A cashflow model could help you visualise changes to your wealth

A cashflow model is a powerful tool that financial planners can use to show how your wealth might change over the long term in various scenarios.

To start, you’ll input essential information, such as the value of your assets, your income, and how you use your money each month. Then you can make certain assumptions, such as the rate of inflation, potential investment returns, or your expected retirement date, to see how your wealth might change over the years.

It’s important to note that the results of a cashflow model cannot be guaranteed, as they rely on the data added and assumptions that might prove inaccurate. However, they can provide a valuable way to visualise your long-term wealth and assess the effect of your decisions.

You could use a cashflow model to stress-test your finances

One of the reasons cashflow modelling is useful is that once it’s set up, you can adjust the assumptions to model different scenarios.

If you’re concerned about financial shocks, you can effectively use it to stress-test your finances and as an early warning system. Identifying potential gaps sooner could mean you’re in a position to close them.

As a result, cashflow modelling could help you manage worrisome “what if?” questions.

Imagine you’re the main income earner for your household and you’re worried that your family wouldn’t be able to cope if you were unable to work.

You can use a cashflow model to stress-test your finances and show how long they would last without an income. For example, you might assess how quickly your emergency fund would be depleted.

Armed with this information, you might be able to address potential weak spots in your finances.

In this case, if you found your emergency fund would only cover essential bills for two months, you might start by saving more to build it up. In addition, you may consider taking out appropriate financial protection that would provide an income if you couldn’t work due to an accident or illness, to further improve your financial resilience.

There are many other types of financial shocks where a cashflow model could be useful too, from a period of downturn leading to falling investment values to a large, unexpected household bill, such as needing to replace your home’s roof.

A cashflow model can help you assess the effects of a shock after it’s happened

If you experience a financial shock that you hadn’t previously considered, a cashflow model could still be useful.

It can be difficult to assess the long-term effect of a shock. By adding it to your cashflow model, you may be able to understand whether your goals remain on track and whether any adjustments are necessary.

Imagine you’d previously planned to retire at 65 and calculated that you’d have enough to take a sustainable income that would afford you the lifestyle you’ve been looking forward to.

However, ill health means you now need to bring forward your retirement by three years. This might not be something you’ve considered before. You’re now unsure whether you’ll be financially secure later in life or if you need to reduce your outgoings in retirement.

Updating your cashflow model following this life event could enable you to assess the long-term effects. It could give you the confidence to make decisions, even when life is unpredictable.

We could help you improve your financial resilience

If you’d like to understand if you’re vulnerable to financial shocks and how you might improve your resilience to them, please get in touch.

Speak to our team about a free one-hour consultation with an independent financial planner. It’s an opportunity to speak with an adviser about your personal circumstances and decide if financial planning is right for you.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

SUBSCRIBE for more investment, retirement and pension practical guidance once a fortnight – subscribe to our latest insights

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

The Financial Conduct Authority does not regulate cashflow modelling.

The post How cashflow modelling can act as an early warning system for financial shocks appeared first on Innes Reid.

Creating goals on your own can be challenging, especially if they bring together several different parts of your financial plan or have a long-term time frame. If you’re overly ambitious, it can be disheartening if you don’t reach the target you’ve set. On the other hand, if you’re too cautious, you could miss out on opportunities.

Here are seven ways a financial plan could help you set realistic goals in 2026.

1. A financial plan can help you assess your starting point

A valuable aspect of a financial plan is understanding your current financial position. To assess what’s possible, you first need to know where you are.

A financial plan might involve reviewing your assets and budget so you’re in a better position to identify where changes could be made.

For example, if your goal is to retire in 10 years, you may benefit from increasing your pension contributions. By understanding where your money is going, you might find that you could reduce your day-to-day spending or divert some of your savings to your pension.

2. Your goals are at the centre of your financial plan

While managing your finances often conjures thoughts of figures and calculations, what’s really at the centre is your goals.

Working with a financial planner can create a space to explore what matters to you. Some goals might already be clearly defined, such as supporting children when they want to get on the property ladder or retiring by a set date.

However, other goals might become apparent through discussions with your financial planner, such as being in a position to overcome a financial shock or achieve peace of mind.

3. A financial plan can translate goals into numbers

Once your goals are set out, it’s time to consider what you’ll need to achieve them.

If you set a vague goal, such as “retire comfortably”, it can be difficult to assess if you’re on track.

A financial plan can help you get to grips with the numbers. So, your goal might become “to secure a retirement income of £40,000 a year”. You can then take it a step further to calculate what the size of your pension pot will need to be at retirement, and how you might need to alter current contributions.

4. A financial plan can help you balance multiple goals

Most people don’t have just one financial goal. It’s common to have several, often competing, priorities.

You might be paying off your mortgage, saving for retirement, putting money aside for your children, and hoping to go on holiday at the same time. A financial plan can bring together these different goals, so you’re able to strike the right balance between short- and long-term objectives.

5. Creating a cashflow model can help you visualise your changing wealth

One challenge of creating an effective financial plan is that you’ll usually need to consider how your finances will change over decades. It can be difficult to assess how the decisions you make today could have a positive or negative impact in the future.

A cashflow model is a tool that allows you to visualise how your wealth might change in different scenarios. For instance, you might use the model to see how adding different amounts to your investment portfolio each month will change your ability to reach your goals.

6. Working with a financial planner allows you to consider factors outside of your control

It’s not just the factors you can control that will affect the outcome of your financial plan. Sometimes, external influences, like the rate of inflation or stock market performance, might have an impact.

While you can’t know for sure what outside factors will occur, you can use a cashflow model to test different scenarios. For example, when investing, you might model several different average annual rates of return to assess what they’d mean for your goals.

This allows you to consider how your finances would cope in different scenarios, and you may be able to take steps to help ensure your goals stay on track.

7. A financial plan can create accountability

Every year, thousands of people make and break a new year’s resolution. According to a YouGov poll (17 December 2025), only 38% of people who made resolutions at the start of 2025 had kept all of them.

Working with a financial planner means you’ll have regular meetings and someone who can hold you accountable. With a clear strategy to follow, you’ll know when you’re straying from the path that could turn your realistic goals into reality. As a result, you might be less likely to break the commitments you’ve made.

Talk to us about your goals for 2026

If your goals have changed or you’d like a review to understand whether you’re on track, please get in touch to arrange a meeting.

Talk to our team today to arrange your free one-hour consultation. Its a great opportunity for you to have a personal conversation face-to-face or online with a financial planner. You may come away with a clearer understanding of your circumstances and a welcome reassurance moving forward with some realistic goals in place.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

We hope you enjoyed this article. For more, be sure to subscribe to our latest insights and follow us on Facebook, Instagram or LinkedIn

Access our latest blogs:

Is the default pension fund right for you?

How pension consolidation can maximise your retirement savings.

How to access your pension.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The Financial Conduct Authority does not regulate cashflow modelling.

The post 7 ways financial planning helps set realistic goals appeared first on Innes Reid.

Last year, in her maiden Budget, the Chancellor sought to balance the public finances with tax rises to cover a reported £22 billion black hole.

This year, Reeves arguably faced an even more difficult landscape. In turn, she has announced an estimated £26 billion of tax rises by 2029/30.

The Chancellor had to start her speech, however, by acknowledging the “deeply disappointing” and “serious error” of the Budget announcements being released early by the Office for Budget Responsibility (OBR).

It’s also notable how many predictions ultimately proved to be wide of the mark.

Now that we know exactly what’s included, it is important to understand the Autumn Budget changes and how they could affect you.

The headlines regarding GDP, national debt, and inflation

The Chancellor says the government’s plans will reduce borrowing more over the rest of this parliament than any country in the G7.

GDP is expected to grow by 1.5% in 2025, higher than the OBR’s 1% forecast from earlier this year. In subsequent years, the estimations are as follows:

• In 2026, the economy is forecast to grow by 1.4%, below the previous forecast of 1.9%.
• In 2027, GDP is forecast to expand by 1.6%, falling short of March’s estimate of 1.8%.
• In 2028, GDP is estimated to rise by 1.5%. In March of this year, the OBR said this figure would be 1.7%.
• In 2029, the economy will expand by 1.5%, again falling short of the previous estimate of 1.8%.

Due to weaker underlying productivity growth, the OBR estimates that tax receipts will be £16 billion lower in 2029/30 than initially forecast in March 2025.

Average inflation is expected to fall over the next three years.

• In 2025: 3.5%, an increase of 0.2% from the OBR’s original forecast.
• In 2026: 2.5%, up from the OBR’s 2.1% forecast from March.
• In 2027: 2%.

National debt will stand at £2.6 trillion this year. £1 in every £10 the government spends is on debt interest.

Tax threshold freezes extended until 2031

The Labour manifesto promised not to increase Income Tax or National Insurance (NI), and despite pre-Budget speculation, the government has kept to that promise in this Autumn Budget.

However, the Chancellor did announce that the Income Tax thresholds will remain frozen for a further three years beyond the previous 2028 freeze, staying where they are until April 2031. This move will raise £8 billion for the government. Similarly, the Inheritance Tax (IHT) threshold freeze is extended from 2030 to 2031.

While this will not increase your Income Tax or IHT bills directly, this fiscal drag means more of your income and wealth may be exposed to tax over time.

The government is also upholding its commitment to bringing pension pots into the scope of IHT from April 2027, and reforms to relief for business and agricultural assets from April 2026.

The tax rates on dividends, savings, and property income will rise by two percentage points 

Tax rates are set to rise for dividends, savings, and property income.

• Dividends: From April 2026, ordinary and upper rates of tax on dividend income will rise by two percentage points to 10.75% and 35.75% respectively. There is no change to the additional rate, which will remain at 39.35%.

• Property and savings: From April 2027, the rate of tax on property and savings income will increase by two percentage points across all tax bands to 22%, 42%, and 47% respectively.

The government confirmed that, even after these reforms, 90% of taxpayers will still pay no tax on their savings. However, these changes are set to impact business owners and landlords.

The Chancellor says these increases will raise £2.2 billion in 2029/30.

The ISA allowance will be reformed for under-65s, and some allowances have been frozen

The Chancellor announced that from April 2027, the Individual Savings Account (ISA) allowance will change for under-65s.

As it stands, adults can contribute £20,000 across their ISAs, including Cash ISAs and Stocks and Shares ISAs, each tax year.

From April 2027, £8,000 of this allowance will be reserved exclusively for investments, leaving an available £12,000 that savers can pay into their non-investment accounts, such as Cash ISAs.

Savers over the age of 65 will continue to be able to save up to £20,000 in a Cash ISA each year.

The allowances for Junior ISAs and Lifetime ISAs are frozen until April 2031 at £9,000 and £4,000 a year, respectively.

Salary sacrifice on pension contributions to be capped at £2,000

The Chancellor put a cap on NI-efficient pension contributions made under salary sacrifice.

Salary sacrifice schemes cost the government £2.8 billion in 2016/17, but this figure was set to triple to £8 billion by 2030/31.

The government will charge employer and employee National Insurance contributions (NICs) on pension contributions above £2,000 a year made via salary sacrifice. This will take effect from 6 April 2029.

The Chancellor says that many of those on low and middle incomes will be able to continue using salary sacrifice as normal, while high earners can expect to pay increased NI.

New “mansion tax” on high-value properties

The Chancellor announced the much-speculated “mansion tax” that will affect the top 1% of properties.

The new property surcharge will be paid alongside Council Tax.

There will be four price bands starting with £2,500 for a property valued between £2 million and £2.5 million. For properties valued more than £5 million, the levy will be £7,500.

The measure is estimated to raise £400 million by 2031.

Welfare reforms expected to increase by 2029/30

The BBC reported that changes to the government’s previously announced winter fuel payments and health-related benefits will cost £7 billion in 2029/30.

In addition, Reeves revealed she would remove the two-child benefit cap. This will cost £3 billion by 2029/30.

State Pension: Removal of overseas access to Class 2 National Insurance contributions and committing to the triple lock 

As a result of a loophole in the Class 2 voluntary NICs regime, overseas individuals with a limited connection to the UK can build a State Pension entitlement through cheaper rates.

The government is looking to end this by removing access to the cheapest Class 2 NICs for these individuals. Additionally, it will increase the initial residency or contribution requirements for those living outside the UK.

The Chancellor also confirmed the government’s commitment to the triple lock. From April 2026, this will increase the basic and new State Pension by 4.8%, offering up to an additional £575 per year to pensioners, depending on their entitlement.

A range of significant changes for business owners

In addition to the Dividend Tax increase, the Chancellor announced a range of changes that could affect business owners, including:

• Increases to both the National Living Wage (NLW) and National Minimum Wage (NMW). From 1 April 2026, the NLW paid to workers aged 21 and over will rise by 4.1%, from £12.21 to £12.71 an hour, increasing annual income by approximately £900 a year for full-time employees. For those aged 18 to 20, the NMW will rise by 8.5% from £10 to £10.85 an hour, equivalent to around £1,500 a year if working full-time. For 16- and 17-year-olds, and those on apprenticeships, the NMW will rise by 6%, going from £7.55 to £8 an hour.
• Listing Relief from Stamp Duty Reserve Tax for some businesses. The Chancellor said this will “make it easier for entrepreneurs to start, scale, and stay in the UK”.
• Reduced Capital Gains Tax (CGT) relief for Employee Ownership Trusts (EOTs). When a business is sold to an EOT, CGT relief will fall from 100% to 50% starting from November 2025. This will raise £0.9 billion from 2027/28 onwards.
• Fully funded apprenticeships for under-25s. This will make them effectively free for small- and medium-sized businesses (SMEs) from April 2026.
• Lower business rates for more than 750,000 retail, hospitality, and leisure properties. That move will be funded through higher rates on properties worth £500,000 or more, such as warehouses used by online retail.
• Customs duty will apply to parcels of any value from March 2029 at the latest. There is an existing exemption for parcels worth less than £135, favouring large-scale importers.

Other announcements that may affect you

• Household energy bills will fall. Reeves is scrapping the Energy Company Obligation (ECO) scheme, saying that on average, families will save £150 a year in 2026.
• A new tax on electric vehicles. The Electric Vehicle Excise Duty (eVED) will come into effect in 2028 and equal 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids. The rate per mile will increase annually in line with the CPI.
• Fuel duty will be frozen until September 2026. In addition, a new “fuel finder” will help drivers find the cheapest fuel, saving the average household £40 a year.
• Reducing the levy threshold on soft drinks. From 1 January 2028, the sugar tax will also be applied to milk-based drinks, including bottled milkshakes and lattes.
• A spousal exemption for agricultural and business asset IHT relief. Unused combined business and agricultural asset IHT relief will become transferable between spouses and civil partners.
• Tobacco Duty and Alcohol Duty will both be uprated. Tobacco Duty will be uprated as announced last year, and Alcohol Duty will now rise with inflation.
• Rising taxes on online gambling. From April 2026, Remote Gaming Duty will increase by 21% to 40%. A new Remote Betting Rate set at 25% will be introduced from April 2027, though horse race betting will be exempt from the changes.

Other key thresholds that remain the same

More broadly, the Chancellor made no mention of other key thresholds that will remain the same. These include:

• The pension Annual Allowance
• Stamp Duty Land Tax for residential properties
• The headline rates of Income Tax, NI, and VAT, as outlined in the government’s election manifesto.

Talk to us.

If you have any questions regarding the Autumn Budget and how it may affect your financial plan, please get in touch. We provide a free one-hour consultation with an independent financial planner.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

We hope you enjoyed this article. For more, subscribe to our latest insights and follow us on Facebook, Instagram or LinkedIn

Please note

All information is from the Budget documents on this page.

The content of this Autumn Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed, and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

The post Autumn Budget 2025 update appeared first on Innes Reid.

When setting out your goals as part of your financial plan, your family might feature in them. Perhaps you want your retirement income to be enough so that you can treat them to an annual family weekend away? Or you might want to gift a deposit that will help each of your grandchildren get on the property ladder?

By incorporating family goals into your financial plan, you can take steps to turn them into a reality.

If you’re hesitant to offer support because you’re worried about how it will affect your long-term finances, using a cashflow model could be valuable.

Download your guide to cash flow modelling here: How financial planning could help you answer essential “what if” questions.

A cashflow model can give you an idea of how your wealth might change based on the decisions you make. It may ease your worries and give you the confidence you need to expand your financial plan to include your loved ones.

There are several ways you might support loved ones as part of your financial plan.

Providing gifts to support your loved ones’ finances now

You may want to support your loved ones immediately. Whether through providing gifts or covering regular expenses on their behalf, it’s an option that your family might welcome, particularly if they’re struggling to manage their short-term expenses.

One of the benefits of gifting during your lifetime is that it could reduce your estate’s Inheritance Tax (IHT) liability.

In 2025/26, the nil-rate band is £325,000. If the entire value of your estate is below this threshold, no IHT will be payable. Many people can also make use of the residence nil-rate band, which is £175,000 in 2025/26, if they leave their main home to direct descendants.

If the value of your estate exceeds these thresholds, IHT may be due.

Some gifts are immediately outside of your estate when calculating IHT. As a result, if you want to support loved ones now, you may want to consider using these gifting allowances:

• Up to £3,000 each tax year, known as your “annual exemption”
• Up to £250 to each person, so long as they have not benefited from another allowance
• £1,000 as a wedding gift, rising to £2,500 and £5,000 for grandchildren or great-grandchildren and children respectively.

Another exemption which could be useful if you want to support loved ones now is regular payments made to another person. You might use this allowance to:

• Pay rent for your child
• Give financial support to cover living costs
• Pay into a savings account for your grandchild.

Payments must be regular and funded from your monthly income after living costs. If you use this allowance to reduce an IHT bill, it’s a good idea to keep a record of the payments.

A financial plan can help you assess how gifts might affect your long-term wealth. So, when you gift a generous sum or commit to regular support, you can do so with confidence.

Offering gifts that support your family’s long-term goals

Another option is to set money aside for your family to support their long-term goals.

For instance, you might focus on building a nest egg for your grandchildren to help them through university, buy their first car, or travel the world.

Incorporating this into your plan helps identify the best way to save, depending on your goals and the beneficiary’s circumstances.

When saving for a child to provide a financial helping hand when they reach adulthood, you might choose a Junior ISA, which they gain access to when they turn 18. Whereas if you were helping your child increase their retirement fund, you might make contributions directly into their pension.

Incorporating these gifts into your financial plan can also help make them part of your regular outgoings and provide reassurance that you’re still on track to meet your other goals.

Leaving an inheritance

Receiving an inheritance could change your loved ones’ financial situation and mean they’re more secure.

If leaving assets behind for your family is important to you, it can be a central part of your financial plan. You might earmark a portion of your wealth to leave in your will or set aside particular assets for someone.

We can help you understand how much you could leave behind for loved ones, and how to do it tax-efficiently.

Contact us

A good financial plan helps you reach your goals, including those that involve your family, and we can help you. Whether you want to involve your loved ones in planning or build a nest egg to support them long-term, please get in touch.

Talk to our team today to arrange your free one-hour consultation. Its a great opportunity for you to have a personal conversation face-to-face or online with a financial planner. You may come away with a clearer understanding of your circumstances and a welcome reassurance moving forward.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

We hope you enjoyed this article. For more, be sure to subscribe to our latest insights and follow us on Facebook, Instagram or LinkedIn

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate cashflow modelling, Inheritance Tax planning, or estate planning.

The post How the benefits of your financial plan go beyond you to your family appeared first on Innes Reid.

While you might have a better understanding of what you want to get out of life than when you were younger, finances can often become more complex, making it difficult to understand what’s possible. A financial midlife MOT gives you a chance to examine your finances now and calculate if you’re on track to reach your aspirations.

Here’s how a financial MOT can prepare you for retirement.

1. Merging your finances with a partner

As you start to consider retirement and your future, you may opt to merge finances with your partner if you don’t already.

Bringing together your finances can be challenging at any time, but particularly when you’re older, as you may both already hold assets, such as pensions or property. Working with a financial planner could help you take stock of your assets and start to understand how they might form part of your financial plan as a couple.

As well as juggling two sets of assets, you might have different views on financial priorities and long-term goals.

As your financial plan places your aspirations at the centre, a midlife MOT could help you clarify your priorities and balance them with your partner’s.

2. Planning for your retirement

66% of people aged between 45 and 49 feel unprepared for retirement, according to research from LV published in June 2025.

Retirement might feel years away, but it’s a milestone that benefits from early preparation. The decisions you make now could affect your income in your later years, so weighing up your options is essential.

A midlife financial MOT can include reviewing your pensions and other assets you intend to use in retirement to calculate if you have “enough” to live the retirement lifestyle you’re looking forward to.

You could find you’re already on track and enjoy peace of mind as a result. If you discover there’s a potential shortfall, knowing this sooner puts you in a stronger position to bridge the gap, and a financial plan highlight the steps you might take.

Blog: Understand how financial planning could help you emotionally prepare for retirement here

3. Balancing care responsibilities

While you might no longer have young children to care for, you could find that you still have care responsibilities during your midlife.

In fact, according to December 2024 research from Legal & General, 1 in 6 middle-aged people support other adults financially, such as grown-up children or elderly parents.

If this isn’t something you’ve considered as part of your financial plan, it could make it harder to budget now and may affect your financial security in the future.

It’s not just your finances that care duties may affect. 1 in 7 mid-lifers said they provide unpaid care, with hours equivalent to a part-time job. Around half said they feel overwhelmed by their weekly commitments. This can take a toll on your overall wellbeing.

A financial plan that’s focused on what’s important to you could help you balance new responsibilities with your personal goals. For example, you might pay for a carer a few times a week so you’re still able to attend social clubs that you enjoy.

4. Improving your financial resilience

While you might have ticked off some financial commitments, such as paying your mortgage or children’s school fees, it’s still important to ensure you could withstand a financial shock. Your income stopping or facing an unexpected bill often has the potential to derail your plans.

A midlife review gives you the opportunity to evaluate your financial security and assess how you’d cope with an unexpected event.

You might check if you hold enough cash in your emergency fund or review your financial protection to see if you have an adequate safety net. While you hope never to need it, a financial safety net can provide reassurance and protection if the unexpected happens.

For more information on how to plan for the unexpected download our guide: How financial planning could help essential “what if questions?

5. Setting out your legacy

It’s easy to think that you don’t need to consider how you’ll pass on assets to your loved ones yet. However, it’s impossible to know what’s around the corner, and there may be benefits to passing on wealth during your lifetime rather than waiting to leave an inheritance.

Putting together an estate plan can be difficult. Not only are you bringing together all your assets and considering how circumstances may change in the coming decades, it’s also an emotional topic. So, if it’s something you’ve been putting off, you’re not alone.

It may be daunting at first, but your estate plan allows you to take control of your legacy. As your financial planner, we can help you create an estate plan that gives you long-term security while supporting the people who are important to you.

Talk to us about a midlife financial MOT

Get the most out of your life by feeling confident about your finances. If you feel under-prepared for retirement you may find reassurance speaking to an independent adviser.

Talk to our team today to arrange your free one-hour consultation. Its a great opportunity for you to have a personal conversation face-to-face or online with a financial planner. You may come away with a clearer understanding of your circumstances and a welcome reassurance moving forward.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

We hope you enjoyed this article. For more, be sure to subscribe to our latest insights or follow us on Facebook, Instagram or LinkedIn

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Note that life insurance and financial protection plans typically have no cash in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

The Financial Conduct Authority does not regulate estate planning.

The post How a financial MOT can prepare you for retirement appeared first on Innes Reid.

The good news is, there are often ways to reduce a potential tax bill on your savings. Read on to find out when your savings might be taxed and how to avoid an unexpected bill.

3 allowances that may affect whether you’re liable for tax on your savings  

How much you can earn in interest before tax might be due depends on your other income, such as your salary or pension.

First, if you add the interest to your other income and the total is below the Personal Allowance, which is £12,570 in the 2025/26 tax year, no tax will be due.

Second, most savers will benefit from the Personal Savings Allowance (PSA). You do not pay tax on interest that falls within this tax-free allowance. How much of the allowance you get depends on the rate of Income Tax you pay.

In 2025/26, before Income Tax is due on interest:

• Basic-rate taxpayers can earn up to £1,000
• Higher-rate taxpayers can earn up to £500.

If you’re an additional-rate taxpayer, you do not benefit from a PSA.

Finally, if your income is less than £17,570 in 2025/26, you may also benefit from an additional £5,000 allowance on your savings. This is known as the “starting rate for savings”.

2 million people are expected to pay tax on cash savings for the 2024/25 tax year

A combination of frozen tax thresholds and rising interest rates means more people will pay tax on their savings.

Indeed, according to AJ Bell figures released in February 2025, more than 2 million people will pay tax on cash savings for the 2024/25 tax year. The figure compares to just 650,000 in 2021/22.

It’s not just high earners who are affected. The number of basic-rate taxpayers who need to pay tax on savings has more than doubled in the same period.

If you already complete a self-assessment tax return, you will be asked to declare the interest you’ve received.

Banks and building societies send information to HMRC. So, if you’re usually taxed under PAYE, you might not be aware that any tax is due until you receive a letter. Usually, if tax is due, HMRC adjusts your tax code, which would affect your take-home pay.

How to manage your savings to reduce a tax bill

If you want to mitigate a potential bill on your savings, it’s important to keep track of how much interest you’re earning. Should you near the threshold for when you might start paying tax, these five options may help you avoid a bill.

1. Save money in an ISA

Interest earned on savings held in an ISA is tax-free. So, if you’re nearing the threshold for paying Income Tax on savings, moving some of your money to an ISA may be a logical step.

If you select a Cash ISA, your money will earn interest in the same way it would if you used a savings account.

You should note that the ISA allowance limits the amount you can place in an ISA in the 2025/26 tax year to £20,000. If your savings exceed this, you could slowly move your money into an ISA by making a new deposit each tax year, as your allowance will reset.

2. Buy Premium Bonds

The money held in Premium Bonds won’t earn interest. However, you’re entered into a prize draw each month and, if you win, the money is tax-free.

The prizes range in value from £25 to £1 million – there is a 22,000 to 1 chance of winning each month for every £1 you have in Premium Bonds.

As there’s no guarantee you’ll win through Premium Bonds, it may not be the right option if you want to generate a regular income or guaranteed returns.

You can hold between £25 and £50,000 in Premium Bonds, and you can withdraw your money at any time.

3. Increase your pension contributions

A pension provides a tax-efficient way to save for your retirement. So, if you’re holding a large sum in cash, you might want to consider boosting your pension contributions.

Your pension is normally invested with the aim of delivering long-term growth. The returns generated from investments held in a pension are not liable for tax.

In addition, your pension contributions will typically benefit from tax relief. Assuming your pension contributions don’t exceed the Annual Allowance (£60,000 in 2025/26), you’ll receive tax relief at the highest rate of Income Tax you pay. If you’re a basic-rate taxpayer, that means when you deposit £80, the government will add £20.

While the Annual Allowance is £60,000, the maximum tax relief you can claim is 100% of your annual earnings. If you’re a high earner or you have already taken a flexible income from your pension, your Annual Allowance may be lower. Please get in touch if you have any questions about your pension contributions.

Historically, investment markets have delivered returns over a long-term time frame, but this cannot be guaranteed. It’s important to ensure your pension investments are appropriate for you and your goals.

Keep in mind that money placed in your pension usually won’t be accessible until you turn 55 (rising to 57 in 2028).

4. Invest your savings

Boosting pension contributions isn’t the only way to invest your savings.

An efficient way to invest is to use your ISA annual allowance to place money into a Stocks and Shares ISA. Through a Stocks and Shares ISA, you may be able to invest in a range of assets that suit your risk profile and financial circumstances.

Again, remember that investment returns are not guaranteed, and the value of your investments may fall as well as rise.

Returns on investments that aren’t held in a tax-efficient wrapper, like a pension or ISA, could become liable for tax. Making investments part of your wider financial plan could identify ways to reduce a potential bill.

5. Place savings for a child in their own Junior ISA

If some of your savings are earmarked for a child, you might want to consider moving the money into their own Junior ISA (JISA).

There are benefits to holding the money intended for a child in your account, including having greater control over it. However, doing so could also increase your tax liability.

So, you may want to weigh up the pros and cons of opening a JISA in the child’s name. Keep in mind that you cannot usually access the money placed in a JISA until the child turns 18, at which point they can use it how they wish.

Get in touch to create a tailored plan that considers your tax liability

Reducing your tax liability in a way that aligns with your goals could help you get more out of your assets. Contact us to discuss how we could work with you to create a tailored financial plan that suits your needs.

Please get in touch to arrange a free initial meeting with one of our independent advisers. Its an opportunity for you to speak to an expert about your individual circumstances and understand if financial planning is right for you.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning or NS&I products, including Premium Bonds.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The post 5 ways to avoid paying tax on your savings appeared first on Innes Reid.

Indeed, a February 2025 report from HSBC suggests the younger generation is less likely to define wealth by how much they have in the bank. It’s an approach that may help you identify what’s most important to you.

It’s not a new trend either. In fact, the new understanding of wealth could be returning to its roots. The origin of the word “wealth” links back to the Old English word “well”, which is also the same root as words like “wellbeing”, “welfare”, and “wellness”.

So, when you think about growing your wealth, you might want to look beyond your assets.

A £213,000 annual income is deemed enough to be wealthy

When asked what you need to be considered wealthy, participants in the HSBC report suggested an average annual income of £213,000 was the threshold in the UK – more than six times the national average salary.

Interestingly, many people who were paid six-figure salaries, placing them in the top 4% of earners, didn’t identify themselves as wealthy.

Many wealth signifiers focused on material assets too. For example, having a boat, private jet, or luxury car were among the items the general population believed someone would own if they were wealthy.

While your income and how you spend it may be a good indicator of your financial freedom, it offers only a narrow view of wealth. The income you need to feel financially secure can vary significantly depending on your lifestyle, and many other non-financial factors might affect how wealthy you feel, like the time to focus on what you want.

Your lifestyle will affect what wealth means for you

One of the key challenges when giving wealth a monetary value is that it’s likely to be different for everyone.

Even if you’re earning a high salary, you can still feel financial pressure. For example, a significant portion of your income might be used to pay a mortgage, school fees, or car repayments. A higher income doesn’t necessarily mean you feel financially confident or that you’re free from worries about how financial shocks could affect you.

So, if your goal is to build wealth, it’s worth thinking about the lifestyle you want and what financial wealth means to you.

For some, it might be defined as having a certain amount in the bank saved for a rainy day. For others, it may be about the income they earn through work.

Non-financial items could add wealth to your life too

When you’re setting out your desired lifestyle, you may want to think about non-material wealth, and it might be something you could learn from younger generations.

According to the HSBC report, almost half of Generation Z see wealth as best understood in non-material terms, such as having a strong work-life balance. Among those aged 35–44, this understanding of non-material wealth falls to 35%.

Considering what gives your life purpose or what you simply enjoy could be a useful exercise and help you make decisions that will enrich your life.

A strong financial foundation is often needed to support non-material wealth.

For instance, being able to spend more time with your children or grandchildren may make your life wealthier. However, if you want to reduce your working hours or enjoy days out together, you’ll usually need money to support this.

Alternatively, you might love learning more about other cultures and visiting incredible sights around the world. While this type of wealth isn’t material, having a higher disposable income could allow you to make it a greater part of your life.

As a result, when you’re thinking about how to increase your life’s wealth, you may need to consider financial wealth with lifestyle wealth to strike a balance that makes your life richer.

Get in touch to talk about a financial plan that makes your life richer

As your financial planner, we could work with you to build financial wealth and manage your assets. After all, your finances are likely to play an important role in creating the lifestyle you want.

In addition, we may create a financial plan that makes your life richer in other ways, from providing more free time to dedicate to the things you love to supporting causes that are close to your heart. So, a financial plan doesn’t just focus on material wealth, but on improving your wellbeing too.

If you’d like to arrange a meeting, please get in touch.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The post How much do you need to be wealthy? appeared first on Innes Reid.

Reassuringly, the major headline from this year’s springtime fiscal event is that Reeves made few announcements that are likely to affect you and your personal finances directly. Although, it did reveal that none of the changes made in the Autumn Budget would be overturned. However, one significant change has been made to the High Income Child Benefit Charge, which could affect you or your family.

The chancellor did announce that, due to global uncertainty and after the economy declined in January, the Office for Budget Responsibility (OBR) has downgraded its 2025 forecast for UK growth from 2% in October 2024 to 1% as of March 2025. She also noted the OBR’s long-term forecast, indicating that growth would increase for each year remaining in this parliament.

In addition to growth figures, the chancellor’s Statement introduced a range of measures designed to increase economic activity in the UK, as well as cost-saving initiatives, predominantly at state level, to reduce government debt.

Read on for your summary of the chancellor’s 2025 Spring Statement.

Personal tax thresholds and allowances are set to remain unchanged 

Those who were concerned the chancellor would announce sweeping changes that might affect their personal finances will be breathing a sigh of relief as many worries didn’t materialise.

Personal tax

Reeves stuck to a pre-Spring Statement commitment to not increase personal taxes.

So, Income Tax thresholds and rates will remain unchanged, and thresholds are frozen until April 2028. As a result, your Income Tax liability is likely to rise in real terms.

Similarly, the rates and thresholds for paying Capital Gains Tax (CGT) and Dividend Tax will remain the same.

Individual Savings Accounts (ISAs) 

Before the Spring Statement, the government was reportedly considering reducing the amount you can tax-efficiently place in a Cash ISA each tax year to £4,000 in a bid to encourage greater investment.

The good news is the ISA subscription limit will remain at the current level (£20,000) in the 2025/26 tax year. The ISA subscription limit is frozen until 2030.

The Junior ISA (JISA) allowance will remain at £9,000 in 2025/26.

However, the government did note it will continue reviewing ISA reform options to improve the balance between cash and equities to earn better returns for savers, boost the culture of retail investment, and support its growth mission.

Pensions

Last year, the government announced a new Pension Schemes Bill, which will legislate several areas of pension policy. However, further reforms weren’t announced in the Spring Statement.

The Annual Allowance will remain at £60,000 in 2025/26. Your Annual Allowance may be lower if your income exceeds certain thresholds or you have already flexibly accessed your pension.

As usual, there was also speculation that the amount you could withdraw from your pension tax-free would be reduced, but this has remained unchanged. So, when you reach the normal minimum pension age (55, rising to 57 in 2028), you may withdraw up to 25% of your pension (up to a maximum of £268,275) before paying Income Tax.

State Pension

As expected, there were no announcements relating to the State Pension or the triple lock, which guarantees the State Pension will increase every tax year by either the rate of inflation, average earnings growth, or 2.5%, whichever is higher.

As a result, the full new State Pension will pay a weekly income of £230.25 in 2025/26.

High Income Child Benefit Charge reforms will come into place this summer

Although the chancellor did not explicitly announce the change, the Spring Statement document revealed that those who pay the High Income Child Benefit Charge will be able to do so through PAYE from summer 2025.

As it stands, those who pay the charge need to register for self-assessment to do so, even if they do not otherwise need to self-assess. But this year, the government is making it easier for families to pay the charge without needing to submit a tax return.

Inflation is forecast to meet the Bank of England’s 2% target by 2027

After reaching a 40-year high of 11.1% in October 2022, inflation, as measured by the Consumer Prices Index (CPI), has gradually fallen, bringing it closer to the Bank of England’s (BoE) target of 2%.

The chancellor announced in her Statement that in the 12 months to February 2025, inflation rose by 2.8%, down from 3% in January. Now that inflation is better under control, the BoE has cut its base rate three times since the general election, bringing the rate down from 5.25% to 4.5%. These cuts mean borrowers will likely pay less while savers may see their interest payments fall.

It was then announced that, according to the OBR’s forecast, inflation will average:

• 2% in 2025
• 1% in 2026
• 2% in 2027, 2028, and 2029 – the BoE’s target rate.

The key fiscal announcements from the 2025 Spring Statement

The chancellor’s speech largely revolved around changes to government spending and investment. Some of the key measures and announcements included in the Statement were to:

• Increase defence spending to 2.5% of GDP by 2027, including providing an additional £2.2 billion to the Ministry of Defence next year
• Rebalance payment levels in Universal Credit to incentivise people into work, and review the assessment for Personal Independence Payments, with the OBR stating these changes will save £4.8 billion from the welfare budget in 2029/30
• Crack down on promoters of tax avoidance schemes, as initially announced in the Autumn Budget in October 2024
• Invest £2 billion in social and affordable housing, so housebuilding reaches a 40-year high that helps put the government on track to reach its target of building 1.5 million homes by the end of this parliament
• Introduce a £3.25 billion Transformation Fund to streamline public services using technology and Artificial Intelligence, making the government “leaner and more efficient”. Additionally, government departments will reduce their administrative budgets by 15% by the end of the decade.

2024 Autumn Budget changes remain intact

In October 2024, the chancellor announced a series of tax-raising measures during the Autumn Budget, some of which could have affected your personal finances. These included:

• Inheritance Tax (IHT) will be levied on unused pension benefits from April 2027.
• Agricultural Property Relief and Business Property Relief will be reduced from April 2026.
• CGT rates for non-property gains were raised in line with property rates with immediate effect, and Business Asset Disposal Relief and Investors’ Relief were both reduced.
• Employer National Insurance contributions (NICs) will rise from April 2025, from 13.8% to 15%, and the threshold at which employers start paying NICs will also fall.
• Income Tax thresholds will remain frozen until 2028.
• The IHT nil-rate bands will remain fixed for a further two years, until 2030.
• VAT was levied on fee-paying schools, effective from 1 January 2025.
• The non-dom tax regime is set to be abolished from April 2025.
• The Stamp Duty Land Tax surcharge on second home purchases rose from 3% to 5% from 31 October 2024.
• Corporation Tax is now capped at 25% for the duration of the parliament.

While many hoped the chancellor would row back on some or all of these measures, all remain intact.

Get in touch

If you are new to financial planning and have any questions after reading about the Spring Statement do not hesitate to contact our team. We provide a free initial meeting worth up to £300 with one of our trusted, independent advisers.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

Please note

All information is from the Spring Statement documents on this page.

The content of this Spring Statement summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

The post Your Spring Statement update – the key news from the chancellor’s speech appeared first on Innes Reid.

Here are five ways a financial plan could improve your wellbeing and confidence when you retire.

1. Financial confidence could ease concerns when you retire

One of the key concerns that weighs on those nearing retirement is a financial one. According to This is Money in January 2025, more than half of over-55s fear they’ll run out of money later in life. Just a quarter of people believe they have enough to see them through retirement.

Worrying about running out of money could mean you’re not able to fully relax and enjoy your retirement. A financial plan could help you understand how you might create a sustainable income that will last a lifetime.

So, taking control of your finances before you give up work could improve your overall wellbeing and mean you feel far more prepared emotionally for taking the next step.

2. It provides a chance to consider what you’re looking forward to

A financial plan doesn’t just focus on your assets, but what you want to get out of life. A retirement plan is the perfect opportunity to consider what you’re looking forward to in retirement and address any apprehensions you might have.

You might start by setting out what your ideal week in retirement would look like – are you keen to see your family and friends more now you’re not working, or would you like to join a class to develop a hobby?

While you’re doing this, you might discover concerns as well. For example, some retirees may worry about feeling lonely if they enjoy the social aspect of work. As a result, they might ensure their retirement income provides enough disposable income to regularly go out with loved ones or try an activity that allows them to meet new people.

3. Financial security could mean you’re able to enjoy big-ticket expenses

It’s not just the day-to-day retirement lifestyle you might be looking forward to, there might be one-off experiences or purchases that you’d like to spend some of your money on.

If you love to explore new places, you might dream about taking an extended holiday to exotic locations now you’re no longer tied to work. Or, if you’re a keen gardener, you might want to explore purchasing an extra plot of land to turn into an outdoor oasis.

Whatever your big-ticket plans, incorporating them into your financial plan could help you understand what’s possible and get you excited for the future.

4. A financial plan could address retirement trepidations

Worrying about your future could dampen retirement celebrations. So, addressing these concerns and understanding how you might create a safety net could take a weight off your shoulders.

As you near retirement, you might worry about how your partner would cope financially if you passed away first, or how you’d fund care services if you needed support.

While a financial plan can’t prevent some things from happening, it could allow you to identify areas of concern and take steps to reduce the effect they could have. So, in the above cases, you might purchase a joint annuity with your pension so you know your partner would continue to receive a reliable income if you passed away and set aside some money to act as a care fund.

5. Working with a financial planner could allow you to take a hands-off approach

Managing your finances in retirement can be very different to handling your household budget when you are working. You might not receive a regular, reliable income, and, for retirees, the change can be difficult to manage or they simply want to take a hands-off approach.

Working with a financial planner means you can rely on someone else to handle your finances on your behalf and inform you if changes are needed.

It could lead to a happier retirement that allows you to focus on living the retirement lifestyle you’ve been looking forward to.

Contact us to talk about how to achieve your desired retirement lifestyle

If you’re nearing retirement, get in touch to talk about what you’re looking forward to and concerns you might have. We could work with you to create a financial plan that gives you confidence and means you’re able to focus on what’s really important – enjoying the next chapter of your life.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The post 5 ways financial planning could help you emotionally prepare for retirement appeared first on Innes Reid.

1. ISA allowance

ISAs provide a popular way to tax-efficiently save and invest. Indeed, the latest government figures show in 2022/23, 12.4 million ISAs were subscribed to with around £71.6 billion being collectively added to accounts.

For the 2024/25 tax year, you can add up to £20,000 to ISAs. If you hold money in a Cash ISA, the interest you receive wouldn’t be liable for Income Tax. Similarly, if you invest through a Stocks and Shares ISA, any returns generated aren’t liable for Capital Gains Tax (CGT).

If you don’t use your ISA allowance before the tax year ends, you’ll lose it. So, it could be worthwhile reviewing your saving and investing goals now.

Before you place money into an ISA, it’s often a good idea to consider your goal. For short-term goals, a Cash ISA might be suitable for your needs. On the other hand, if you’re putting money away for a goal that’s more than five years away, you may want to consider if you could benefit from investing.

In addition, if you’re aged between 18 and 39, you could open a Lifetime ISA (LISA). In the 2024/25 tax year, you can add up to £4,000 to a LISA and receive a 25% government bonus. The £4,000 LISA allowance counts towards your overall £20,000 ISA allowance.

However, if you withdraw money from a LISA before the age of 60 for a purpose other than buying your first home, you’d pay a 25% penalty. As a result, a LISA is often most suitable for those saving to get on the property ladder.

2. Dividend Allowance

If you’re a business owner or hold shares in some companies, you might receive dividends.

You don’t pay tax on dividends that fall within your Personal Allowance, which is £12,570 in 2024/25. In addition, you can receive up to £500 in dividends before Dividend Tax is due under your Dividend Allowance. So, dividends could offer a valuable way to boost your income without increasing your tax liability.

You cannot carry forward unused Dividend Allowance.

Even if your dividends could exceed the allowance, the tax rate you pay could be lower than receiving a comparable amount that was liable for Income Tax. The rate of Dividend Tax you pay depends on your Income Tax band. In 2024/25, the rates are:

• Basic rate: 8.75%
• Higher rate: 33.75%
• Additional rate: 39.35%

So, making dividends part of your financial plan could reduce your overall tax bill even if you’re liable for Dividend Tax.

3. Capital Gains Tax Annual Exempt Amount

Chancellor Rachel Reeves made several changes to CGT in the Autumn Budget, including increasing the main rates. Consequently, you could find your tax liability is higher than expected when you make a profit when you dispose of some assets.

Indeed, the Office for Budget Responsibility estimates CGT could raise £15.2 billion in 2024/25, which may then increase to £23.5 billion in 2028/29.

From 30 October 2024, the standard rates of CGT are:

• 24% if you’re a higher- or additional-rate taxpayer
• 18% if you’re a basic-rate taxpayer and the gains fall within the basic-rate Income Tax band.

Importantly, the Annual Exempt Amount means you can make profits of up to £3,000 in 2024/25 before CGT is due. So, if you plan to dispose of assets, timing the decision to make use of this exemption could be valuable.

You cannot carry forward the Annual Exempt Amount into the new tax year if you don’t use it.

4. Pension Annual Allowance

Pensions provide a tax-efficient way to save for your retirement as contributions benefit from tax relief and the interest or investment returns generated are tax-free.

In 2024/25, the Pension Annual Allowance is £60,000 – this is the amount you can tax-efficiently add to your pension in a single tax year, so you might also need to consider employer contributions and those made by other third parties. However, you can only claim tax relief on up to 100% of your annual earnings, or £2,880 if you’re a non-taxpayer.

There are two reasons why your Annual Allowance may be lower.

• If your adjusted income is more than £260,000 and your threshold income is more than £200,000, the allowance will taper. For every £2 your income exceeds the adjusted income threshold, your Annual Allowance will fall by £1. The tapering stops at £360,000, so everyone retains an allowance of £10,000.
• If you’ve already flexibly accessed your pension, the Money Purchase Annual Allowance may affect you. This reduces the amount you can tax-efficiently add to your pension to £10,000.

You can carry your Annual Allowance forward for up to three tax years. So, you have until 5 April 2025 to use any unused allowance from 2021/22.

5. Inheritance Tax annual exemption

Government figures suggest Inheritance Tax (IHT) bills are on the rise. Indeed, IHT tax receipts between April 2024 and October 2024 were £5 billion – around £500 million higher than the same period last year.

If your estate could be liable for IHT when you die, passing on wealth during your lifetime could be a valuable way to reduce a potential bill.

However, not all gifts are considered immediately outside of your estate for IHT purposes. Some may be included in your estate for up to seven years, which are known as “potentially exempt transfers”.

So, using allowances and exemptions that enable you to pass gifts to your loved ones without worrying about IHT might be an important part of your estate plan.

In 2024/25, the annual exemption means you can pass on £3,000 without worrying about IHT. You can carry forward your annual gifting exemption from the previous tax year, so you could gift up to £6,000 in a single tax year and have it fall immediately outside your estate.

There are often other allowances or ways you could reduce your estate’s potential IHT bill. Please contact us to talk about steps you may take.

Get in touch to discuss 5 useful allowances and exemptions that will reset at the end of the tax year

If you’d like to talk about which allowances and exemptions you may want to use to reduce your tax bill in 2024/25, please get in touch. We’ll work with you to help you understand which steps could be right for your circumstances and aspirations.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate tax planning, Inheritance Tax planning, or estate planning.

The post 5 useful allowances and exemptions that will reset at the end of the tax year appeared first on Innes Reid.

Cognitive bias is an error in cognition that can happen if your personal beliefs or experiences affect a decision you’re making. So, you might act based on an emotion rather than evidence. In some ways, cognitive bias is useful – it helps you make decisions quickly.

However, there are times when bias is potentially harmful, including when you’re making financial decisions.

Loss aversion is a common type of financial bias that might happen when you’re investing. Loss aversion is a tendency to avoid losses over achieving equivalent gains. The theory suggests that people feel more pain from losses than they feel pleasure from gains.

From an investment perspective, loss aversion could mean you’d prefer to hold your money in cash, even though it could be losing value in real terms once you consider inflation. Or that you choose low-risk investments even when taking greater risks would align with your goals and circumstances.

In these cases, loss aversion could mean missing out on an opportunity to grow your wealth because you’re worried about potential losses.

There are many other types of financial bias, and setting out your goals could help you manage them. Here are three insightful reasons why.

1. A goal could help you understand why certain decisions are right for you

A clearly defined goal can give you a sense of direction and an understanding of why you’re making certain financial decisions.

Having a long-term vision could mean you’re less likely to have a knee-jerk reaction due to emotions or events that are outside of your control. For example, if market volatility means the value of your investments falls, knowing that you’ve invested with a long-term view could help you stick to your plan, even if you’re nervous.

Setting out goals and understanding what’s realistic might remove some other forms of bias too.

Overconfidence bias involves overestimating your skill or knowledge when investing. It could mean you overlook relevant information or feedback because you believe you’re correct. In some cases, investors take more risk than is appropriate for them because they believe they’ll be able to secure higher returns by doing so.

A goal could temper some of the impulsiveness you might experience if you’re overconfident. If you’ve calculated you can secure your goals by achieving average annual investment returns of 4%, you might be less likely to chase potentially higher returns that could result in losses.

2. Setting goals could mean you recognise when emotions are affecting your decisions

Emotions are one of the reasons why people might make financial decisions that aren’t right for them. From feeling fearful during market volatility to being excited when a new opportunity comes along. Emotions might mean you don’t take the time to fully assess your options before acting.

Setting a goal can’t remove your emotions, but it might mean you’re more likely to realise when they could be clouding your judgment.

Let’s say you’re talking to a group of friends who are excitedly talking about an investment opportunity that they say will deliver high returns. It can be easy to be swept up in the conversation and invest without carrying out additional research to see if it’s right for you.

However, if you’ve set an investment goal and know what steps you need to take to reach it, you might be less likely to be side-tracked by emotional decisions.

3. A goal could help you form positive money habits

Working towards large goals often requires consistent and repetitive actions. You might regularly contribute to a savings account, pension, or Stocks and Shares ISA.

Taking consistent actions could help you form positive money habits that mean you’re less likely to stray from your financial plan when emotions or other influences occur.

Do you want help setting your financial goals?

If you’d like help setting financial goals and understanding the steps you could take to achieve them, please get in touch. Having an outside perspective looking at your finances could also highlight where financial bias might affect your decisions.

Call our team: 01244 347 583 | Send an email: info@innesreid.co.uk | Send a message

Please note: This blog ‘goals may reduce financial bias’ is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The post 3 insightful reasons why setting goals may reduce financial bias appeared first on Innes Reid.

Spending some time going through your finances and thinking about what you want to achieve next year could help you step into 2025 feeling confident about your future. So, here are 10 jobs you could complete before the end of the year.

1. Check the interest rate your savings are earning

You’ve no doubt heard a lot about interest rates rising over the last year. If you’ve got money in a savings account, it could mean your savings have a chance to work harder and deliver more interest.

After more than a decade of historically low interest rates, your savings could now earn more than 5% and even a small difference can add up over the long term. If you haven’t reviewed the interest rate your savings are earning now and the alternatives available, it could be a worthwhile task.

Usually, the highest interest rates are available if you lock your money away for a defined period. So, setting out what the money is for and when you might need to access it could help you find the right account for you.

2. Review your investments

Investment markets have experienced volatility in 2024 – how have your investments fared?

A quick review of your investments could help you see if you’re on track. Remember, don’t just focus on the performance over the last 12 months. Instead, look at your returns over a longer time frame and the overall trend.

As well as checking if you’re on track, you might also want to ensure your investments continue to align with your needs. If you’re financial circumstances or goals have changed, you may want to update your investments to reflect that.

3. Use your gifting allowance

If your estate could be liable for Inheritance Tax (IHT) when you pass away, gifting assets during your lifetime may be a useful way to reduce a potential bill.

However, not all gifts are considered immediately outside of your estate for IHT purposes. So, making use of those that are could be useful. One such option is known as the “annual exemption”, which allows you to gift up to £3,000 to an individual or split between several people each tax year – that could make a welcomed Christmas present for a loved one!

The small gift allowance also allows you to make as many gifts as you’d like up to £250 to each person each tax year, as long as you have not used another allowance on the same person.

The Autumn Budget announced changes to IHT. visit our blog pages for the latest update.

4. Track down “lost” pensions

Do you know where all your retirement savings are? It could be easier than you think to “lose” a pension.

Indeed, according to a report in FT Adviser, 29% of Brits have no idea how many pensions they have. If you’ve moved home or switched jobs since you last reviewed your pension, a quick check could uncover some missing savings.

Start by going through your current pensions and employment history to identify gaps. If you discover a gap, you can use the government’s pension tracing service to find the contact details you need for the pension scheme.

5. Complete some pension admin

While you’re checking you’ve not lost touch with any retirement savings, a quick check-in on your current pensions could be useful too. You may want to review if your:

• Personal details are correct
• Target retirement date is right
• Pension is invested in a way that suits your goals.

In addition, if you’re a higher- or additional-rate taxpayer, you may want to check if you could claim additional pension tax relief through a self-assessment tax return.

Getting your pensions in order could make it easier to understand if you’re on track for retirement and reduce the risk of losing them in the future.

6. Assess your financial protection

According to the Association of British Insurers, a record £7.34 billion was paid out through financial protection in 2023. While you hope you don’t need to make a financial protection claim, it could provide an invaluable safety net when you need it most.

Take some time to assess the protection you already have in place – does it still meet your needs? If your financial commitments have increased or your circumstances are different, you might find you want to increase the cover.

7. Name a Lasting Power of Attorney

A Lasting Power of Attorney (LPA) gives someone you trust the power to make decisions on your behalf if you’re unable to. While it can be difficult to think about, an LPA could reduce stress and ensure your affairs are in order if you’re affected by an illness or accident.

If you already have an LPA in place, you might want to consider your wishes and if any changes could affect the decisions you’d like an attorney to make.

8. Inspect your Will

Over time, your wishes and circumstances can change. So, reading your Will now and again to ensure it’s still accurate is important. You might find that an update is necessary after you welcome a new grandchild or the value of your assets has grown.

According to Will Aid, more than half of UK adults don’t have a will in place. If you’re among them, you may want to make writing a Will a priority. A Will is one of the main ways to state how you’d like your assets to be distributed when you pass away. Without a Will, your estate would be distributed according to intestacy rules, which could be very different from your wishes.

9. Fill in your pension expression of wish form

Usually, your pension isn’t covered by your Will. Yet, it could be one of the largest assets you have, so it’s important to make sure you let your pension provider know who you’d like to receive it if you pass away.

You can do this by completing an expression of wish form, which you can typically do online. If you have more than one pension, you’ll need to fill in the form for each one.

10. Arrange your next financial review

If you don’t already know when your next financial review will be or you want to speak to us, you can get in touch to arrange a meeting. We provide a free, no obligation initial meeting to enable to you to speak to a financial adviser about your personal circumstances. Its a opportunity to ask ask any questions about your finances and understand if financial advice is right for you.

Call our team to arrange a free one hour consultation with an adviser 01244 347583 or email info@innesreid.co.uk

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate Lasting Powers of Attorney or will writing.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The post 10 financial tasks to complete before 2025 appeared first on Innes Reid.

Arguing that the July general election had given Labour a “mandate to restore stability and start a decade of renewal”, Reeves described it as “a Budget to fix the foundations and deliver change”.

Against a backdrop of a manifesto pledge not to increase Income Tax, employee National Insurance, or VAT, Reeves also announced that her Budget would raise taxes by £40 billion, stating that any other Chancellor would “face the same reality”.

Read on for a summary of some of the key measures and announcements from this year’s Autumn Budget – and what they might mean for you.

Extra investment in infrastructure

The Chancellor argued that “the only way to drive economic growth is to invest, invest, invest.”

In the run-up to the Budget, Reeves announced she was making a technical change to the way debt is measured, which will allow the government to fund extra investment. This wider debt measure will allow for more borrowing to invest in big building projects such as roads, railways, and hospitals.

It’s important to note that this additional room for manoeuvre for spending on investment projects will not be used to support day-to-day spending, as the Chancellor has committed to fund that with tax receipts.

A rise in employer National Insurance contributions

As many analysts had predicted, Reeves increased employer National Insurance (NI) rates by 1.2% from 13.8% to 15%, effective 6 April 2025.

Currently, employers pay NI only above a threshold of £9,100 a year. The Chancellor reduced this threshold to £5,000 a year, effective 6 April 2025. The threshold will remain at £5,000 until 6 April 2028 and then increase in line with the Consumer Prices Index (CPI) thereafter.

These reforms will raise £25 billion a year by the end of the forecast period (2029/30).

At the same time, the government is increasing the Employment Allowance.

The current Employment Allowance gives employers with NI bills of £100,000 or less a discount of £5,000 on their employer NI bill.

From 2025, the Employment Allowance will rise to £10,500. Moreover, the government will expand the Employment Allowance by removing the £100,000 eligibility threshold so that all eligible employers now benefit.

Taken together, the government says that 865,000 businesses will pay no NI contributions at all, and more than half of employers with NI liabilities will either see no change or will gain overall next year.

An end to the freeze on Income Tax thresholds from 2028

Back in 2021, the then-chancellor, Rishi Sunak, raised both the Personal Allowance and the threshold at which higher-rate Income Tax is due by £70 and £270 respectively.

Importantly, however, he also fixed these thresholds until 2026. Then, in the 2022 Autumn Statement, Jeremy Hunt extended this freeze until 2028.

Unexpectedly, Reeves decided against extending the freeze beyond 2028. From 2028/29, personal tax thresholds will be uprated in line with inflation once again.

Capital Gains Tax reforms

The Chancellor announced several changes to the Capital Gains Tax (CGT) regime.

Firstly, as of 30 October, the main rates of CGT have increased. The basic rate has risen from 10% to 18% and the higher rate has increased from 20% to 24%.

The government will maintain the lifetime limit for Business Asset Disposal Relief (BADR) – formerly Entrepreneurs’ Relief – at £1 million. Meanwhile, the lifetime limit for Investors’ Relief (IR) will be reduced from £10 million to £1 million.

The BADR and IR rate of CGT will continue to be charged at 10%, before rising to 14% on 6 April 2025 and 18% on 6 April 2026.

These measures will raise £2.5 billion a year by the end of the forecast period.

Furthermore, CGT on carried interest – paid by private equity managers – will rise from 18% (basic rate) and 28% (higher rate) to 32% from 6 April 2025. There will be further reforms from April 2026 to bring carried interest within the Income Tax framework, under bespoke rules.

Changes to some Inheritance Tax reliefs

As expected, the Chancellor made key announcements that could affect estate planning.

Nil-rate bands

The freeze on IHT thresholds will be extended by an additional two years, to 2030. The nil-rate band and residence nil-rate band will remain at £325,000 and £175,000 respectively.

Pensions

Reeves announced she was closing the “loophole” that gives pensions preferable IHT treatment. She will bring unused pension funds and death benefits payable from a pension into a person’s estate for IHT purposes from 6 April 2027.

The government estimates this measure will affect around 8% of estates each year.

Agricultural Property Relief

Currently, individuals can claim up to 100% relief on agricultural property (land or pasture that is used to grow crops or rear animals).

From 6 April 2026, the first £1 million of combined business and agricultural assets will continue to attract no IHT at all. However, for assets above this threshold, IHT will apply with 50% relief (i.e. 20%).

Business Property Relief

From 6 April 2026, the government will also reduce the rate of Business Property Relief from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as the AIM.

ISA subscription limits frozen until 2030

Prior to the Budget, there was speculation that the Chancellor may make changes to simplify the ISA regime.

While these did not materialise, the Budget did confirm that annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.

Additionally, the starting rate for savings will be retained at £5,000 for 2025/26, allowing individuals with less than £17,570 in employment or pension income to receive up to £5,000 of savings income tax-free.

A change to business rates relief

The current business rates relief system is set to run until April 2025. It effectively serves as a reduction on business rate bills for eligible businesses, with retail and hospitality firms having been key beneficiaries.

The Chancellor announced that, from 2026/27, permanently lower tax rates will be introduced for retail, hospitality and leisure properties.

Additionally, for 2025/26, some retail, hospitality, and leisure properties will receive 40% relief on their bills, up to a cash cap of £110,000 per business.

Corporation Tax capped at 25%

The government plans to support businesses to invest by publishing a Corporate Tax Roadmap. This confirms that the government will cap Corporation Tax at 25% for the duration of the parliament.

A rise in the national living wage

Reeves announced a 6.7% rise in the national living wage for workers aged 21 and over, from £11.44 to £12.21 an hour, effective April 2025. For a full-time employee earning the national minimum wage, this means a £1,400 annual pay boost and is expected to benefit more than 3 million workers.

In addition, the national minimum wage for people aged 18 to 20 will rise from £8.60 to £10 an hour. Apprentices will receive the biggest pay increase, with hourly pay rising from £6.40 to £7.55 an hour.

The announcement could significantly increase outgoings for businesses, particularly when coupled with reforms to employers’ NI.

A freeze in fuel duty

Fuel duty has been frozen since 2011, and the 5p cut brought in by the Conservatives in 2022 has been extended at every subsequent Budget.

Despite speculation that Reeves might increase fuel duty, she confirmed the freeze for another year and extended the 5p cut. This will save the average motorist £59 in 2025/26.

Second home Stamp Duty surcharge increasing

With effect from 31 October 2024, the Stamp Duty surcharge on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property in England and Northern Ireland will increase from 3% to 5%.

This surcharge is also paid by non-UK residents purchasing additional property.

Reforms to the non-dom regime

Currently, for UK residents whose main residence – or “domicile” – is elsewhere in the world, income and gains are taxed differently, depending on factors such as how long individuals are resident in the UK.

The Chancellor confirmed that the tax regime for non-domiciled individuals (non-doms) will be abolished from April 2025, claiming that the rules will ensure that those who “make the UK their home will pay their taxes here”.

Moving forward, there will be a residence-based scheme with “internationally competitive arrangements” for those who come to the UK on a temporary basis.

Over the next five years, Office for Budget Responsibility (OBR) figures estimate that these reforms will raise £12.7 billion.

VAT on private school fees from January 2025

As they had promised in their election manifesto, Labour announced that, from 1 January 2025, VAT will apply to all education, training, and boarding services provided by private schools.

Additionally, the Chancellor announced that she was removing business rates relief from private schools from April 2025.

An end to the £2 bus fare cap

The £2 cap on bus fares introduced by the previous Conservative administration is due to end on 31 December 2024.

Labour has announced that it will extend the cap for a further 12 months but that the cap will rise from £2 to £3.

Changes to duties for alcohol, tobacco, and vaping

The Chancellor confirmed a reduction in the duty for draught alcohol, cutting duty on an average strength pint by a penny. Rates for non-draught products will increase in line with the Retail Prices Index (RPI) from 1 February 2025.

Furthermore, a new vaping duty will be introduced from 1 October 2026, standing at £2.20 per 10 ml of liquid. Meanwhile, there will be a one-off tobacco duty rise designed to maintain the incentive to choose refillable vaping over smoking.

Confirmation of the 4.1% increase to the State Pension under the triple lock

The basic and new State Pension will increase by 4.1% in 2025/26, in line with earnings growth, meaning over 12 million pensioners will receive up to £470 a year more.

Get In Touch

If you have questions about the Autumn Budget or would like to discuss any of the changes announced, please contact our team to arrange a consultation.

Please note

All information is from the Autumn Budget documents on this page.

The content of this Autumn Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

The post Your Autumn Budget update – the key news from the Chancellor’s statement appeared first on Innes Reid.

Here are five reassuring ways a financial plan could help you next time you encounter one of life’s scares.

1. A financial plan could help you build financial resilience to overcome obstacles

Even the best-laid plans can be knocked off course by events outside of your control. Dealing with obstacles like long-term illness or losing your job can be scary, especially if low financial resilience means you’re also facing additional pressure.

For example, if you’re diagnosed with a serious illness, you may want to focus on your recovery, spending time with your loved ones, or adapting to a new lifestyle. But if your income has stopped and you don’t have a plan in place, you could find you’re more worried about how to meet bills or support your family.

So, as part of your financial plan, we’ll work with you to assess your financial resilience and the steps you might take to improve it.

Depending on your circumstances, that could include building an emergency fund, taking out appropriate financial protection, and assessing how you might use your other assets to provide a regular income if necessary.

A financial plan can’t remove unexpected obstacles, but it could provide you with a way to overcome them and mean they’re less scary to face.

2. A financial plan could help you prepare for the future

Effective financial planning often involves considering the future. In some cases, you might need to consider what you want your life to look like in several decades.

It can be exciting to set out your life goals, but, at the same time, it may be frightening too. There might be many different factors you need to weigh up and, for some goals, the steps you need to take to achieve them can seem impossible.

Take retirement planning, for example. The figure you want to save into your pension to secure the retirement you want may seem dauntingly high. Even as you near the milestone, you might still have retirement worries. Indeed, according to a report in IFA Magazine, almost half of pension savers are worried they won’t have enough to last their lifetime.

A financial plan could help you prepare for the future and break down large goals so you can see how to reach them.

If you are unsure about your financial future try the Wealth Calculator for an instant, personal calculation straight to your inbox. It will give you a much clearer understanding of where you are heading. Try the Wealth Calculator here 

3. A financial plan could provide answers to questions that keep you up at night

It’s not just the memories of a horror film that might keep you up at night, wondering “what if?” could be just as harmful to your wellbeing.

Dealing with uncertainty can be terrifying. If you’re kept up at night by wondering what would happen in different scenarios, a financial plan could offer some reassurance.

A financial plan doesn’t just consider how your finances will change if everything goes according to plan. It also looks at how factors outside of your control could affect your wealth and lifestyle. As a result, it could help you answer the questions you’re worried about.

You might want to understand:

• If your partner and children would be financially secure if you passed away
• Whether you could afford the cost of care if you needed support later in life
• How your finances would be affected if you’re no longer able to work due to an illness
• If your retirement would still be secure if investments underperformed or the pace of inflation increased.

Often “what if” scenarios are scary because of the unknown. It’s impossible to know what’s around the corner, but we could help you understand the potential impact and then take steps to keep your long-term plans on track.

4. A financial plan could help you tackle conversations you’re dreading

There might be times when you need to have a difficult conversation with your loved ones about your finances or long-term plans. For some, the nerves around talking about certain subjects could lead to anxiety or putting them off altogether.

Indeed, according to a Canada Life survey, 5.1 million UK adults who received an inheritance in the last five years did not discuss the value of it with the benefactor beforehand.

It’s easy to see why some benefactors choose not to discuss inheritances. Talking about passing away may be difficult or they might not feel comfortable divulging the value of their estate. However, doing so could help beneficiaries better manage an inheritance when they receive it.

Other difficult conversations could include how you’d like someone to handle your affairs if they become your Power of Attorney or your preferences for a funeral.

Setting out your goals and taking steps to improve your financial wellbeing could mean you feel more confident tackling difficult conversations around money and your life.

In some cases, you might decide to have your financial planner be part of the conversation too. Having a third party who understands the financial aspect could help you all get on the same page.

5. You’ll have someone to turn to for support

By working with a financial planner, you don’t have to tackle life’s scares alone – you’ll have someone to turn to who understands your goals, worries, and financial circumstances. Knowing that a professional has reviewed your financial plan and is there to answer questions could make the intimidating far less daunting.

If you’d like to arrange a meeting to talk about your aspirations and worries, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The post 5 reassuring ways a financial plan could help you deal with life’s scares appeared first on Innes Reid.

Figures from the House of Commons Library show there were 2.86 million students in the UK in 2021/22. Around 550,000 applications were accepted for full-time undergraduate places through UCAS in 2023.

If your child was among them, read on to find out what you need to know about supporting them through university.

The average student will graduate with debt of £43,700

While going to university could broaden career prospects, you might worry about the financial implications of borrowing money to pursue further education.

Many students will take out loans to cover tuition fees, which are a maximum of £9,250 a year in England in 2024/25. With the average course lasting three years, that means graduating with debt of £27,750.

In addition, students may take out a maintenance loan to help with living costs while they study. Rent alone can add up to a substantial amount. Indeed, according to the BBC, in 2023/24, the average student outside of London and Edinburgh paid £7,475 in rent for the academic year.

How much your child can borrow through a maintenance loan will depend on a range of factors, including where they’ll be studying, if they’ll be moving out, and your household income.

Official figures show that the average student going to university in 2024 is expected to graduate with debt of £43,700. The government expects around 65% of these students to repay their student loans in full during their lifetime.

With such a large figure, you may be tempted to offer an alternative to student loans. However, they work differently from traditional loans, so using your money to replace a student loan might not be the best way to support your child.

“Plan 5” students will make student loan repayments once they earn £25,000 a year

The way student loans work often means they can be viewed like a graduate tax rather than a traditional loan.

Students starting university in 2024 will take out “Plan 5” loans, which launched in 2023.

Under a Plan 5 loan, your child won’t need to make repayments until they’re earning £25,000 a year. If after graduating, they’re unemployed or are a low earner, they wouldn’t need to make any student loan repayments. The repayment threshold is frozen until 2027, after this point it’s expected to increase with inflation.

Once your child earns more than £25,000, 9% of their earnings above the threshold will be used to repay their student loan. So, a graduate earning £35,000 would make student loan repayments of £900 a year. If your child hasn’t repaid the loan within 40 years, it is automatically wiped.

For employees, repayments are automatically removed via payroll, just like Income Tax and National Insurance deductions.

Interest is added to the loan at the rate of inflation, as measured by the Retail Prices Index (RPI).

So, while you might be worried about how your child will repay their student loan, it’s manageable for most graduates.

The average student maintenance loan falls short by £582 a month

The rising cost of living has placed pressure on students’ day-to-day finances. As a parent, lending financial support to cover living expenses might prove more useful than covering tuition fees.

According to Save the Student, in 2023, the average student faced a financial shortfall of £582 a month as the maintenance loan they were entitled to didn’t cover their living costs. Indeed, monthly expenses increased by 17% to £1,078 in 2023 when compared to a year earlier.

It means some students had to make difficult choices about where to cut back. The survey found that a fifth of students often skip meals to save money.

With 4 in 5 students worried about how they’ll make ends meet, regular financial support from parents throughout their education could make a huge difference. More than half of students said financial concerns harmed their mental health and 30% stated their grades suffered as a result.

So, if you’re in a position to, you might want to consider how you could help your child manage their budget and ease some of the financial stress they may experience as a student.

Contact us to make supporting your child part of your financial plan

If your child will be going to university soon and you want to update your financial plan to offer them support while they study, please contact us. We’ll work with you to adjust your plan to reflect your short and long-term priorities.

Supporting your children through university – Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The post Want to support your children through university? Here’s what you may want to consider appeared first on Innes Reid.

Lifestyle creep leads to your regular expenses rising

Lifestyle creep refers to your regular expenses rising in line with your income. So, after you’ve received a pay rise, your outgoings would start to creep up.

It can be more difficult than you expect to spot lifestyle creep. It might be as simple as choosing a more expensive bottle of wine when you’re at the supermarket or stopping by a café on the way to work each morning to pick up a latte. It could include larger expenses too. Perhaps you start to upgrade your phone every year instead of every three years, or eating out becomes a regular habit rather than a treat.

Over time, lifestyle creep can lead to former luxuries becoming your new essentials. If you don’t keep an eye on your budget, the amount you spend could rise much further than you expect.

According to a survey carried out by Aqua, 89% of Brits say they exceed their social budgets every month. The average person is spending around £67 more on social activities than they plan for.

When you consider how social creep could affect other areas of your spending, it’s easy to see how it could lead to your regular outgoings rising by far more than you initially thought.

On the surface, lifestyle creep might seem like it’ll have little impact. After all, the £3.50 you might spend on a coffee during your commute is small change. Yet, grab a coffee three times a week, and you’ve added almost £550 to your expenses over a year.

Increased spending means you can become dependent on a higher income. Once you’ve established a habit of spending more, it can be difficult to go back to your original budget.

Lifestyle creep could mean you don’t save as much for your retirement

Small rises in your regular outgoings might seem relatively small in isolation, but when they’re combined, they could add up to thousands of pounds unwittingly spent every year.

As a result, you might divert a smaller portion of your new income to your retirement. Contributing less to your pension, investment portfolio, or savings could have a much larger effect than you first believe, especially once you calculate the returns you’ve potentially missed.

Another way lifestyle creep could affect your future is by changing your desired retirement income.

According to a 2022 survey published in FTAdviser, the top retirement aspiration among those nearing the milestone is to maintain their standard of living. If your regular expenses have crept up during your working life, your pension might need to provide a greater income than you’ve previously calculated.

As a result, some retirees could find they face an income shortfall in retirement or risk using their pension too quickly and running out of money later in life.

A financial plan could help you strike a balance between enjoying today and securing your future

While lifestyle creep may be harmful to your long-term plans, you don’t have to put all your new income to one side for the future – it’s about striking a balance that suits you.

From planning an annual holiday to an exotic location to days out with your family, there are lots of ways you might plan to spend a pay increase. Making these expenses part of your overall financial plan could help you assess what’s right for you.

It may be worth considering which expenses add joy to your life when you’re prioritising them. For example, a cup of coffee on the way to work might become a habit that doesn’t improve your mood or outlook. On the other hand, regularly buying a coffee as you catch up with friends could be an important part of your social routine that you look forward to.

Creating a financial plan and being aware of lifestyle creep is about more than cutting back your expenses. It’s about being intentional with how you use your wealth now and in the future.

Contact us to talk about your finances and how to avoid the negative effects of lifestyle creep

If you’ve received an income boost or would like to review your finances, we could assist you in formulating a financial plan that could help secure the lifestyle you want. Please contact us to arrange a meeting.

Call our team on 01244 347583 or send us a message by entering your details below. We all always aim to respond within 24 hours during the working week.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The post Could “lifestyle creep” affect your retirement plans? appeared first on Innes Reid.

In this blog, we will explore several key tips to help you build a substantial retirement. From the importance of starting your pension contributions early to taking advantage of new pension allowances, we’ll cover practical steps you can take to help you build a financially secure future.

Whether you are just beginning to save or looking to optimise your existing pension plan this is your 8 pension boosting tips.

1. Start paying in as soon as you can

The sooner you start saving, the more time you’ll have to reach your goals.

Here are some examples of how much your pension could be worth by the time you’re 68 if you pay in £300 a month (increasing by 3% each year), depending on when you start. These figures are based on assumed annual growth of 5% after any charges. They also don’t take inflation into account. These figures are an illustration and what you get will depend on several factors including your investment performance.

2. Regularly increase how much you pay in

If you can afford to, it can make sense to increase your contributions regularly.

Imagine you start investing £600 Gross (£360 net) a month in a pension from age 30 with annual increases of 3%. You could end up with a pension worth over £1 million at age 68.

This assumes investment growth of 4% each year after charges. It doesn’t consider inflation, which erodes the value of money over time.

3. Make sure you’re maxing out your employer contributions

If you have a workplace pension, your employer will be making regular contributions into it. One potential quick win is to find out the maximum your employer will pay in and make sure you’re taking advantage of that opportunity, if you’re able to.

While lots of employers only pay the minimum set out under auto-enrolment rules (pension contributions equal to 3% of your qualifying earnings), others are willing to pay more. Your employer could be too.

4. Consider making a lump sum payment

Making a larger contribution – even as a one-off – can have a significant impact on your retirement fund. And if left invested for several years, could leave you with a much larger pension than you otherwise would have.

If you decide to significantly boost your pension, you could pay in more than £60,000, by using unused allowance from previous years, provided you also have sufficient earnings. This is known as the carry forward rule.

5. Stay on top of your pension if you take a career break

Career breaks often mark the start of a major life change like starting a family or looking after an elderly relative. But it’s important your pension doesn’t fall off the agenda.

Stopping your pension contributions for even a relatively short time could have a huge impact on your retirement savings. If you’re taking a break to go on paid parental leave, it could pay to keep your pension contributions going if you can. That’s because your contributions will normally be based on your actual earnings during that period (which are likely to be lower). But any employer contributions will continue to be based on the level of earnings you were getting before.

6. Avoid dipping into your pension unless you really need it

You can usually access a pension from age 55 (rising to 57 in 2028). You can normally take up to 25% tax-free (up to a maximum of £268,275) and the rest is taxable.

Many people choose to access their tax-free cash to pay off expenses, like a mortgage or to make a big purchase. But if you can afford to, it makes sense to leave your pension untouched until you plan to retire.

7. Watch out for the new allowances which replaced the Lifetime Allowance

There used to be a limit to the total value of pension benefits you could build up throughout your lifetime and generally receive up to 25% tax free. This limit was known as the lifetime allowance and was set at £1,073,100 for most people. However, from 6 April 2024, the lifetime allowance was abolished and replaced with three new allowances. These are the lump sum allowance, the lump sum and death benefit allowance, and the overseas transfer allowance.

Read more about new allowances for 2024/25 in our recent blog: Spring Budget 2024 – What It Means For You.

8. Track down old pension pots and consolidate them

Around £27bn has been left unclaimed in the UK. If you’ve moved jobs or changed address you could have an old pension waiting to be found.

If you are hoping to build up a sizable retirement pot, check the whereabouts of all your old pensions and claim back any that have been misplaced.

Taking Action

Visit our Pension Calculator to give you a much clearer view on where you are heading. You will receive an instant, personal calculation straight to your inbox.

Ready To Take Control?

If you are serious about taking control of your future and looking for independent advice about your pension and investments get in touch with our team today. Book a one-hour free consultation worth up to £300 with an Independent Financial Adviser.

Call: 01244 347583  Email: info@innesreid.co.uk or send our team a message below…

8 Pension Boosting Tips – PLEASE NOTE: This article is not personal advice. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

We cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this article. Please obtain professional advice before entering into or altering any new arrangement.

Source: Hargreaves Lansdown

The post 8 Pension Boosting Tips appeared first on Innes Reid.

Other notable announcements were an increase in the threshold before child benefit begins to be clawed back, the scrapping of the non-doms remittance basis rules, the introduction of a new ‘UK ISA’ to encourage investment in UK equities, and a reduction in the higher rate of CGT on residential property.

There were no significant announcements on pensions, with the abolition of the lifetime allowance having already been confirmed.

Read on for the Spring Budget 2024 – what it means for you.

National Insurance

Following fast in the footsteps of a cuts to NI announced in the Autumn Statement the Chancellor has announced a further 2% cut to the main rate of NI.

Employees

The main rate (Class 1) will be cut by 2%. The new rate of 8% will apply to earnings between the primary earnings threshold and the upper earnings limit, giving a maximum saving of £754 pa (£37,700 x 2%). Employees will continue to pay 2% on earnings above the upper earnings limit.

This measure will start from 6 April 2024.

There are no changes to the actual thresholds, and these will remain at 2023/24 levels.

Self-employed

As previously announced, there are changes to the way the self-employed will pay NI from April.

Class 2 NI will be abolished for those with annual profits exceeding £6,725. The current weekly rate is £3.45. Individuals will still get access to contributory benefits, including the State Pension.

Those with earnings below £6,725 must pay voluntary Class 2 contributions if they wish to retain access to the State Pension and other benefits, although there could be further changes to this next year. The rate for those who wish to do so will be frozen at £3.45 per week.

Self-employed also pay Class 4 NI contributions on profits between the lower and upper profits limit (up to £37,700). From April, this will be cut by a further 2% on top of the 1% reduction announced in the Autumn Statement. The main rate will therefore drop from 9% to 6% representing annual savings of up to £1,131. The rate applicable to profits above the upper profits limit will remain at 2%.

There will be no change to the actual limits and thresholds for Class 2 or Class 4 next year.

Employer

There were no changes to employer rates of NI which will remain at 13.8%.

Pensions

The Spring Budget committed to supporting pensioner incomes by maintaining the State Pension “triple lock”.

There were no new changes announced affecting pensions. This will be welcome news as the industry is still getting to grips with the abolition of the Lifetime Allowance (LTA). The LTA is to be replaced by two new allowances from April 2024.

The Lump Sum Allowance (LSA) will cap the amount of tax-free cash which can be taken and is set at £268,275 for those without protection.

The Lump Sum and Death Benefit Allowance (LSDBA) places a cap on tax free lump sums paid during the member’s lifetime and on death before age 75.It has been set at £1,073,100 for those without protection and is reduced by any LSA used.

ISA changes

ISA subscription limits remain fixed at £20,000 for adult ISAs and £9,000 for Junior ISAs.

UK ISA consultation

A new ‘UK ISA’ is to be introduced to support UK investment. This will give savers an additional annual subscription allowance of £5,000 on top the existing £20,000 limit.

Previously announced ISA changes

The ‘one ISA of each type per tax year’ restriction will be removed from April 2024. This simplification will mean investors will be able to subscribe to multiple cash or stocks and shares ISAs in a year without fear of invalidating their subscriptions leading to a loss of tax-free status on their savings.

From April 2024 it will also be possible to do partial transfers of ISA funds. Currently there are separate rules for the transfer of current and previous years subscriptions. While it is possible to do a partial transfer of previous years subscriptions, transfers of current years subscriptions must be for the whole amount including the attributable investment growth. This will be relaxed from April allowing partial transfers to apply to all ISA subscriptions whenever they were made.

The age at which an adult ISA can be opened will fixed at 18 across all ISA types from April. This will mean it will no longer be possible to open an adult Cash ISA at age 16, removing the ability for 16 and 17 year olds to pay £29,000 into ISAs by combining contributions into both a Cash ISA and Junior ISA.

Income tax

Despite speculation of a cut to income tax in the lead up to the budget there were no changes announced to rates or allowances.

The personal allowance and basic rate bands for income tax will remain at £12,570 and £37,700 respectively. The threshold for additional rate tax will remain at £125,140.

With regards to dividends, the dividend allowance will be halved from £1,000 to £500 for 2024/25. The dividend tax rates for basic rate, higher rate and additional rate taxpayers will remain at 8.75%, 33.75% and 39.35%.

Reforming child benefits

Child benefit is currently based on the highest earner in a household and is withdrawn at the rate of £1 for every £100 earnings they have over £50,000. This is achieved via a tax charge and means that families will not enjoy any child benefit if the high earner has income over £60,000.

From April 2024, the threshold at which child benefit is withdrawn will increase from £50,000 to £60,000, and the rate of withdrawal will be £1 for every £200 of income. Child benefit will therefore be extinguished once the highest earner’s income exceeds £80,000.

There are plans to make the system fairer by administering the benefit on a household basis, rather than on the highest earner. The government aims to introduce this by April 2026 following consultation.

Capital gains and residential property

The Chancellor has announced a cut to the rate of CGT payable on the disposal of residential property benefiting multiple homeowners and those with buy to let properties. The higher residential property CGT rate is to be cut from 28% to 24% from 6 April 2024. Gains falling within basic rate will continue to be taxed at 18%. An individual’s main residence will still be exempt from CGT as Principle Private Residence Relief will continue to apply.

The CGT rates for all other disposals of non-residential property remain at 10% and 20% and as previously announced the annual CGT annual exempt amount will fall from £6,000 to £3,000.

Furnished holiday lets

Furnished holiday lets will be taxed in the same way as buy to let properties from 6 April 2025. This will mean that income from furnished holiday lets will cease to be relevant UK earnings for pension purposes.

Changes to the taxation of non-UK domiciles

It was announced that from the 6 April 2025 the remittance basis of taxation for non-UK domiciled individuals will be abolished. This is to be replaced with a new Foreign Income and Gains (FIG) regime which is determined by UK residency rather than domicile.

Individuals who become UK resident having been non-resident for more than 10 years will not pay UK tax on their overseas income and gains for the first four tax years of UK residence and will be free to bring these funds to the UK free of any additional tax. They will continue to pay tax on their UK income and gains in the normal way.

There is also to be a consultation on changes to inheritance tax for non-UK doms. Currently someone who is non-UK domicile is only subject to UK IHT on assets situated in the UK. However, they become subject IHT on their worldwide assets if they become UK domicile or deemed domicile.

The proposed new rules, intended to apply from 6 April 2025, would apply IHT on their worldwide assets once someone has been resident in the UK for more than 10 years. Also, where someone ceases to be UK resident they will remain subject to IHT for 10 years after leaving the UK.

There are also proposals which may remove the IHT effectiveness of excluded property trusts taken out after 6 April 2025.

Inheritance tax

There were no changes to inheritance tax announced in today’s budget. The nil rate band will remain frozen at £325,000 and £175,000 for the residence nil rate band.

A consultation on a new IHT regime for non-doms has been launched with the proposed rules anticipated to take effect from 6 April 2025.

Corporation tax

There were no further changes to the rates and thresholds. The main rate will remain at 25% and the rate for small companies with profits below £50,000 continues at 19%. There’s tapering relief for businesses with profits between £50,000 and £250,000 so that they also pay less than the main rate.

Spring Budget 2024 – What It Means For You – Get in touch

If you have any questions about how the Spring Budget will affect you and your finances, please get in touch. Call 01244 347583 to speak to a member of our team.

All information is from the Spring Budget documents

The content of this Spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

Source: abrdn plc, UK Gov: Spring Budget documents

The post Spring Budget 2024 – What It Means For You appeared first on Innes Reid.

1st April – National Living Wage and Minimum Wage Rise Take Effect

The hourly rate for people aged 21 and over will go up by 9.8% in April, from £10.42 to £11.44.

Those aged 18 to 20 will also see pay rise to £8.60 per hour – up £1.11. The minimum hourly wage for apprentices will increase too.

5th April – End of the 2023/24 tax year

You have until midnight to use as much of you tax-efficient allowances as possible. If you’re planning to utilise your entire annual ISA allowance, the full £20,000 will need to have been paid into your accounts by this date.

Anyone wanting to pay extra into their pension should also try and do this before 5th April. Most people can contribute up to £60,000 to their pension pot each tax year and benefit from tax relief. However, those with an annual income – including salary, and income from savings and investments – of more than £260,000, or those who earn less than £60,000 a year, have a lower pension allowance.

Read our latest blog for must-know tips on how to maximise your tax allowances before 5th April.

6th March – Spring Budget

Every year we have at least one big Budget statement delivered by the chancellor. It outlines how well the economy is performing, the financial forecasts for the year ahead as well as any proposed changes to the tax system.

Rishi Sunak recently announced that the general election is likely to be in the second half of the year, this could be the last budget before a general election.

Keep an eye out for our updated insights following the Spring Budget and how it could affect you.

6th April – New 2024/25 Tax Year 

You can start making use of your tax allowances straight away. Remember, the longer you invest for the more time you are giving your investments to grow.

You can learn more about the power of compounding here. 

6th April – State Pension Rises

The 2024-25 tax year begins on 6 April, and this is a date when increases to various state benefits will kick in.

6th April – Tax Changes

There are a few tax changes that will occur at the start of the new tax year.

• The dividend tax-free allowance will be halved from £1,000 to £500. The tax rates on dividend income remain unchanged.
• The threshold for paying capital gains tax will also be halved, from £6,000 to £3,000.
• Class 2 National Insurance contributions (NICs) for the self-employed are set to be abolished, while the rate of class 4 NICs will drop from 9% to 8% in April. Both these reforms aim to save around two million self-employed workers an average of £350 a year.
• ISA savers will be given some more flexibility from 6 April, thanks to ISA reforms announced in the Autumn Statement. They will be able to pay into multiple ISAs of the same type in a tax year – and will be able to transfer slices of ISA money paid in during the current tax year too.
• The minimum age to open a cash ISA will rise to 18, closing the loophole that allows 16 and 17-year-olds to have a junior ISA and a cash ISA allowance in the same tax year.
• In years gone by the tax-free personal allowance often increased each April, but in 2024 it will again be frozen at £12,570. It’s due to be held at this level until April 2028. Income tax thresholds will also remain at their current levels.

15th April – 15 Hours Free Childcare for Two-Year-Olds

The government’s policy of 15 free hours childcare available for working parents of two-year-olds will kick in this month.

It is part of a wider reform to provide 30 hours free childcare to all under 5s for eligible working parents – rather than just three and four-year-olds, as it is currently. The Treasury said in this year’s spring Budget that this would “help with the cost of living, support education for the youngest children, and remove one of the biggest barriers to parents working”.

The policy is being phased in gradually, with the full reform (30 free hours from nine months to the start of school) in place from September 2025.

July – New Banknotes Featuring King Charles

New banknotes featuring King Charles III’s portrait will enter circulation by mid-2024. he King’s portrait will appear on all four polymer banknotes (£5, £10, £20 and £50).

September – 15 Hours Free Childcare from 9 Months Old

This is the second stage of the government’s roll-out of free childcare from the age of nine months. In September, the 15 free hours childcare scheme will be extended to working parents with babies aged nine months and over.

5th October - Deadline to Register for Self-Assessment

If you are new to self-assessment, this is the deadline to register with HMRC. This applies if you are self-employed or a sole trader, a trustee or a partner in a partnership business.

31st October – Deadline for Postal Self-Assessment

Postal self-assessment tax returns must be returned by midnight.

November – Autumn Statement

Effectively a mini-Budget, the Autumn Statement is another big statement from the chancellor. It is usually delivered in November.

30th December - Online Tax Return

Submit your online tax return by this date if you want HMRC to automatically collect tax you owe from your wages and pension.

Getting in Touch

Staying abreast of these key dates in the financial calendar for 2024 will help you to make informed decisions and navigate your personal finances with confidence. Whether it’s tax planning, investment strategy, or staying updated on policy changes, being proactive is the key to financial success in the year ahead.

If you have any questions and would like to speak to an Independent Adviser we provide a free, no obligation initial meeting. It’s a great opportunity for you to have a personal conversation and to understand if financial planning is right for you.

We provide face to face or video call meetings to fit to your lifestyle.

Call 01244 347 583 or email info@innesreid.co.uk to speak to our team today.

Your essential guide to 2024 financial dates – PLEASE NOTE: This article is not personal advice. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

Source: Money Week

The post Your Essential Guide to 2024 Financial Dates appeared first on Innes Reid.

At the end of the 2023/24 tax year many important allowances will reset. In our latest article we highlight which allowances could be an opportunity to make your money go further and reduce the tax you pay.

We’re always on hand to help, if you are unsure which allowances are the right fit for your personal financial plan please get in touch.

Read on for must-know tips on how to maximise your tax allowances before 5th April.

National Insurance

From 6 January 2024, the main rate of Class 1 National Insurance (NIC) was cut to 10%, so workers will get more in their first pay packets of the new year.

An employee earning £50,000 will pay £3,743.00 in National Insurance after the change, saving £748.60.

Pension opportunity: This unexpected windfall could make a difference to your retirement planning if you redirect it to your pension.

ISA Allowance

You can contribute up to £20,000 in your ISA in tax year 2023/24. Any savings added to your ISA from 6th April will go into your new 2024/25 tax allowance, as the shortfall cannot be carried over.

The savings in an Individual Savings Account (ISA) are protected from UK income tax or capital gains tax, so they are very tax efficient. There is no need to declare these savings on your self-assessment tax return.

JISA allowance

A Junior ISA (JISA) offers many of the same tax benefits as a standard ISA, and it’s a useful way to set aside wealth for a child or grandchild. The money is held on their behalf until they can access it – typically when they are 18.

In the 2023/24 tax year, you can contribute £9,000 to a JISA for each child.

Tax relief on your Workplace pension

When you pay into your pension, some of the money that would have gone to the government as tax goes towards your pension instead.

Most Workplace pension schemes operate under the Net Pay arrangement, meaning everybody gets 20% tax relief. If you are a higher-rate taxpayer, you have to make a Self-Assessment claim for the additional 20% relief on your pension contributions.

Marriage Allowance

Eligible married couples and those in civil partnerships can transfer up to £1,260 of personal allowance to their partner under the Marriage Allowance. This applies if one of you earns less than the personal allowance, so is not liable to tax, and the other partner is a basic tax payer.

You can also backdate your claim to include any tax year since 5 April 2019 that you were eligible for Marriage Allowance.

You can apply for Marriage Allowance on the HMRC website.

Child Benefit

Child Benefit is clawed back by a tax charge if the highest earning individual in the household has income of more than £50,000. It is cancelled altogether once their income exceeds £60,000. A pension contribution will reduce income and reverse the tax charge, wiping it out altogether once income falls below £50,000.

Inheritance Tax bill

Inheritance Tax (IHT) is paid by the people who inherit your estate after your death. The rate is 40% for estates worth more than £325,000.

One way of avoiding your family paying IHT on your estate is to give it away when you are still alive. However, the giver must survive for 7 years after the gift, depending on circumstances.

You can also give away £3,000 worth of gifts each tax year without them being added to the value of your estate. This is known as your ‘annual exemption’.

In addition, you can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

Charitable Donation

Making a charitable donation can bring about numerous benefits. Not only the emotional satisfaction, but also ensuring your money goes towards creating positive social change rather than, somewhat unfavourably, towards HMRC.

Charitable donations are generally tax free. Those made through Gift Aid entitle the charity to an extra 25p for every £1 you give. This doesn’t cost you extra, Gift Aid assumes that the money has been already been taxed at the standard rate.

Capital Gains Tax Annual Exemption

The ‘Capital Gains Tax’ (CGT) Annual Exempt amount is the amount of gains that you are allowed to make before paying tax on those profits. You may pay CGT on any profits you make when selling or disposing of certain assets such as stocks and shares outside an ISA, or a property that isn’t your main home.

The Annual Exempt amount is £6,000 for individuals for the 2023/2024 tax year.
If you are looking to supplement your income tax efficiently, you could withdraw funds from an investment portfolio and keep the gains within your annual exemption.

Even if cash isn’t needed, you could take profits within the £6,000 CGT allowance and re-invest the proceeds, possibly via an ISA. This means there will be less tax to pay when you eventually need to access these funds to meet spending plans.

Fortunately, by using your full Annual Exempt amount, you may be able to reduce the CGT that you pay. Additionally, you and your spouse or civil partner each have your own Annual Exempt amount and you can transfer assets between you without incurring CGT.

By considering how you use both Annual Exempt amounts and potentially spreading the disposal of assets across multiple tax years, you might be able to mitigate a large CGT bill.

This could be especially important as the CGT Annual Exempt Amount is set to halve to £3,000 on 6 April 2024.

Personal Pension Tax Relief

Tax relief is one of the main advantages to using a pension to save for your retirement. The government will add basic rate (currently 20%) tax relief when you contribute into a personal pension up to £60,000, the current annual allowance.

For instance, to contribute £10,000, you put £8,000 into your pension and the government adds £2,000. You qualify for basic rate tax relief if you’re a UK tax payer under 75.

If you are a higher rate or additional taxpayer, you could get extra tax relief on top of the basic rate amount. Higher rate taxpayers (paying 40% tax) can claim up to a further 20% through their tax return. Additional taxpayers (paying 45% tax) can claim up to a further 25% through their tax return.

The ‘Carry Forward’ rule can also let you take advantage of any unused allowance from the three previous tax years.

Personal Allowance

Pension contributions reduce an individual’s taxable income. In turn, this can have a positive effect on the personal allowance for higher earners, resulting in a lower tax bill. An individual pension contribution that reduces income to below £100,000 will restore your full tax-free personal allowance. The effective rate of tax relief on the contribution could be as much as 60%.

Business Owners

If you’re a director of a business, taking significant profits as employer pension contributions could be an efficient way of paying yourself and cutting your overall tax bill.

The tax and NI savings can go into the director’s pension fund and the company can also benefit from corporation tax relief.

Bonus Sacrifice

Another option is to ‘exchange’ a bonus for an additional employer pension contribution before the tax year end. The employer and employee National Insurance savings made could be used to boost pension funding. This would give more in the pension pot for every £1 lost from take-home pay.

Family Wealth

You can also pay up to £3,600 into the Personal Pension Plan of a non-tax payer such as a non-working spouse or a child under the age of 18.

As with your own pension, you would be entitled to pension tax relief on any contributions made. This means you would only need to contribute £2,880 of your own money to reach the £3,600 annual limit, as the government would add the extra £720.

Special Investments & Tax Incentives

Business owners have long benefited from Inheritance Tax (IHT) savings and now private investors can too with ‘Business Property Relief’ (BPR). This is one of several tax incentives available to support investment into small UK companies.

Unlike gifts and Trust arrangements which usually only achieve IHT savings after 7 years, a BPR investment is effective after just 2 years.

Investments that qualify for BPR can be passed on free from inheritance tax upon the death of the investor, provided the shares have been owned for at least two years at that time.

For those with investment experience and appetite for risk, Venture Capital Trust (VCT) and Enterprise Initiative Schemes (EIS) can also bring significant tax benefits.

Tax Allowances – What’s right for you?

These tips are here to give you practical insights into maximising just some of the tax allowances available. There are many more tax allowances that could be beneficial to your own personal financial plans.

To find out more about reducing the tax you pay speak to a member of our team about a free, no obligation meeting with an adviser.

Contact us: 01244 347583, email: info@innesreid.co.uk or enter your details in the form below and a member of our team will respond promptly.

How To Maximise Tax Allowances Before 5th April: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change. The value of your investments can go down as well as up and you may not get back the full amount you invested.

The post How To Maximise Your Tax Allowances Before 5th April appeared first on Innes Reid.