When it comes to planning for retirement, the earlier you start, the better. But the reality is that many of us, especially those in our 20s and early 30s, don’t always prioritise saving for the future. Instead, we’re focused on the present—career progression and enjoying life. However, those who are committed every step of the way will reap the greatest rewards down the line.
Starting with small steps in retirement planning now can make your financial journey smoother as you approach retirement.. As the retirement savings journey often spans several decades, it can be helpful to separate your plan into stages.
This will help you achieve the right blend of enjoying the present and funding your future.
The general recommendation is to save at least 15% of your income towards retirement. However, the amount you should contribute depends on your personal circumstances and retirement goals. Starting with smaller contributions is okay, but aim to increase your contributions as your income grows.
Let’s explore the different stages of life and how retirement planning fits in.
At this age, retirement may feel a long way off, but that’s exactly why it’s the perfect time to start. In your 20s and early 30s, you are likely to have fewer financial responsibilities than in later years, and this can work to your advantage. While retirement saving might not seem urgent, building a solid foundation early on will make a huge difference in later life.
The best time to start saving for a pension is when you’re young, as this gives your money more time to grow. Delaying contributions by even a few years can significantly reduce your final pension pot.
It’s estimated that postponing pension savings until middle age could mean missing out on up to £100,000 in investment returns and tax relief.
Fortunately, as soon as you begin working, you’ll typically be enrolled in your employer’s pension scheme automatically. By law, if you contribute 5% of your salary, your employer must add at least 3%.
Making the most of this scheme is essential for building a comfortable retirement fund. The earlier you start, the greater the benefits of compound growth over time.
Self-employed individuals don’t have access to workplace pensions, making personal retirement savings essential. Options like Self-Invested Personal Pensions (SIPPs), stakeholder pensions, and ISAs can provide tax-efficient ways to save.
Since income can fluctuate, setting up flexible contributions and using high-earning periods to boost pension savings can help ensure financial security. It’s also vital to check National Insurance contributions to qualify for the full State Pension, as self-employed workers must actively manage their contributions.
When deciding how to invest your pension, a long-term approach is key. Choosing assets with strong growth potential—such as stocks and shares—can help maximise returns. While investments can fluctuate in value, a longer investment horizon allows you to ride out market ups and downs.
A Self-Invested Personal Pension (SIPP) gives you more control over how your pension pot is invested. Unlike traditional pension plans, which have a limited range of investment options, a SIPP lets you choose from a wider variety of assets, including stocks, bonds, and property. If you’re confident in your investment knowledge or want more flexibility, a SIPP could be a good choice.
When you’re young, you have time on your side, which allows you to take more investment risks and benefit from the growth potential of the markets. Even though markets go up and down, you have decades before retirement, so short-term volatility tends to smooth out in the long run.
It’s essential to focus on your future during this phase, even if it feels distant.
Many young people receive financial gifts from parents or grandparents, often intended for long-term savings or investments. While these gifts can provide a valuable boost to retirement savings, they should be managed carefully.
Instead of spending them immediately, consider investing them in a pension, stocks & shares ISA, or other tax-efficient savings vehicles to maximise growth over time. Additionally, family gifts may have inheritance tax (IHT) implications if the giver passes away within seven years, so seeking financial advice on how best to structure these contributions can be beneficial.
Financial responsibilities tend to pile up by your mid-30s, with mortgage payments and childcare costs becoming major expenses.
On the plus side, career progression often leads to higher earnings, making it a great time to focus on retirement savings.
By now, your income has likely increased. Perhaps you’re further along in your career, maybe starting or have a family, and you may have more financial flexibility. With this increased earning power, it’s the ideal time to review your retirement plans and consider ramping up your contributions.
If you earn more than £50,270 a year, you can benefit from 40% tax relief on pension contributions. This means that for every £100 you invest in your pension, the actual cost to you is just £60. When combined with employer contributions, this presents a powerful opportunity to grow your savings.
By the time you reach your mid-40s, it’s crucial to assess whether your pension savings align with your retirement goals. You may have a clearer idea of the income you’ll need and the age at which you’d like to stop working, allowing you to fine-tune your savings strategy accordingly.
If you haven’t already, it’s time to speak with a financial adviser. Retirement is becoming more real, and a professional can help you understand exactly how much you need to save and at what age you would like to retire. A financial adviser can also help ensure that your retirement savings are aligned with your personal goals and provide insight into the best investment strategies.
Now is the time to make some important adjustments:
Consolidate Your Plans: If you have multiple pension pots, consider consolidating them into one plan. This will help simplify your retirement strategy and potentially reduce fees.
Maximise Contributions: Aim to contribute more than the minimum required. If you’re able, topping up your pension with extra contributions will make a significant difference when you retire.
Update Your Beneficiaries: Ensure that the beneficiaries listed on your pension plans are up to date. This is particularly important if your life circumstances have changed, such as marriage or the birth of children.
Consider Bonus or Salary Sacrifice: Some employers allow you to sacrifice a portion of your salary or bonus for pension contributions, giving you more flexibility and tax advantages.
Use Your ISA Allowance: Don’t forget about Individual Savings Accounts (ISAs). Using your ISA allowance each year provides additional tax advantages and flexibility.
By the time you turn 50, your focus on retirement savings should be sharper than ever—this is the stage to make significant progress toward your goals.
If your pension pot isn’t where you’d like it to be, don’t panic—you still have time to make a meaningful impact.
At this stage, many financial commitments begin to ease. You may be approaching the final years of your mortgage, and other expenses could start to decline. Meanwhile, earnings often peak in your 50s, creating the perfect opportunity to accelerate your retirement savings—especially if you need to catch up.
If you have spare cash in the bank that you don’t need immediate access to, consider boosting your pension through lump-sum contributions. The maximum you can contribute in a year while receiving tax relief is 100% of your earnings or £60,000, whichever is lower—this is known as your annual allowance.
Additionally, you may be able to contribute even more using the “carry forward” rule, which lets you use unused allowance from the previous three tax years.
As you approach 65, your retirement plans should be taking shape, with a clear understanding of the final steps needed to achieve your target income. Having a well-defined plan will make decision-making much smoother when the time comes to transition into retirement.
At this stage, you should be looking at the big picture and considering all the ways you can maximise your pension and savings before retirement. This could include consulting with a financial adviser to review your retirement strategy in detail.
Here are some key steps to take as you near retirement:
Conduct a Pre-Retirement Review: Work with your financial adviser to conduct a full review of your pension plan, including how your benefits can be taken and how your finances will look post-retirement.
Consider SIPPs: A Self-Invested Personal Pension (SIPP) may be an option to give you more control over your pension investments. A SIPP lets you choose how your pension is invested, which could potentially help you boost your retirement income.
Understand Your Pension Options: The rules around pensions are changing, and now that you’re getting closer to retirement, it’s important to understand how you can take your pension benefits. For example, you can start accessing your pension savings at age 55, but you should understand the different ways to draw your pension—whether that’s through lump sum payments, income drawdown, or purchasing an annuity.
State Pension Forecast: Make sure you know how much you can expect from the state pension and whether you’re on track to receive it at the right time.
You might be wondering, “Can I withdraw my pension before 55?” The answer is generally no, unless you meet certain conditions such as ill health or specific pension schemes. While some people may consider early pension release, this is a complex issue and should be explored with a financial adviser to understand the long-term impact on your retirement funds.
Changes in employment, such as moving to part-time work or switching jobs, can impact your pension contributions and long-term retirement strategy. When changing jobs, it’s important to track and consolidate pension pots, ensuring your savings continue growing efficiently. If transitioning to part-time work, consider adjusting your savings strategy to maintain financial stability. Career breaks can also affect your National Insurance record, so checking contributions and making voluntary payments can help protect your State Pension entitlement.
Death Benefits: Understanding how your pension can pass to your beneficiaries is important for inheritance planning. You can use death benefit options to save on inheritance tax.
ISA Allowance: Continuing to use your ISA allowance is essential for flexibility in how you draw funds during retirement.
Investment Strategy: Review your investments carefully. You might want to shift toward lower-risk options as you get closer to retirement to preserve the value of your pension fund.
At this stage, your focus should shift from growing your wealth to ensuring it provides a steady income for the rest of your life.
Your primary goal is to make your retirement savings last, balancing security with flexibility. When it comes to drawing an income from your pension, you generally have two main options:
Choosing between these options requires careful consideration, as each has its advantages and drawbacks. With income drawdown, you have the freedom to access your money when needed, but there’s a risk of running out of funds. An annuity, on the other hand, provides financial security but is irreversible and leaves no remaining capital for inheritance.
However, you don’t have to pick just one. Many retirees opt for a mix of guaranteed and flexible income, striking a balance between security and control.
Once you reach State Pension age (66, rising to 67 from 2028), you may also qualify for the full new State Pension, provided you have sufficient National Insurance contributions. At £203.85 per week, this can provide a valuable boost to your retirement income.
Retirement planning is a lifelong journey, and it’s important to stay focused on the long term. By starting early, increasing contributions over time, and consulting with professionals, you can ensure that your retirement years are comfortable and financially secure.
Whether you’re just starting out in your career or approaching retirement, making smart decisions about saving and investing now can set you up for success in the years to come. Start today, and let your future self, thank you for it!
It’s never too early to start! The earlier you begin saving for retirement, the better. Even if you’re in your 20s or 30s and feel retirement is far off, starting early allows you to benefit from compounding and gives you the flexibility to take more investment risks. The earlier you set up a pension and start contributing, the more time your money has to grow.
In most cases, you cannot access your pension before age 55 unless you meet specific conditions, such as ill health. Early pension release is generally not an option unless you are in one of these circumstances. It’s crucial to plan your pension withdrawals with care, as early access could reduce your pension pot when you need it most.
In your 20s and 30s, it’s essential to start contributing regularly to your pension plan, even if you can’t afford to make large contributions. Setting up a direct debit or salary deduction is a good way to ensure regular savings. If your employer offers a pension scheme, contribute enough to take full advantage of any matching contributions they offer, as this is effectively free money.
The general recommendation is to save at least 15% of your income towards retirement. However, the amount you should contribute depends on your personal circumstances and retirement goals. Starting with smaller contributions is okay, but aim to increase your contributions as your income grows.
A Self-Invested Personal Pension (SIPP) gives you more control over how your pension pot is invested. Unlike traditional pension plans, which have a limited range of investment options, a SIPP lets you choose from a wider variety of assets, including stocks, bonds, and property. If you’re confident in your investment knowledge or want more flexibility, a SIPP could be a good choice.
In most cases, you can access your pension savings from the age of 55. This could include taking a lump sum, income drawdown, or purchasing an annuity. However, taking funds early means you could reduce your retirement income in the long term, so it’s important to plan carefully with a financial adviser.
It’s essential to ensure your pension plan has up-to-date beneficiaries listed. This will make sure your pension pot is passed on to the people you want in the event of your death. Many pension schemes also allow you to specify how death benefits are paid, which could be used for inheritance tax planning.
If you change jobs, your pension from your previous employer doesn’t go away. You can leave it where it is, transfer it to your new employer’s pension scheme, or move it to a personal pension plan. It’s important to keep track of any pension pots you have from previous jobs to ensure they are well-managed and continue to grow.
Yes, you are entitled to a state pension when you reach the state pension age, which is currently 66 but will rise over time. The amount you receive depends on your National Insurance contributions throughout your working life. You can request a state pension forecast from the government to see how much you’re likely to receive.
There are several ways to boost your retirement savings, including:
We have over 1250 local advisers & staff specialising in investment advice all the way through to retirement planning. Provide some basic details through our quick and easy to use online tool, and we’ll provide you with the perfect match.
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THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
Dreaming of retiring early? Achieving early retirement requires strategic planning, disciplined saving, and smart decision-making. By focusing on financial independence and proactive management of healthcare expenses, pensions, and workplace benefits, you can significantly boost your chances of retiring early. Whether you aim to retire in your early 60s or even earlier, smart planning is always key.
In the early years of retirement, the focus often shifts to fulfilling long-held dreams and enjoying life to the fullest. Spending during this phase may be higher due to increased activity but tends to decline as activity levels decrease over time. However, expenses may rise again later in life, often due to growing care needs.
Many individuals overestimate their health or underestimate how long they will live. With increasing life expectancy, it is not uncommon for retirement to span over 20 years or more. However, as with most life scenarios, this is influenced by various factors, including personal health, lifestyle, and financial planning.
Retirement planning requires ensuring that lifetime expenses do not exceed income and accumulated assets, such as savings and investments. This balancing act can be challenging and requires careful evaluation of pensions, income streams, and anticipated changes in spending over time.
Investment returns and inflation also play a critical role in retirement planning. Inflation, in particular, can erode the purchasing power of fixed incomes or cash savings. As recent years have demonstrated, the cost of living can rise sharply, emphasising the need for financial strategies that adapt to economic fluctuations.
Goal setting is another crucial aspect of retiring early. Define clear financial and lifestyle goals and create a roadmap to achieve them. Whether it’s building a larger pension pot, reducing healthcare expenses, or maximising workplace benefits, every step brings you closer to financial independence.
Your pension pot is one of the most critical resources for retiring early. Start by reviewing your workplace pension schemes and personal savings to understand how much pension income they will provide. Explore how different scenarios—like speaking to your employer about salary sacrifice, increasing contributions or delaying withdrawals can impact your overall retirement savings and income.
Flexible pots and lump sum options offer ways to access your savings early, allowing you to fund your early retirement while maintaining financial stability. However, it’s essential to withdraw strategically to ensure your funds last. Retiring early also means you may need to bridge the gap until you reach the state pension age, so plan your withdrawals carefully.
Workplace benefits can be a game-changer when planning to retire early. If your employer offers a defined benefits scheme or a generous workplace pension, these can provide a reliable income stream. Survivor’s pensions and other benefits can also support your family’s financial security.
Redundancy pay can act as a financial springboard for early retirement. If you’ve received a redundancy payout, consider using it to boost your retirement savings or pay off outstanding debts. Combining redundancy pay with an early retirement deal can help you transition smoothly into your next phase of life, especially if you aim to retire in your early 60s.
For many aspiring early retirees, transitioning to a part-time role or adopting a phased retirement approach can provide both income and flexibility. A reduced work schedule allows you to test the waters of retirement while still contributing to your pension pot.
Work-from-home opportunities are another excellent option, offering the chance to earn income without the physical demands of commuting. This flexibility is particularly beneficial if mobility or mental health concerns arise. Mini retirements, where you take short breaks from work before fully retiring, can also help you build confidence in your financial plan while enjoying the benefits of downtime.
The exact amount depends on your lifestyle and expected expenses. A common rule of thumb is to save 25 times your annual expenses.
Yes, many pension schemes offer flexible pots or lump sum options that allow early withdrawals. However, early withdrawals may reduce your overall pension income, so plan carefully.
Invest in comprehensive health insurance. Consider setting aside a portion of your savings specifically for healthcare expenses.
Yes, part-time roles, freelance work, and phased retirement options can provide additional income while allowing flexibility. Work-from-home opportunities are particularly convenient.
Evaluate the financial implications, including redundancy pay and the impact on your pension pot. Ensure the deal aligns with your long-term retirement goals.
Stick to a budget, monitor your investments, and periodically review your financial plan.
Retiring early is a challenging but achievable goal. Working with an Independent Financial Adviser could help improve your chances of retiring early. By proactively managing healthcare costs, maximising your pension income, and leveraging workplace benefits, you can create a solid foundation for early retirement. Whether you opt for phased retirement, a part-time role, or a mini retirement, staying flexible and informed will increase your chances of success. With careful planning and determination, you can retire early and enjoy the freedom and fulfilment you deserve.
We have over 1250 local advisers & staff specialising in investment advice all the way through to retirement planning. Provide some basic details through our quick and easy to use online tool, and we’ll provide you with the perfect match.
Alternatively, sign up to our newsletter to stay up to date with our latest news and expert insights.
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THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
Managing your corporation’s tax efficiently is more than just crunching numbers — it’s about making smart, proactive decisions. It’s an opportunity to optimise your finances by utilising all available allowances before 5 April 2025 tax year end.
The corporation tax landscape for 2024/25 hasn’t changed significantly, but staying informed is critical. Here’s the breakdown:
If your business is part of a group or has associated companies, you’ll need to share the profit thresholds, which can affect your effective tax rate. We recommend keeping a close eye on profit forecasts and reviewing them regularly is a must.
Extracting profits effectively is one of the simplest ways to reduce your corporation’s tax liability. Here are some tax-efficient options:
Dividends remain a popular and tax-efficient way to extract profits, but changes to the Dividend Allowance mean careful planning is vital. The Dividend Allowance has been reduced, so you’ll want to ensure your strategy aligns with your overall financial goals.
Paying yourself (or key team members) a salary or bonus isn’t just good for cash flow—it’s also deductible from your company’s taxable profits. By doing so, you may lower your overall corporation tax liability.
Did you know that pension contributions made by your business are deductible and free of National Insurance contributions? They’re a fantastic way to build long-term savings while keeping your tax bill in check.
A quick tax-efficient review of your current profit extraction methods could reveal opportunities to save more.
Timing is key. Adjusting the timing of your expenses can help you optimise your tax position.
If your business is planning to invest in equipment or machinery, consider making those purchases before your year-end. Why? The Annual Investment Allowance (AIA) allows a 100% deduction on qualifying capital expenditures, giving your business an instant tax break.
Aligning bonuses and other employee-related expenses with your financial year is another savvy move. This strategy can increase your allowable deductions and lower your taxable profits.
So, review your planned expenses for the year and see if shifting them forward or back could save you money.
If your family plays a role in your business, it’s time to explore how their involvement can benefit your bottom line.
Paying a fair, commercially justified salary to family members can be an effective way to reduce your taxable profits while spreading income across lower tax bands.
Allocating shares to family members can help you take advantage of lower personal income tax rates on dividend income. Just ensure compliance with tax laws to avoid issues down the road.
Tax planning doesn’t have to be overwhelming. Use this handy checklist to guide your tax-efficient review and planning efforts:
Make sure you know whether your company falls into the small profits rate, main rate, or marginal relief bracket. Adjust your strategy accordingly.
Evaluate the best ways to extract profits—whether through dividends, salaries, or pensions. Balance your current needs with long-term planning.
Are you taking full advantage of the AIA for capital investments? A strategic review of planned expenses could save you thousands.
If your business engages in innovative activities, don’t leave money on the table. Research and Development (R&D) tax credits could significantly reduce your tax bill.
Look at how family involvement in the business could optimise income distribution and reduce overall tax liability.
Take Action: Work with a tax adviser or schedule a tax-efficient review to ensure you’re maximising every available opportunity.
Whether it’s managing corporation tax rates, extracting profits wisely, or exploring family tax efficiency, the key is to stay proactive. Tax rules may seem complex, but with the right planning, you can transform them into opportunities for savings.
Not sure where to start? Conduct a thorough tax-efficient review to identify the strategies that best suit your business. From profit extraction to capital investments, a few small changes can lead to significant benefits.
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THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
The end of the tax year is fast approaching, ending on 5 April 2025. This is your opportunity to review your annual allowances and assess how best to make the most of them. With some significant changes to tax allowances in the 2024/25 tax year and further reductions expected in the future, planning ahead is key. Using your allowances now could maximise your wealth by leveraging tax-efficient strategies and minimising liabilities.
The end of the tax year is more than a deadline, it’s an opportunity to make your money go further. This is the time to use up allowances that reset in April, reduce your tax liabilities, and fine-tune your financial strategy. For higher rate taxpayers, this could mean significant savings with the right moves in place.
There have been many tax changes in the last 12 months but here are the ones you really need to be aware of.
Understanding these updates ensures you’re prepared to navigate them and take full advantage of what’s available.
There are many ways to ensure you are being as tax efficient as possible, from maximising pension contributions to managing capital gains tax. Below are the key actions to consider ahead of 5 April 2025.
Tax relief on pensions offers one of the most generous savings opportunities. Higher rate taxpayers can claim up to 40% relief on contributions, whilst additional rate taxpayers can claim up to 45% relief. Make sure to use your £60,000 annual allowance and consider contributing to pensions for non-earning family members to secure their futures while staying tax-efficient.
Planning withdrawals is just as important—access up to 25% of your pension tax-free, and time it with other income to reduce overall liabilities.
If you’re earning above £100,000, making pension contributions is a powerful way to reduce taxable income. Not only could this help you retain your full £12,570 personal allowance, but it also delivers up to 45% tax relief.
We’d recommend you take action by contributing before 5 April and, if possible, carry forward unused allowances from the past three years to increase your savings potential.
The £20,000 ISA allowance is a simple yet effective way to shield your savings and investments from tax. Consider using a mix of Cash ISAs for easy-access funds and Stocks & Shares ISAs for long-term growth. Don’t forget Junior ISAs for your children, which allow contributions of up to £9,000 annually. If you’re under 40, then consider opening a Lifetime ISA, into which you can save £4,000 per year and receive an immediate 25% bonus (This £4,000 forms part of your overall £20,000 ISA allowance).
With the dividend allowance now just £500, it’s time to rethink your dividend income strategy. If you’re a higher rate taxpayer, dividends above this threshold are taxed at 33.75% (39.35% for additional rate taxpayers).
Consider spreading dividend income across family members or paying dividends before 5 April to take advantage of current rates. A little planning here could save you significantly.
The reduced CGT exemption means gains above £3,000 are taxable at 20% for higher and additional rate taxpayers, but gains realised from 30th October 2024, are charged at 24%.
Strategies like “Bed and ISA” (selling assets and repurchasing within an ISA) or transferring assets to your spouse to utilise their CGT allowance can help you stay efficient and minimise tax.
Higher rate taxpayers should also focus on inheritance tax efficiency. Use the £325,000 Nil-Rate Band and £175,000 Residence Nil-Rate Band to minimise IHT exposure. Lifetime gifts—like the £3,000 annual exemption and £250 small gifts—can also reduce your estate while helping loved ones.
For more complex estates, trusts and other specialist investments offer a strategic way to manage assets and shield them from unnecessary tax.
The personal allowance for the current tax year is £12,570. To retain the full allowance:
The annual ISA allowance of £20,000 allows you to shelter savings and investments from tax. You can:
Contribute up to £4,000 into a Lifetime ISA if you opened one before the age of 40.
Pension contributions attract tax relief at your highest marginal rate (20%, 40%, or 45%). By contributing before 5 April, you can:
Yes, charitable donations through Gift Aid allow you to claim additional relief if you’re a higher or additional rate taxpayer.
The annual CGT exemption is £3,000 for the current tax year. To reduce CGT:
With the dividend allowance reduced to £500, dividends above this threshold are taxed at:
Consider spreading dividend income across family members or adjusting your dividend strategy before 5 April.
Use the £325,000 Nil-Rate Band and the £175,000 Residence Nil-Rate Band efficiently. You can also:
If you or your spouse earn below the personal allowance, you can transfer up to 10% (£1,260) of your allowance to the higher-earning partner, potentially saving up to £252 in tax.
Yes, options like:
Offer tax relief and can complement your broader investment strategy. It’s vital you seek professional financial advice as these investments are highly complex.
The deadline for Self-Assessment tax returns is:
Keep detailed records of:
The 5 April deadline is fast approaching, so don’t wait to take action. Whether it’s pension contributions, ISA investments, or estate planning, each step you take today can make a meaningful difference. By getting your finances tax-efficient now, you’ll set yourself up for a stronger, more secure financial future.
Take control, optimise your savings, and make every pound work harder for you.
For further information on tax year-end planning opportunities get in touch today.
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THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
I’ve always believed in the power of New Year’s resolutions. Over the years, I’ve seen first hand how sticking to well informed financial commitments can transform people’s lives, not only in terms of wealth, but in their overall sense of security and confidence. Building a stronger portfolio is similar to many other long-term goals, like buying a home or securing a comfortable retirement, those who embrace financial resolutions consistently see progress in their portfolio and a strong foundation for their future.
By committing to a few smart resolutions and sticking with them, you’ll set a strong foundation for the years to come. Whether you’re just starting your investment journey or looking to refine your approach, these are the steps that I think investors should take to help take control of your finances and move closer to the life you want.
Consistency is one of the most powerful habits in investing. By contributing to your portfolio regularly, even when markets are unpredictable, you can benefit from pound cost averaging. This strategy helps smooth out the ups and downs of the market over time.
Make it easy by automating your contributions. Whether you’re investing large sums or starting small, the key is building the habit and staying consistent. And if you have any unused cash in your portfolio, ensure it’s put to work in your chosen assets, so every penny contributes to your financial growth.
It’s easy to get frustrated when markets fluctuate. Maybe you’ve seen a share price dip and second-guessed your decisions, but that’s usually just temporary sentiment at work. Even solid companies can see their stock values drop due to short-term market conditions or broader trends.
The key is focusing on the bigger picture. History shows that markets recover, and patience often turns perceived losses into gains. The real secret to success? It’s not about timing the market but spending time in it. Stick to your strategy, trust the fundamentals of your investments, and resist the urge to react to every market hiccup.
Many UK investors stick close to home, but the global market offers so much more. Did you know that the UK makes up just 4% of the world’s equity markets? That leaves a massive 96% of opportunities waiting to be explored.
By diversifying your portfolio beyond the UK, you can tap into differentiated markets like the US, Europe, and even emerging economies. The world is full of possibilities—don’t miss out by keeping all your investments local.
While it’s smart to let your investments grow without constant tinkering, an annual check-in is essential. What worked for you a few years ago might not align with your goals or the current economic environment today. Inflation, global trends, and personal milestones all play a role in shaping your financial needs.
Take time to review your investment portfolio management and make sure it’s on track. You might consider rebalancing your assets, exploring fee-free platforms, or even switching to a managed portfolio for professional guidance. Staying proactive ensures your investments remain aligned with your evolving goals.
A well-rounded investment approach starts with gathering insights from a variety of trusted sources, whether website or news outlets. While personal research is essential, broadening your network to include industry leaders and financial experts can give you a clearer, more comprehensive understanding of the markets. Many professionals regularly share valuable advice on market trends, investment strategies, and portfolio management—resources that can help refine your own decisions.
At the same time, it’s crucial to challenge your assumptions by seeking out alternative views. Avoid the trap of “confirmation bias,” where you only focus on information that supports your existing beliefs. Instead, leverage a diverse range of insights to ensure your portfolio remains balanced and forward-looking.
For those seeking a deeper level of expertise, working with a wealth manager can be a natural next step. Professional advisers provide tailored strategies, objective advice, and access to advanced tools that can enhance your financial plan. By combining your independent research with expert guidance, you can optimise your portfolio for long-term success and greater peace of mind.
Market fluctuations are normal, and even strong companies can experience temporary price dips. Focus on the bigger picture:
The UK represents just 4% of the global equity market, leaving 96% of opportunities in regions like the US, Europe, and emerging markets. Diversifying globally can:
Consistency in investing allows you to benefit from pound cost averaging, which smooths out market volatility over time.
An annual review helps ensure your investments align with your financial goals and the current market environment. Consider:
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Emerging markets can offer significant growth opportunities but also come with higher risks. Diversify wisely and consider these investments as part of a balanced portfolio.
To combat inflation:
Explore ESG (Environmental, Social, and Governance) investments to align your portfolio with your values. Many platforms now offer tools to screen for sustainable or ethical investment options.
It’s never too late to begin. Even small contributions over time can significantly grow thanks to compounding. The key is to start where you are and remain consistent.
While it’s possible to manage your investments independently, a financial adviser can offer:
The habits you build today will shape your financial future. By diversifying globally, investing consistently, and focusing on the long term, you’ll set yourself up for success. Take the time to review and refresh your portfolio so that it’s working as hard as you are.
Start now, and 2025 could be your most rewarding financial year yet.
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THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
The festive season is a wonderful time for giving, but what if you could share that joy all year round? Gifting from surplus income is a meaningful way to provide for your loved ones while managing your inheritance tax (IHT) liabilities. However, this process requires careful planning and attention to detail—and we strongly recommend seeking professional advice to ensure everything is done correctly.
Mandy Crawford DipPFS Cemap, Financial Planner explores how you can make the most of this generous opportunity.
Gifting out of surplus income means sharing money from your regular income rather than your assets. The advantage of this approach is that these gifts are immediately free from inheritance tax and don’t fall under the seven-year rule, which applies to gifts from your assets. However, this isn’t a straightforward process, as you’ll need to establish a clear pattern and maintain thorough records.
This exemption allows you to support your family while reducing the taxable value of your estate. Whether you’re helping a child onto the property ladder, contributing to your grandchildren’s education, or simply sharing the joy of giving, surplus income gifts are a practical and heartfelt way to make a difference.
The amount you can gift depends on your surplus income. You can gift as much as you like, as long as it doesn’t affect your standard of living. Whether it’s modest amounts or substantial contributions like school fees or house deposits, the key is to ensure the gifts are part of your regular expenditure.
Surplus income is what’s left after covering your regular outgoings. This can include:
It’s important to calculate your income carefully to comply with HMRC rules. For example, tax-free withdrawals from investment bonds don’t count as income for this purpose.
To qualify for the exemption, the following rules apply:
Good record-keeping is essential to benefit from this exemption. Here’s how to stay on track:
Document your income, expenses, and gifts. This will help your executors when they complete HMRC’s IHT403 form after your passing.
Spread the spirit of giving throughout the year with these ideas:
These thoughtful gestures not only strengthen family bonds but also ensure your gifts qualify as part of your normal expenditure.
Yes, income from investments such as dividends or rental income can qualify as surplus income. However, make sure your investment portfolio supports income generation
2. Does pension income count?
Pension income does qualify as surplus income, but it’s wise to consider the long-term implications. Unused pension funds can often be passed on tax-free, so weigh this option carefully.
3. What happens if my gifts aren’t regular?
HMRC requires gifts to form part of your normal expenditure. Irregular gifts may not qualify, so setting a pattern and clearly stating your intentions is crucial.
4. Do I need to consult a professional?
Yes, we highly recommend seeking advice from a financial adviser or tax specialist. Professional guidance ensures your gifts meet HMRC criteria and are as tax-efficient as possible.
5. How can I make the process easier for my executors?
Filling out an IHT403 form during your lifetime and keeping it with your will simplifies matters for your executors. Maintaining accurate records and writing letters of intent also ensures everything is clear.
6. Are there any pitfalls to avoid?
Yes, take care not to gift so much that it affects your lifestyle. Ensure the income you’re gifting truly qualifies as surplus and think through the implications of gifting from pensions or other key sources.
By gifting from surplus income with care, you can enjoy the joy of giving while protecting your estate from unnecessary tax burdens. Whether it’s a festive tradition or a year-round practice, this little-known exemption can create lasting benefits for your loved ones—and peace of mind for you.
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX AND TRUST ADVICE.
As the 2024 draws to a close, you could have the perfect opportunity to maximise your annual allowances, and enhance your financial wellbeing ahead of the New Year.
Making sure your finances are optimised and strategically planning ahead over the festive period can yield substantial tax savings.
With this in mind, understanding the options you have available to you is crucial. Here, Richard Macmillan explores different ways in which you can optimise allowances and avoid pitfalls.
ISAs are one of the most efficient ways in which you can handle your investments. As it stands the ISA allowances is £20,000 for 2024/25 tax year. And you can spread this across everything from cash and investment to innovative finance and lifetime ISAs.
ISAs offer flexibility and ensure that if you make a gain from your investment with your ISA, that gain will be free from income tax, tax on dividends or capital gains tax (CGT). With recent changes to CGT having been announced in the Budget, the latter could be absolutely invaluable.
It is important to note that investing outside of an ISA doesn’t automatically incur tax. If your dividends don’t surpass the dividend allowance and any interest for cash, fund or bonds stay within the personal savings allowance.
Topping up existing ISAs can be practical step to ensure every part of the allowance is used. The annual ISA limit operates on a use-it-or-lose-it basis, meaning previous years’ unused allowances cannot be reclaimed. Making the most of current opportunities is, therefore, essential.
As ever, in order to maximise these benefits, strategic planning is key.
Currently, the Capital Gains Tax allowance stands at £3,000. Meaning you can sell shares, property and other assets without incurring a CGT charge, on the first £3,000 of gains. If you’re looking to sell any assets with substantial gains, being able to strategically utilise the CGT allowance over multiple tax years can help to minimise your liability.
As previously mentioned, the Autumn Budget confirmed that CGT changes will be coming into play. The lower CGT rate will rise from 10% to 18%, while the higher rate will increase from 20% to 24%. This change means you might face higher taxes on profits from selling assets like shares. Previously, those with gains above the threshold had to pay 20% on profits from assets such as shares, or 24% from selling additional property. Rates on residential property will remain at 18% and 24%, respectively.
It’s important to note that CGT does not apply to assets within pensions and ISAs, or on your primary residence. Being aware of these exceptions can help you make informed decisions about asset sales and investments.
As the New Year approaches, so does the tax year end. Boosting your pension contributions ahead of year end can be a really effective way to secure your financial stability.
Some employers may offer to match your contributions up to a certain threshold. This is a great opportunity for employees to enhance saves. Tax relief on pension contributions is also available, depending on which tax bracket you fall into.
For basic rate taxpayers, every £800 contributed is topped up to £1,000 by HMRC. Higher and additional rate taxpayers can claim even more through their tax return, making pensions a lucrative option for tax efficiency. With a maximum of £60,000 eligible for tax relief per year, understanding these limits can help plan contributions effectively.
If you have accessed more than your tax-free lump sum from a pension, the amount you can contribute might be reduced, with the Money Purchase Annual Allowance (MPAA) coming into effect.
Again, this only further emphasises the importance of planning when accessing pension funds to avoid unexpected contribution limits.
The New Year could bring potential changes in tax rules with it. So, staying informed is vital.
Your personal circumstances could be impacted due to any changes to these regulations, with that in mind professional advice can really help to secure your financial health.
For further information or personalised guidance on maximising your allowances before the tax year ends, please do not hesitate to contact us.
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU MAY GET BACK LESS THAN YOU INVESTED.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.
We often hear about the importance of improving financial literacy across the UK. Research consistently shows that developing these skills can enhance life outcomes across all ages and demographics, while also contributing to greater economic potential.
With that in mind, we asked IFAs across our 50+ locations in the UK to suggest the financial gifts they’d recommend—or those they loved receiving when they were growing up.
Inspired by the classic carol The 12 Days of Christmas, their suggestions are practical ideas designed to educate and encourage the future financial habits of your loved ones.
While it may not be the most cheerful gift suggestion, financial protection is undoubtedly one of the most important.
Life insurance, critical illness cover, or income protection can ensure your loved ones are financially supported in case of unforeseen circumstances. For young families or those with dependents, this kind of financial security is invaluable. It’s not the flashiest gift, and it’s unlikely to make an appearance under the tree, but it could be the most impactful. If you don’t currently have protection in place and you have dependents, the greatest gift you can give this Christmas is guaranteeing their future financial security in the face of unforeseen circumstances.
Board games are not just a fun way to spend time; they can also teach valuable financial lessons.
Games like Monopoly and The Game of Life introduce players to investing, managing cash flow, and the strategic risks of property ownership. Similarly, Hotel adds another dimension by showing how to build and manage assets effectively. These games can spark conversations about financial concepts in an engaging and entertaining way.
A Junior ISA is a forward-thinking gift that grows alongside the child.
This tax-free savings account allows parents or guardians to save on behalf of a child, giving them a financial head start when they turn 18. Whether it’s for university, their first car, or a deposit on a home, starting early makes all the difference. It’s a wonderful opportunity to teach young people about savings and compound interest.
Owning a stake in a company is a fantastic introduction to the world of investing.
Shares in a company that resonate with the recipient can make the concept of investing more relatable. If you’re looking for a diversified and expertly managed option, a Managed Portfolio Service (MPS) can offer an ideal way to invest in a balanced portfolio. Whether it’s individual shares or an MPS, the recipient can gain insights into how markets work and build an understanding of long-term wealth creation.
Piggy banks might feel like a throwback, but they’re still a simple and effective way to teach younger children about money management.
Growing up, the NatWest porcelain pigs were an introduction to saving for many people. Each new pig was a reward for hitting a savings milestone, teaching the importance of setting goals and working towards them. These days, vault-style electronic piggy banks can bring that concept into the modern era. Children love having their own codes, hiding birthday money, and even having friendly competitions to see who can save the most.
There are plenty of fun themed piggy banks available, alongside modern electronic versions, which make saving both engaging and practical. While we’re moving towards a cashless society, the act of physically saving and building up money remains a valuable and lasting life skill for children. Alternatively, digital savings jars within banking apps can also offer a modern twist on this traditional concept.
Books can be an excellent gift, offering insights and lessons that last a lifetime. Here are six thoughtfully curated titles that cater to various levels of financial literacy:
Each book offers a unique perspective, from budgeting basics to investment principles, making them ideal for anyone looking to improve their financial literacy. These titles don’t promise quick fixes but provide the knowledge and tools needed to make informed decisions about money.
Premium Bonds offer an exciting way to save.
They provide the opportunity to win monthly, tax-free prizes. Although they don’t pay interest, they’re backed by the government, making them a secure and engaging gift for someone new to saving.
Planners are a simple yet powerful tool for achieving financial goals.
High-quality financial planners encourage the user to track their expenses, set budgets, and achieve milestones. Options like the Clever Fox planner is particularly useful for younger individuals starting their financial journey.
A pre-paid debit card is a fantastic way for teens and young adults to manage their money.
By loading a set amount onto the card, they can learn budgeting skills without the risk of overspending. Many cards now come with companion apps that provide spending insights and promote financial responsibility.
Apps like Emma and Plum can transform the way young adults manage their money.
Emma helps track spending across multiple accounts, identifying areas where costs can be cut, while Plum automates savings and encourages investing with small, regular contributions. Both apps are invaluable for developing good financial habits, from saving for goals to making your money work harder.
Empowering someone with the knowledge to take control of their financial future is a gift that lasts a lifetime.
An online course in financial literacy or investing can equip young adults with the skills they need to budget, save, and invest effectively. Platforms like Coursera or Udemy offer affordable, high-quality options.
Finally, a consultation with a financial adviser is a gift of clarity and confidence.
A session with a financial adviser can be transformative. Whether it’s for a recent graduate setting up a budget or a mid-career professional planning their retirement, tailored advice can provide a strong foundation for a brighter financial future.
Why focus on financial gifts?
Financial gifts are about long-term value. They’re not just items; they’re tools for building security, independence, and confidence in managing money.
Are these gifts suitable for all age groups?
Absolutely. We’ve included options for children, teens, and adults. From piggy banks for the little ones to financial planning consultations for adults, there’s something for everyone.
What if the recipient isn’t excited by these gifts?
While financial gifts may not spark immediate excitement, they’re appreciated over time. Pair them with something fun or meaningful to create a balanced gift.
How do I choose the best financial gift?
Consider the recipient’s age, interests, and financial knowledge. A Junior ISA might suit a teenager, while a pre-paid debit card is great for older kids learning to budget.
By choosing a financial gift this Christmas, you’re not just giving something practical; you’re helping your loved ones take a step towards a brighter financial future. What better way to celebrate the season of giving?
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX AND TRUST ADVICE
Christmas is the season of giving, and for many, it’s an opportunity to make a meaningful impact on the lives of loved ones. Beyond the charm of wrapped presents, monetary gifts can offer long-term benefits, helping younger generations save for education, buy a home, or invest in their future. However, ensuring that your generosity aligns with UK financial rules and tax regulations is essential for maximising the impact of your gifts.
Understanding the rules surrounding gifting is not just a matter of legal compliance—it’s the key to making your financial presents as effective and worry-free as possible. This guide will walk you through the essentials of gifting money in the UK, helping you make informed and confident choices this festive season.
With proper planning, your holiday generosity can bring both immediate joy and lasting financial security to your family. Here’s what you need to know to make your monetary gifts count without unintended tax implications.
You can technically gift as much money as you wish to your children or grandchildren. However, the amount you gift, and the timing of your generosity can have an impact on the Inheritance Tax position of your estate further down the line.
The annual tax-free gifting allowance enables you to give up to £3,000 per year without it being subject to Inheritance Tax (IHT). If you didn’t use last year’s allowance, you can combine it to gift up to £6,000 this tax year.
It is also worth keeping the seven year rule in mind when gifting – especially if you are gifting significant sums or assets. If you live for more than seven years after making a gift, no IHT will be due on the respective gift but care is needed, as in certain circumstances, gifts going back up to 14 years can be caught. Advice on the order of gifting is really important.
HMRC allows for several exemptions that make gifting money tax-efficient:
In the UK, there isn’t a specific “gift tax” in the way some countries define it. However, monetary gifts are considered under the umbrella of IHT. As we previously mentioned, if you pass away within seven years of giving a gift, it may be liable to IHT depending on the total value of your estate and the timing of the gift.
Some gifts are fully exempt from tax:
Potentially Exempt Transfers are gifts that may become exempt from tax, depending on how long you live after giving them. Taper relief reduces the tax rate on gifts made three to seven years before your death. It’s really important to note that Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold.
| Years Between Gift and Death | Tax Rate |
| Under 3 | 40% |
| 3-4 | 32% |
| 4-5 | 24% |
| 5-6 | 16% |
| 6-7 | 8% |
| 7+ | 0% |
To minimise the inheritance tax burden on your family:
Can I Give £3,000 to Each Child I Have?
No, the £3,000 annual exemption applies to you, not your recipients. You can divide it among children or double it to £6,000 if your spouse also gifts.
What’s the Best Way for Grandparents to Gift Money?
Contributing to living expenses, Junior ISAs, or setting up a trust are common approaches. Tailor the method to your grandchildren’s needs and your financial goals.
Do I Need to Declare Cash Gifts to HMRC?
No declaration is required for gifts within the £3,000 allowance or covered by exemptions. For larger gifts, recipients may face IHT if you pass within seven years.
Will HMRC Find Out About Gifts After Someone Dies?
Yes, executors must report gifts made within seven years to ensure accurate IHT calculations.
Are All Gifts Subject to the Seven-Year Rule?
No. Tax-free gifts such as those within the £3,000 exemption or to a spouse/charity are not subject to this rule.
Can My Child Be a Beneficiary of My Life Insurance?
Yes, but children under 18 will need a guardian to manage the payout. Consider writing the policy in trust to prevent it from counting towards your estate.
This Christmas, consider how gifting money can create lasting impacts for your loved ones. By understanding the rules and planning strategically, you can spread joy and ensure your family benefits from your generosity in the most tax-efficient way. If in doubt, consult a financial adviser to make your festive giving as impactful as possible.
How Inheritance Tax works: thresholds, rules, and allowances: Rules on giving gifts – GOV.UK
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX AND TRUST ADVICE
In a significant shift announced by Chancellor Rachel Reeves, inherited pensions will become subject to Inheritance Tax (IHT) from April 2027. This marks a departure from previous rules where pensions were excluded from IHT calculations. Currently, pensions are usually passed on tax-free if you die under the age of 75 – or taxed at the beneficiaries’ marginal rate of Income Tax if you die over 75 – but in most cases, pensions don’t attract IHT.
This announcement is expected to impact roughly 8% of estates annually, as those who have heavily saved in pensions to lower their IHT liabilities now face new tax burdens.
Additionally, the IHT tax-free threshold remains frozen at £325,000 (your property, money and possessions) until 2030. If your assets include the family home that you’re giving away to children or grandchildren, you also receive up to a £175,000 residence nil rate band. As property and asset values rise, more estates will likely fall above this threshold, incurring IHT at the standard 40% rate.
Autumn Budget 2024Download our full guide to the Autumn Budget 2024 as we explore the spending plans set by the Chancellor, Rachel Reeves. |
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Chancellor Reeves emphasised that these adjustments aim to make the IHT system fairer, ensuring wealthier estates contribute more to public finances. Also, starting April 2026, reductions in agricultural and business property relief will be introduced. The first £1 million of such assets will remain tax-free, with a 20% IHT levied beyond that, including on Aim shares.
Retirees may need to reassess their long-term financial plans, as defined contribution pension funds could attract up to 40% IHT. Despite these changes, no adjustments to existing gifting rules were announced.
With over 1,250 local advisers and staff, we’re here to help you address any financial needs arising from the Autumn Budget – from investment advice to retirement planning. Simply provide a few details through our quick and easy online tool, and we’ll match you with the ideal adviser.
Alternatively, click below to download our comprehensive guide to the Autumn Budget.
| Match me to an adviser | Download full guide to the Autumn Budget |
THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).
THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
