Estate planning is essentially working out how you would like your assets to be managed and passed on after your death.
In this article, we look at the estate planning process, the financial and legal aspects and how estate planning solutions can help you and your family.
You don’t have to be rich or have extensive land and property holdings to benefit from estate planning.
In fact, with inheritance tax (IHT) allowances frozen until at least 2030, even people with moderate levels of assets could end up leaving their descendants with tax bills if they’ve not taken estate planning advice.
Getting expert advice on estate planning can:
On a basic level, estate planning starts with you adding up the value of all of your assets, from money to property.
When calculating your assets, it’s important to take into account any unused defined contribution pensions you have. This is because from April 2027, unused pensions will form part of your estate and will be subject to inheritance tax.
Once you’ve added up your assets, you need to subtract any liabilities you have, such as loans, mortgages and other payments. The resulting sum is your estate.
You now need to plan what to do with your estate after your death. This can include things like:
In order to make those wishes legally binding, you will need to make a will. Getting professional legal advice at an early stage will help to create, manage and safely store your will.
To make sure that everything in your estate goes to the right person, you will need to put together a full list of your assets and outline who will get what.
Your assets can include:
You should get your assets valued regularly so you always have an accurate picture of the total value of your estate.
All assets left to your spouse or civil partner – including property – will not attract inheritance tax upon your death due to something called the spousal exemption.
However, assets left after their death could attract inheritance tax, as detailed below.
With limited exceptions, inheritance tax (IHT) of 40% is charged on anything you leave after your death over £325,000. This amount is known as the ‘nil-rate band’.
If you leave your main home to your children or grandchildren, you may also get a residence nil-rate band of £175,000. This adds up to a maximum £500,000 before tax kicks in. Therefore, a couple who are married or in a civil partnership can potentially pass on up to £1m without their inheritors paying tax.
There are several strategies and estate planning solutions which can help you to cut down on inheritance tax bills which your loved ones may face.
These include things like gifting, trusts, life insurance and maximising allowances.
Check out our blog on inheritance tax planning to find out more.
While the basics of estate planning may sound straightforward, there is a lot of complexity involved in the process.
Getting expert advice from a financial adviser can help not just in putting together your estate plan and actioning it, but also in putting that plan in the context of your overall financial situation.
This way, not only will you have peace of mind for the future that your wishes will be carried out and your loved ones will be cared for after your death, but also that you will have confidence in your finances for your own life.
Estate planning is a vital part of helping your loved ones when you are no longer here and is becoming more important due to the increasing pressure of inheritance tax.
At Fairstone, we have a raft of estate planning experts who have helped hundreds of families face the future with confidence and ensure assets are passed on to the next generation.
To start your estate planning journey and find out more about estate planning solutions, get in touch today.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions. It is important to note that the value of investments and the income from them can go down as well as up and that you may get back less than the amount you invested.
Inheritance tax (IHT) is one of those subjects I see many families push to the back of their minds, until it suddenly becomes unavoidable.
The reality is that with house prices rising, tax-free allowances frozen, and new rule changes on the horizon, more families than ever will be affected.
Acting early isn’t just about protecting wealth; it’s a selfless step that puts your loved ones first, sparing them unnecessary stress and cost in the future.
Every family’s situation is unique, so it’s always important to seek professional advice before making any big decisions. That said, understanding the basics of inheritance tax can help you plan ahead and avoid being caught out.
Over the years, I’ve spoken with many clients who assumed IHT was just for the wealthy, only to discover that the value of their home alone pushed them over the tax threshold. The good news is there are straightforward steps you can take to reduce your liability for IHT.
This guide summarises many of the initial conversations I have with clients and their families. I hope that a quick walk-through of some of the high-level strategies will help you avoid paying more inheritance tax in the UK than you have to.
Inheritance tax used to be something only very wealthy families worried about, but that’s no longer the case.
House prices have increased dramatically and inheritance tax allowances haven’t kept up. That is leaving more people finding out that their family faces a large tax bill when they pass wealth on.
In some parts of the country, especially London and the South East, house prices have soared. Over 700,000 homes across Great Britain are worth more than £1 million.
But it’s not just million-pound homes that are affected. The average UK house price is around £300,000 today, which means many ordinary family homes are close to or over the inheritance tax threshold.
The rules on how much you can pass on tax-free haven’t moved for years.
Right now, you can leave £325,000 tax-free (this is called the nil-rate band) and an extra £175,000 if you’re passing your home to children or grandchildren (this is the residence nil-rate band). That makes a combined total of £500,000.
The problem is these limits haven’t risen in years, even though the value of houses and savings has. If they had risen with inflation, families would have much more breathing room.
That’s why more families are now finding themselves caught by inheritance tax, often without realising it. As a result, I’m seeing more people take action early to protect their loved ones from an unnecessary tax burden in the future.
One of the simplest ways we reduce inheritance tax is by making full use of allowances.
These thresholds can make a significant difference, but many people don’t realise just how much protection they provide when combined.
Here is a quick summary of the key allowances to be aware of:
| Allowance | Amount | How it works |
| Nil-rate band | £325,000 | Every estate gets this basic threshold before IHT applies |
| Residence nil-rate band | £175,000 | Applies when passing your main home to your spouse, your children or grandchildren |
| Annual gift allowance | £3,000 | You can gift this amount each year without it counting towards IHT. If unused, the previous year’s allowance can be brought forward too |
| Small gifts exemption | £250 per person | Unlimited recipients, provided no other exemption is used |
For couples, these allowances can be combined, effectively doubling the protection. That means, with the right planning, you could pass on up to £1 million tax-free to your children or grandchildren. I often see families’ relief when they realise how effective these combined allowances can be.
Lifetime gifting is a popular way to reduce inheritance tax. The concept is straightforward: the more you give away during your lifetime, the smaller your taxable estate will be when you pass away.
There are a few ways to approach this:
The benefit here isn’t just tax efficiency, it’s also about seeing your loved ones enjoy the gift while you’re still around. I’ve seen clients experience real joy helping their children buy a first home or supporting grandchildren through university.
| Gift type | IHT treatment |
| Exempt transfers | Always tax free |
| Potentially exempt transfers | Tax-free if donor survives 7 years |
| Chargeable lifetime transfers | May be taxed if above nil-rate band |
| Time between gift and death | IHT rate on gift |
| 0-3 years | 40% |
| 3-4 years | 32% |
| 4-5 years | 24% |
| 5-6 years | 16% |
| 6-7 years | 8% |
| 7+ years | 0% |
Trusts often sound complicated, but they’re simply a legal way of holding and managing assets on behalf of others.
They can be an effective tool for inheritance tax planning because they allow you to pass on assets while keeping some control over how they’re used.
Some common types of trust include:
Trusts can be useful if you want flexibility, protection from disputes, or reassurance that wealth is used responsibly. I’ve worked with families where trusts have been a lifeline, ensuring wealth is distributed fairly across generations.
Pensions have quietly been one of the best-kept secrets in inheritance tax planning. For now, most pension pots are outside your estate, which means they usually don’t trigger inheritance tax. That means:
But the bad news is that these rules are changing. Starting on 6 April 2027, unused pension funds will be counted as part of your estate for inheritance tax purposes. That means for the first time, your pension could be subject to inheritance tax, even if you die before drawing from it.
The government has confirmed that death-in-service benefits (like the pay-out from your employer’s scheme if you die while working) will remain exempt from IHT.
Another big change is who handles the paperwork and tax when someone dies. Originally, pension providers would have had to report and pay the inheritance tax. But now it’s going to be the personal representatives, the executors or family members managing your estate who are responsible.
What this means in real terms is that more estates, especially those with significant pension pots, will face inheritance tax, and families may have to deal with a lot more paperwork during a stressful time. That’s why I’m seeing a lot of people choosing to get ahead of this now.
Even with good planning, inheritance tax can still be a factor. That’s where life insurance comes in.
A policy written in trust can provide a lump sum to cover any IHT liability, ensuring your beneficiaries don’t need to sell property or other assets quickly to pay the tax bill.
For many, this can bring peace of mind, knowing their loved ones won’t face unnecessary financial stress.
The rules around IHT are under review, and changes may affect:
Many people are reviewing their plans now to take advantage of the current rules while they remain in place.
Inheritance tax planning doesn’t need to be overwhelming. By taking time to understand the allowances, gifting rules, and opportunities available, you can make informed decisions that protect your estate and support your family’s future.
I’ve helped many clients and families put these steps into practice, and the common theme is always peace of mind, knowing that wealth is protected and passed on in line with their wishes. If you’re concerned about inheritance tax or want to explore your options further, now is the time to act.
Get in touch with us today to discuss your estate planning.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
Yes, through effective estate planning. While estates over £325,000 are typically subject to Inheritance Tax (IHT) at 40%, there are several ways to reduce or eliminate this liability.
These include gifting assets during your lifetime, using trusts, leaving your estate to a spouse or civil partner, and making charitable donations.
The standard nil-rate band is £325,000. Anything above this is taxed at 40%. However, if you leave at least 10% of your estate to charity, the rate on the remaining taxable estate drops to 36%. If your estate qualifies for the residence nil-rate band, the threshold could increase to £500,000.
If you leave your estate to a spouse or civil partner, it’s entirely exempt from IHT. Additionally, your unused nil-rate band can be transferred to them, potentially doubling their threshold to £650,000. This exemption does not apply to divorced partners or those whose civil partnership has been dissolved.
Gifts made more than seven years before your death are generally exempt from IHT. If you die within seven years, the gift may be taxed, but the rate decreases the longer you live after making it. This is known as taper relief. The closer the gift is to your date of death, the higher the tax rate.
Gifts to registered charities are exempt from IHT. If you leave 10% or more of your net estate to charity, the IHT rate on the rest of your estate drops from 40% to 36%. In some cases, beneficiaries can top up charitable gifts to reach the 10% threshold and trigger the reduced rate.
There are three categories:
Yes. A whole-of-life insurance policy held in trust can be used to cover IHT liabilities. If properly structured, the payout won’t be considered part of your estate and won’t be taxed. It’s important to keep premiums up to date and ensure the policy value matches the expected IHT bill.
As at the date of this article, defined contribution pensions fall outside your estate and can be passed on IHT-free. However, from April 2027, Inheritance tax will be levied on unused pension funds after death.
For more on this topic, please read our dedicated blog on inheritance tax and pensions. In addition, if you’ve withdrawn funds and they remain in your bank account at death, they may be taxed. Defined benefit pensions have different rules, so it’s worth checking with your provider.
Additional reliefs include:
Even spending your wealth during your lifetime can reduce your estate’s value and IHT liability.
The truth is, inheritance tax is no longer just an issue for the very wealthy. Even families with an average-sized home, some savings and a pension can now find themselves above the threshold. For loved ones, that can mean facing an unexpected bill of thousands of pounds at an already stressful time.
Thinking ahead is not about beating the tax system. It is about making thoughtful choices so the people you care about most are not left with a burden.
Here is how the rules work today:
The issue is that these allowances have been frozen for years, while property and asset values have kept rising. That is why more estates are being drawn into inheritance tax each year.
At the moment, pensions are usually kept outside of your estate, so they are often passed on without IHT. From 6 April 2027, this will change. Unused pension pots will be included when working out the value of your estate.
That means:
For many households, pensions are one of the largest assets they own. This change alone could push more estates into the IHT net.
At present, you can give away:
There is speculation that these rules may be tightened. If that happens, families will have fewer ways of passing on wealth during their lifetime.
The nil-rate band of £325,000 and residence nil-rate band of £175,000 are both frozen until at least 2030. With the average house price in the UK now over £285,000, and closer to £500,000 in London, it is easy to see why more families are exceeding the threshold.
This freeze acts as a “stealth tax”, quietly pulling more estates into inheritance tax each year without any headline rise in rates.
Imagine a family who bought their home for £180,000 in the late 1990s. Today, it is worth £550,000. Add in a pension pot and some savings, and the estate could easily be over £1 million.
Under the current rules, pensions do not count. But from 2027, they will. This could mean a sizeable tax bill for their children, even though the parents may never have considered themselves wealthy.
This is why more people are paying attention. Inheritance tax is no longer something that only affects a small minority.
Having an up-to-date will is one of the simplest ways to protect your wishes and may help reduce tax.
If you have not updated who your pension should go to, the funds could end up inside your estate and taxed.
Making use of today’s gift allowances could be worthwhile, especially if the rules are tightened. Giving while you are alive also means you can enjoy seeing your loved ones benefit.
Trusts are not suitable for everyone, but they can be a useful tool for controlling how wealth is passed down.
The earlier you start thinking about inheritance tax, the more choices you will have. Leaving it until rules change may reduce your options.
I have spoken with many families who feel uncomfortable talking about inheritance tax. It is not always easy to think about what will happen after you are gone. But when people do take action, it is almost always out of care for those they love.
I have seen families avoid painful decisions because plans were made in good time, and I have seen the relief and peace of mind that brings. In my experience, planning ahead for inheritance tax is one of the most selfless steps you can take.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
The pension changes start on 6 April 2027. Other possible changes, such as to gift rules, have not yet been confirmed.
It is charged at 40% on the value of an estate above the tax-free thresholds.
Not always. It depends on the size of your estate. If your estate including your pension is below the inheritance tax thresholds, there will be no IHT.
Small gifts and annual allowances are currently exempt. Larger gifts are exempt if you live for seven years after giving them. Rules may change in the future.
We have written a full guide on avoiding inheritance tax which covers practical steps families can take. This article focuses on the changes arriving in 2027 and how they may affect you.
For example, did you know that in many cases, you don’t have to take a lump sum in just one lump?
Are you aware that with careful planning and expert help, you can use a lump sum to retire earlier than you may have thought possible?
And did you know that your lump sum can actually grow even after you retire?
Here we take a look at the essentials of the pension lump sum and outline how it can be one of your most effective paths to a fulfilling retirement.
A pension lump sum refers to the amount of money which you can take from a pension that is tax-free.
At the current moment in time, up to 25% of the amount you have saved in a pension fund can be taken tax-free. This is unless you benefit from safeguarded benefits such as protected tax-free cash, in which case it may be more.
As of the time of writing, you can access anything up to the full 25% of your pension as a lump sum from the age of 55. This will increase to the age of 57 by 2028.
In the main, yes. If you have a defined contribution pension – where you (and potentially your employer) put in contributions to build up a pot of money – then you are free to access your lump sum as you like.
If you have a defined benefit pension (also known as a ‘final salary’ pension) then there is normally less freedom when it comes to your lump sum.
Defined benefit schemes give a guaranteed monthly sum upon retirement. Normally they offer pension holders a choice between a larger lump sum and a smaller monthly payment or a smaller lump sum and a larger monthly payment.
Defined benefit schemes usually offer lump sums only in one payment.
However, defined contribution schemes are more flexible.
You don’t have to take your 25% tax-free lump sum all at once. It is possible to take it in whatever stages you like – in a series of monthly sums, quarterly payments or annual payments. You can also start drawing on it and then either increase, decrease or pause withdrawals according to your specific circumstances.
Also, you can decide to take a large sum at the start for things such as paying off debts or buying a once in a lifetime holiday. You could also do that that after a few years, providing you haven’t exceeded your 25% tax-free allowance.
No. If you want to, you can keep working after taking a lump sum, even working full-time.
As a result, your lump sum or part of it could be used for things such as paying off your mortgage or financing your children through university.
You could also use money from your lump sum to start working part-time, taking regular monthly draw-downs to supplement your part-time income.
Yes! You can use money from your pension lump sum to provide a regular income before you reach State pension age.
For example, if you have built up a £250,000 pension pot, you can take £62,500 as a lump sum.
You could take that money aged 64 and use it to give yourself a monthly income of over £1,730 until you reach the current State pension age of 67.
While the pension commencement lump sum itself cannot be taxed, even as a pensioner, any other income will still be subject to tax.
Anything you earn above the personal tax allowance of £12,570 a year will still be subject to income tax at 20%, rising to 40% at £50,271 a year.
This is just one of the reasons why getting expert advice from a qualified financial adviser is so important.
Your adviser can show different scenarios to work out the best way to use your pension lump sum to achieve your life goals.
The adviser can also show you how best to combine your lump sum with other pension savings to finance your retirement.
Generally speaking, it is best to keep your lump sum within your pension fund as long as you can.
Unless your lump sum is small, withdrawing it to put the money into savings could mean you end up paying tax on those savings.
While putting the lump sum into a cash ISA will avoid tax, the interest rate paid could be lower than inflation. This would eat away at the value of your lump sum over time.
Keeping all or part of your lump sum within your pension fund will shelter it from tax. Depending on the performance of your investments, you could also see your lump sum grow, even if you have already taken out some of it.
Previously, pensions were not subject to inheritance tax. This is one of the reasons why we advised clients to keep their lump sums for as long as possible.
However, from April 2027, all unused pensions, including lump sums, will count towards the value of an estate.
In addition, if you die after age 75, your beneficiaries will pay income tax on money from your pension.
This makes keeping a lump sum after the age of 75 questionable since you will be effectively passing on a tax liability.
This is another reason why getting expert advice on your pension is so important.
A pension lump sum is a key part of your financial arsenal when it comes to later life planning.
Used well and with the help of expert advice, a lump sum can help you achieve a host of life goals.
To find out more about how a lump sum could help you, get in touch with one of our advisers today.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions. It is important to note that the value of investments and the income from them can go down as well as up and that you may get back less than the amount you invested.
I’ve had many clients asking me how best to preserve what they leave for their children and grandchildren as a result of the change.
A key tool in your defence against inheritance tax charges is gifting.
Used carefully, gifting money to family can help provide a wide range of benefits both during your lifetime and for many years afterwards.
Here we break down some of the main ways you can make gifting work for you.
You can make one-off gifts of up to £3,000 in any tax year to any individual without attracting any tax charges.
You can also carry forward unused allowance from the previous year. So you could gift up to £6,000 in a tax year if you haven’t used the allowance in the previous year.
There are also special exemptions for weddings and civil partnerships.
You can gift an additional amount:
You can gift up to £250 per person per tax year if that person hasn’t received part of your £3,000 annual exemption.
But while one-off gifts are useful – particularly for special occasions – they are unlikely to have a lasting impact.
So what else can you do to help your family whilst cutting down on potential inheritance tax bills?
It is possible to make larger gifts in addition to those mentioned above without running up an inheritance tax bill.
However, these must be made during your lifetime. You will also need to survive for seven years after making the gift to avoid paying inheritance tax completely.
These gifts are known as Potentially Exempt Transfers – or PETs for short.
Gifts made during the last seven years will use your nil rate band. It is important that you understand this and discuss with your adviser how to manage this.
For example, if you made a gift of £200,000 and died within seven years then you would lose £200,000 of your nil rate. IHT would then be due on any assets over £125,000 (not taking into account the residential nil rate band).
For larger gifts made over the nil rate band, inheritance tax is charged (on the amount over the nil rate band) on a sliding scale as follows:
| Time between gift and death | IHT rate on gift |
| 0–3 years | 40% |
| 3-4 years | 32% |
| 4-5 years | 24% |
| 5-6 years | 16% |
| 6-7 years | 8% |
| 7+ years | 0% |
As an example of how this works, let’s look at a large gift of £400,000.
If you live for seven years or more after the gift has been given, your family will not have to pay inheritance tax on it.
If you die less than seven years after it has been given, your family will have to pay inheritance tax on £75,000 of that gift (the amount over the £325,000 nil rate band) at the rates above.
It is possible to protect the loss of these nil rate band allowances during a 7-year period via life assurance policies.
One of the most effective ways of reducing inheritance tax bills and making a big difference to your family is by regular giftings from income.
In this context, ‘income’ can be money earned from your job or money paid from a pension.
The important part from a taxation point of view is that these regular gifts do not affect your standard of living and that you intend to make the gift on a regular basis.
HMRC define ‘regular’ as at least annually. You also need to make the gifts of a similar value in order to avoid inheritance tax on them.
For example, if you decide to gift your child £500 a month or £6,000 a year from your pension, this would be acceptable.
However, if you gifted £10,000 in one year, £500 the next year and then £8,000 the following year, this would not be regarded as regular gifting.
The gifts must also be at a level that you do not have to draw on your capital e.g. savings to supplement your standard of living.
A good way to maximise the regular gifting allowance is to pay the gifts into an Individual Savings Account (ISA).
Assuming this is done on a regular basis with similar amounts, this would qualify under the regular gifting rules.
And while you may have paid income tax on either your income or salary, your child or grandchild will not pay tax on gains made from their ISA. This applies whether that is a cash ISA or a stocks and shares ISA.
The range of ISAs available – including junior ISAs for under-18s and Lifetime ISAs for over-18s looking to get on the property ladder – means you are likely to find one which fits your family’s needs.
A common concern about regular gifting into an ISA or other account is that the money may be frittered away.
Not every young adult is careless with cash, but the temptation to spend may be too great for some to resist.
With that in mind, another way to use regular gifting money to family is to pay into a pension.
While it may seem too soon to start a pension, particularly for your grandchildren, the opposite is actually true.
If the pension is invested wisely, the earlier you start it, the more it will be worth by the time you can use it.
Also, under current legislation, your child or grandchild won’t have access to the pension fund until they’re at least 58. This ensures that you shouldn’t be too concerned about them drawing it out to spend.
You should not give away too much of your income such that you have to draw on your capital to supplement your standard of living.
Whatever way you decide to make gifts, keeping records of what you do is vital.
Not only does a correct record show compliance with HMRC rules, but it will also save your executors a lot of time and stress on paperwork after you have gone.
The way I recommend clients keep a record of this is via a form available from HMRC – the IHT 403 form.
Part of this form can be used to demonstrate the pattern of gifting and also proves to HMRC that these were from surplus income rather than capital.
I’ve worked with many clients on this aspect of gifting money to families and on a range of strategies to maximise what they pass on to their loved ones.
Gifting money to family is a great way to make a real difference to their lives while reducing the potential burden of inheritance tax.
For a gifting strategy which works well for you, get in touch with us today.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions. It is important to note that the value of investments and the income from them can go down as well as up and that you may get back less than the amount you invested.
The Government announced in July that it was conducting another review of the State pension age.
This will look again at the UK state pension age, which is currently 66 and is set to rise to 67 between 2026 and 2028.
This move could have profound implications for people planning for their retirement and on pension savings.
Here we look at what could change – and what you can do about it.
The Government is required to conduct a review into the state pension age every six years.
The last review concluded in 2023 and the new one announced in July is due to finish in 2029.
The review will consider whether the current state pension age is still appropriate, based on factors such as life expectancy.
The 2023 pensions review agreed to increase the state pension age from 66 to 67 between 2026 and 2028.
Review author Baroness Neville-Rolfe recommended that the age should rise to 68 between 2041 and 2043. This was three years ahead of the previously planned date of 2044 to 2046.
However, the Government of the time decided not to implement this recommendation but to look again at the evidence in two years’ time – hence the review announced in July of this year.
The new state pension review will look at key factors such as linking state pension age to life expectancy, its fairness between generations, as well as its role in ensuring the state pension’s long-term sustainability.
This could result in a recommendation to raise the state pension age higher and faster than currently planned.
The Government has stated that it will stick by a pledge to give ten years’ notice of a change in the pension age, meaning that when this latest review reports in 2029, the earliest it can recommend an increase in the state pension age would be 2039.
Stating the obvious, by speeding up the planned increase in the state pension age by as much as five years, the Government will postpone the date that people currently aged 53 and under will be able to access their state pensions.
With the full state pension currently worth more than £12,000 – and likely to be worth more than that by 2039 – this could mean anything from people having to access more of their private pension earlier (if they have saved enough) to having to work a year longer than they had anticipated.
Either way, any increase in the state pension age is likely to throw something of a spanner in the works of those finalising their retirement plans in the next 10 to 15 years.
If you are currently aged 54 or older and were banking on the state pension age not changing before the dates previously announced, this shouldn’t alter your plans.
However, those aged 53 or younger could find themselves having to make some difficult decisions.
Although rises are introduced incrementally over a two-year period to ensure that those right on the cusp of state pension age under the previous regime do not miss out, you could still be out of pocket. This is particularly so if you’re in your late 40s and the state pension age is raised between 2039 and 2041.
This is where getting expert financial advice can really pay dividends.
Speaking with a financial adviser can give you a clearer understanding of how your pension is performing. It will also show what actions you may need to take, especially in light of potential changes to the state pension age.
More importantly, a financial adviser can help you build a personalised retirement plan that aligns with your goals and circumstances. This guidance is delivered in a clear, straightforward way, helping you feel confident and in control of your financial future.
A well-structured financial plan offers more than just numbers, it provides clarity and direction. With the support of a financial adviser, you can expect:
With expert advice and a clear plan, you’ll be better equipped to make informed decisions and feel confident about retirement.
The pensions review could result in a delay in when you receive your state pension. Careful long-term planning with the help of a financial adviser can help you mitigate the effects and enjoy your retirement.
For further details on any of the issues raised in this article, please get in touch.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
But besides paying them well, how can you ensure that you bring on board and keep hold of talented staff?
I’ve been advising business owners for over 30 years and one thing which I’ve found time and again to be effective when it comes to recruitment and retention is employee benefits packages.
Don’t just take my word for it – recent research shows that 70% of employees are more likely to stay with a company that offers well-structured benefit packages while 65% of candidates say they consider employee benefits as a crucial factor in their job choice.
In this article, I’m going to run through some key employee benefits, how to put attractive incentive packages in place and what factors you need to consider as a business owner when you’re looking to reward employees.
Employee benefits come under a range of different headings and can cover everything from health insurance to Cycle To Work schemes.
They are incentives in addition to standard remuneration and statutory holidays. Just as every business is different, so is every employee within a business, so when considering what benefits to offer to your employees, it’s a good idea to try to provide a range of incentives covering different areas of life.
Let’s break down some of the main employee benefit categories with some examples of incentives you could offer.
Aside from a competitive salary, to help with your employees’ finances you might want to consider:
Also known as Private Medical Insurance, this is one of the most popular employee benefits in the UK. It can help your staff get quicker access to GPs or other health services such as physiotherapy and, depending on levels of cover, potentially a choice of specialists or hospitals. This benefit also has the added advantage to you as an employer of potentially cutting down the length of time staff need to be off work.
Also known as Death In Service benefit, this provides a financial safety net for employees’ families in case the worst should happen to them. Typical levels of cover are three to four times an insured employee’s annual salary.
Having advised business owners on a number of occasions over the years with employee life insurance claims, I know how valuable this kind of policy can be in providing a financial safety net for employees’ families in times of great distress.
In a similar way to company life insurance, disability insurance cover will provide income if any of your employees are unable to work due to illness or injury.
A number of companies offer employees discounted or free expert guidance and support for their financial wellbeing as part of a package of benefits.
In the UK, employers have to enrol eligible workers into a pension scheme and then pay into the scheme on their behalf. There are minimum contribution levels from employers and employees, but you can choose to provide more generous contributions as part of an employee benefits package. This subject is dealt with in more detail on our workplace pensions blog.
A healthy, happy workforce is invariably a more productive one. Health and well-being benefits you could consider for your employees include:
Benefits such as discounted or free gym memberships, health screenings or educational seminars can help promote health lifestyles across your workforce.
This can include things like access to confidential counselling services or advice lines, employee assistance programmes and resources to help your employees to manage stress.
Dental insurance plans insurance plans typically cover routine check-ups, fillings, and other necessary treatments while eyecare insurance helps cover the costs of eye tests and glasses.
Keeping your employees focused at work while enjoying their leisure time can be crucial. Benefits that can assist with this include:
In addition to statutory holidays for full-time workers, you could offer your employees extra holidays and/or the right to ‘buy’ additional leave as well as things like having their birthday off or an allotment of ‘personal’ days to recharge their batteries.
If your business is suitable for it, offering staff things like flexible start/finish times, compressed work weeks and remote working options can be attractive to new hires and existing employees alike.
Providing additional time off for new parents outside of statutory limits can help promote a family-friendly workplace, as can allowing staff time off for caring for family members such as elderly relatives.
Investing in your employees can bring dividends to your business as well as to your staff. Examples of career development benefits include:
Offering opportunities for employees to enhance their skills and knowledge – whether by in-house training or paid places on external courses – can upskill your workforce and improve staff retention rates.
Part or full payment for staff to embark on educational courses or degrees can enhance their personal development and your business.
Paying for sessions with professional vocational coaches has the potential to develop employees’ skills and competencies in the workplace, giving you a more efficient and more productive workforce.
From little touches which make your business a nicer place to be to ways of saving staff money on everyday purchases, there are lots of perks you can put in place including:
From money off goods and services you provide to discounts from leading retailers, many workplace benefits packages offer savings just for being a member of staff.
Whether it’s free fruit on Fridays or access to a subsidised canteen, providing staff with food and drink benefits invariably prove popular.
Something usually offered to senior staff, company cars can be a benefit which people find hard to give up, although it is important to fully investigate and understand the various tax implications involved in company car schemes.
Many public transport providers offer corporate membership for help with staff commuting to their place of work, giving employees access to discounted travel costs.
Under this government initiative, employees can save money on the purchase of a bicycle and cycling equipment through salary sacrifice. Essentially, employees can lease a bike and accessories from their employer, paying for it through monthly deductions from their pre-tax salary, resulting in tax and National Insurance savings.
As you can see from the wide range of different employee benefits available, costs associated with such schemes vary to a similar degree.
When considering which schemes to put in place, it is important to bear in mind not just how much it will cost your business, but also how it will affect your tax situation and the tax and National Insurance situation of your employees.
In many cases, this is not an easy thing to work out. Thjs is just one of the reasons why consulting a financial adviser is an important first step in your employee benefits scheme journey.
Working with your business accountants, a financial adviser can provide detailed advice on new employee benefits and ongoing support.
A financial adviser can also provide forecasts to help you plan for the future and change employee benefits as and when needed as part of your overall corporate financial planning.
Over the years, I have helped many clients to put in place and maintain successful employee benefits programmes which have reaped dividends for their business and their staff alike.
For more details, please get in touch.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
The general feeling is clear: people are tired of the UK’s growing tax burden. High income tax rates, inheritance tax now applying to businesses and farms, rising employer National Insurance costs – the list keeps growing.
One option for wealthy individuals keen to keep hold of their assets is to move to a lower tax country such as the United Arab Emirates (UAE).
However, I know that most of my clients would never actually think of moving to Dubai for tax – for them, the lifestyle change just doesn’t justify the tax savings.
What’s more, there are ways to stay in the UK and shelter your wealth – read on to find out more.
Since Labour came into power in July 2024, there have been growing reports of a wealth exodus from the UK. Initially, the focus was on non-dom reforms, first introduced by Conservative Chancellor Jeremy Hunt in 2024, as providing the spark that made the ultra-wealthy consider leaving.
Now, there’s concern that more of the “mass affluent” may follow, especially with reforms that bring more assets into the scope of inheritance tax (IHT).
One report has claimed that as many as 16,500 millionaires will leave the UK during the course of 2025.
Many of these wealthy people are said to be heading to the UAE because of its low taxes, residency programmes and high-end lifestyle.
But is living somewhere like Dubai all it’s cracked up to be?
Moving to Dubai for tax might seem like a solution, but recent developments suggest it may not be a long-term fix.
For example, neighbouring Oman has become the first Gulf Arab state to introduce income tax, raising concerns that Dubai could follow within the next five years.
Under a royal decree, residents in Oman will pay 5% income tax on earnings above OMR 42,000 (around £80,000). While the tax won’t take effect until 2028 and is modest compared to the UK’s top rate of 45%, it signals a shift in the region.
Most of my clients -those with £1 million to £5 million + in assets – enjoy the UK lifestyle, with plenty of travel built in. So instead of moving to Dubai for tax reasons, we focus on smart, strategic tax planning, retirement planning and estate planning.
Here are some examples of what can be done.
If you’re a high earner now, offshore bonds can help you defer tax on investment gains. Offshore bonds are issued outside UK jurisdiction and are ideal if you expect to be a lower earner in the future or plan to retire in a country with lower tax rates.
For example, if you are a 45% taxpayer, you can defer all gains from tax until you are ready to crystalise them. Later in life, you may become a basic rate taxpayer, meaning you could pay only 20% tax on the profits.
If you are not a basic rate taxpayer and wish to reduce your tax liability, you can assign the Offshore Bond to your children for their benefit (if they are over 18) or your partner to potentially save tax on the gains.
Despite the name, offshore bonds are not complex or shady. They’re a legitimate and often essential part of a well-structured tax plan. Like pensions, they allow you to invest in a wide range of assets while deferring tax until withdrawal.
Pensions remain one of the most powerful tools for tax relief. Contributing £60,000 to your pension every year can attract up to 45% tax relief. Yes, there’s tax when you draw from it, but it’s usually far less.
Here’s a simple example:
If you’re a 45% taxpayer, every £100,000 in your pension only costs you £55,000 net. Later, if you’re a 20% taxpayer in retirement, you could draw £100,000 and receive £85,000 net. That’s a return of £85,000 from a £55,000 net cost.
Note: 25% of any amount drawn down from a pension is tax-free, and the remaining 75% is taxed—netting down to 60% after tax = 85%. Therefore in the above example, you can turn £55,000 net into £85,000.
Venture Capital Trusts allow you to invest in small, high-growth businesses. These investments carry risk, but you receive 30% income tax relief on your investment, and all dividends and gains are tax-free. Names such as Secret Escapes, Five Guys UK, Zoopla, Graze, Tails, Depop were all backed by the UK VCT market.
Individual Savings Accounts (ISAs) are basic but remain very effective when compounded over a long period of time. All gains, dividends and interest from ISAs – whether cash or investment ISAs – are tax free.
A Loan Trust lets you retain access to your capital while removing the growth from your estate. For example, if you lend £500,000 to a trust you set up (of which you can still be trustee) and it grows to £1.5 million over 20 years, only the original £500,000 remains in your estate. The rest belongs to the trust, often for your children/grandchildren. However, it’s important to note that you as the settlor can’t access the growth at any stage!
This strategy is ideal for clients who want flexibility and access to their original capital. If you don’t use the capital during your lifetime, you can write off the loan. If you survive seven years, the £500,000 is outside of your estate. Alternatively, you can spend it on making memories!
These give trustees full control over how and when assets are distributed. They’re perfect for clients who want to gift assets without handing over full control and access to their children/grandchildren.
It’s important to note that if you set up a Discretionary Gift Trust you can’t benefit from the monies. However, a variation of the gift trust – the Discounted Gift Trust (DGT) – allows you to draw a fixed income for life while gifting the capital.
Previously known as Business Property Relief, Business Relief allows qualifying business assets to be passed on free from inheritance tax (IHT), or at a reduced rate, provided certain conditions are met.
There are many Business Relief funds available that qualify for IHT relief after two years of holding the shares. This could potentially save your estate up to 40% in IHT. Nevertheless, there are various risks and conditions that need to be met here. As a result, you should take expert financial advice before going down this route.
A Whole of Life insurance policy is a form of financial protection which can be used to cover a future IHT bill directly.
When written in trust, the payout doesn’t form part of your estate and can be used to pay the tax quickly. It’s especially useful for estates tied up in property or business assets. The proceeds are also free from income tax.
Taking out a Whole of Life Insurance policy also means that there is no investment risk attached. Your family don’t have to worry about whether adverse market conditions will leave them short on the Inheritance Tax bill.
While the tax burden is on the rise, you can mitigate the effects without moving to Dubai for tax.
Taking expert financial advice and planning ahead could help you to keep more of your wealth while enjoying UK life.
For further details on any of the issues raised in this article, please get in touch.
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Disclaimer: It is important to note that the value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
Inheritance tax will be levied on unused pension funds after death from April 2027.
This change has major implications for people looking to leave money to their loved ones.
Here we take a look at how to cope with the new regime and maximise what you can leave your family.
With limited exceptions, inheritance tax (IHT) of 40% is charged on anything you leave after your death over £325,000. This amount is known as the ‘nil-rate band’.
If you leave your main home to your children or grandchildren, you may also get a residence nil-rate band of £175,000. This adds up to a maximum £500,000 before tax kicks in. Therefore a couple who are married or in a civil partnership can potentially pass on up to £1m without their inheritors paying tax.
While this may not sound too bad at first, when you look a little closer then alarm bells may well start to ring.
For example, as of March 2025, the average UK house price was £271,000, a 6.4% increase on the same month in 2024. In 15 years at that annual growth rate, your house would be worth over £531,000.
But with annual house price growth over the last 10 years estimated at 12.1% (by estate agency Zoopla), then after 15 years your home could actually be worth more than £762,000.
With the nil-rate band frozen until 5th April 2030 and higher house prices in certain parts of the country, people even on fairly modest means are now falling into the IHT trap.
At the moment, defined contribution pensions – those where you build up a pot of money to give you an income when you retire – don’t form part of your estate when you die. Consequently, your family doesn’t currently have to pay inheritance tax on any unused defined contribution pensions after your death.
However, from April 2027, any unused defined contribution pensions will be treated as part of your estate for IHT purposes.
Including pension funds in IHT calculations could mean that your estate surpasses the IHT threshold. The rise in house prices and the freeze on tax thresholds makes this even more likely.
Anything above the threshold will be liable for tax at a current rate of 40%. This could have significant financial consequences for your beneficiaries, especially with many people currently using their defined contribution pensions to help pass on assets to the next generation.
As well as potentially paying more in tax, bringing pensions under the IHT umbrella will also cause delays. With HMRC assessing pension funds as part of the overall estate, beneficiaries may face months of waiting for the probate process to be completed. This process could take even longer for more complex estates.
Pension scheme administrators will have to determine the value of any unused pension funds at the time of death and include these in the calculation for IHT. Again, this could lead to significant delays.
With this major change less than two years away, you should take stock of your current situation and evaluate the total value of your assets.
Add up the current worth of your pensions, properties and investments to see where you stand. You should also check you have all appropriate documentation in place. Once you have a comprehensive picture of your financial position, you can start to look at ways of tax-efficient planning.
Careful planning and expert help from a financial adviser can help you to preserve as much as possible of your estate. It can also avoid leaving your family facing major financial headaches.
Here are some options to consider for cutting down on potential inheritance tax liabilities:
As a retiree after being careful with incomes and outgoings for many years, this can be easier said than done. However, it is one sure way of reducing your taxable estate.
You can give away up to £3,000 in any tax year without it counting towards IHT. You can also carry forward unused allowance from the previous year. As a result, you could gift up to £6,000 if you haven’t used it previously.
You can gift additional amounts for weddings and civil partnerships. This can be up to £5,000 to a child, up to £2,500 to a grandchild or great-grandchild and up to £1,000 for anyone else.
Also, you can gift up to £250 per person per tax year, if that person hasn’t received part of your £3,000 annual exemption.
Gifts above these amounts are called Potentially Exempt Transfers (PETs). If you live for seven years after giving the gift, it won’t be taxed. If you don’t, then IHT is charged on a sliding scale as follows:
| Years between gift and death | IHT on gifts over allowance |
| 0-3 years | 40% |
| 3-4 years | 32% |
| 4-5 years | 24% |
| 5-6 years | 16% |
| 6-7 years | 8% |
| 7+ years | 0% |
A Trust is a legal structure that lets you set aside assets for your loved ones while keeping some control over how and when they receive them.
Some trusts are taxed at lower rates or even avoid IHT entirely, depending on how they’re set up. For example:
However, Trusts are complex. A financial adviser or an estate planning expert can ensure they are set up correctly and carry out your wishes.
Many people assume that life insurance policies are only there to help families in the event of an untimely death.
However, you can take out a life insurance policy to cover the anticipated cost of an inheritance tax bill. These policies can be taken out at later stages in life.
If the policy is written in trust, then the payout doesn’t count as part of your estate and won’t be taxed. You should get professional advice since such policies do not come cheap and need careful handling to be effective.
You could consider using some funds to make an investment that qualifies for Business or Agricultural Relief.
From April 2026, any assets worth up to £1m and which you have held for at least two years will get 100% relief from inheritance tax. Assets above that level will qualify for 50% relief from IHT, effectively taxing them at 20% rather than the standard 40%.
Qualifying quoted but unlisted shares (such as those on the Alternative Investment Market) will attract 50% relief from inheritance tax.
This is a complicated area so take expert investment advice and taxation advice before progressing with any plan.
If your defined benefit pension fund is left to your spouse or civil partner, they will not have to pay any inheritance tax.
Nonetheless, when they die, that pension could still attract IHT. The same principle applies when it comes to property.
A financial adviser or estate planning expert can help you put in place joint plans to help maximise benefits.
For example, a joint lives second death policy in trust for the beneficiaries of your estate may help to cover the IHT bill.
Inheritance Tax on pensions will make it harder for people to pass on assets without attracting increased tax bills. This especially the case when you consider rising house prices and frozen tax allowances.
Careful planning with financial and estate planning advisers can create useful solutions to ensure you maximise what you leave behind.
To find out more, why not get in touch with one of our experts by clicking the link below.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
But since the introduction of auto-enrolment in 2012 – obliging businesses to offer staff access to a contributory workplace pension – employee pensions are literally everyone’s business.
I’ve advised employers of all kinds on employee pension schemes over the years to help recruit, retain and motivate their staff. Here are some of the key points to bear in mind as an employer – and how you can make employee pensions work for your business.
If you are an employer, you will need to offer some form of employee pension scheme.
If you deduct tax and National Insurance from an employee’s wages then you are usually regarded as an employer, even if you only have one or two members of staff.
You must enrol and make an employer’s contribution for all staff who:
If staff become eligible because of a change in their age or earnings, you must put them into your workplace pension scheme and write to them within 6 weeks of the day they meet the criteria.
You must pay a minimum of 3% of your employee’s qualifying earnings into your staff’s pension scheme.
Under most pension schemes, this is usually an employee’s total earnings between £6,240 and £50,270 a year before tax. Total earnings include:
If you wish to, you can choose to contribute more than 3% of an employee’s earnings, although there will be tax implications for doing so.
Employees must contribute at least 5% of their qualifying earnings to a workplace pension scheme. They may also receive tax relief on their pension contributions, which can further increase the amount going into their pension pot.
Employees usually have one month from the date they are enrolled on a workplace pension scheme to opt out. If they opt out after this time, any contributions they have made will usually remain in the pension pot until retirement.
Employers can offer two main types of workplace pension schemes: Defined Contribution (DC) and Defined Benefit (DB) schemes.
In a Defined Contribution scheme, the pension pot is built through contributions from the employer and employee. The final amount in the pot depends on investment performance.
Defined Benefit schemes, also known as final salary schemes, guarantee a specific income in retirement. This income is usually based on salary and length of service.
Most modern workplace pension schemes are Defined Contribution schemes since they generally offer more straightforward and predictable costs than Defined Benefit schemes.
There are a range of different pension options which you can pick from to offer as your workplace pension scheme, including specialist schemes for small employers.
These schemes will vary in terms of fees, expenses and investment approach. It can be challenging choosing which scheme is right for you, your business and your employees.
Factors you need to take into account include:
An independent financial adviser can search the whole of the market to find the best possible solution and help you comply with relevant regulations.
I’ve helped many businesses to navigate their way through the workplace pensions maze to find the best fit for their company, their employees and themselves.
Fairstone can also advise on other pension options including a Small Self-Administered Scheme (SSAS) or a group Self-Invested Personal Pension (SIPP) scheme. We can also advise on other aspects of workplace pensions such as salary sacrifice pension schemes.
Employee pensions are an unavoidable fact of life for UK businesses. But with the right approach and the right advice, they can be beneficial for you, your employees and your company.
Expert corporate financial planning advice can help you choose the scheme and ensure you fulfil your associated obligations.
If you’re an employer considering setting up a pension scheme or changing your scheme provider, get in touch with an adviser. They can talk you through the options and find out what’s best for you and your business.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
