, with uncertainty with what's happening [over tax policy], keeping money in cash, liquidating assets and keeping it in cash because of that uncertainty."
Government Campaign Faces Headwinds
These remarks cast doubt on Treasury efforts led by Chancellor Rachel Reeves to persuade savers to allocate more funds to riskier assets. The Chancellor is preparing to launch a major advertising campaign promoting retail investing benefits to the British public, a central component of her strategy to revitalize UK capital markets.
However, this campaign – which features a 'savvy' red squirrel as its mascot – has already encountered significant setbacks. Reports indicate member firms are frustrated about missing the crucial 'Isa season' in early April, undermining the initiative's momentum before its official launch.
ISA Limit Reduction Backfires
In last autumn's Budget, the government reduced the cash ISA limit from £20,000 to £12,000, intending to steer savers toward economic-stimulating assets like stocks and bonds. Yet Tahmassebi's observations suggest these efforts are being counteracted by the Treasury's approach to tax reform.
During her inaugural 2024 Budget, Reeves implemented several significant tax changes that have contributed to current uncertainty. These included raising capital gains tax, overhauling inheritance tax by eliminating several reliefs, applying VAT to private school fees, and abolishing the non-dom regime.
Record Growth Amid Changing Behavior
Tahmassebi made these comments following Flagstone's announcement of record revenue growth for 2025. The savings platform, which manages over £19.6 billion in customer cash – making it the UK's largest of its kind – reported a 16 percent revenue increase, bringing turnover to more than four times its 2022 level.
The fintech executive noted that the impending cash ISA contribution cap has prompted savers to "look to maximize" their contributions before the new limit takes effect next April. "It's a real privilege to announce these results," Tahmassebi stated. "We were able to achieve over £600 million of interest for our clients in 2025, reflecting our proposition's strength in supporting client needs while seeking the highest possible returns for their cash assets."
This combination of robust platform performance and shifting saver behavior highlights the complex relationship between government policy, financial uncertainty, and individual investment decisions in Britain's current economic climate.
