The clock ticks down with only six months remaining to plug National Insurance (NI) gaps. The government is encouraging people to act now and check their National Insurance record as there is no guarantee of a further extension to the deadline.  

As discussed in our previous article on National Insurance contributions (NICs), the government extended the deadline for NI contributions from the original 31 July 2023 to 5 April 2025 to allow eligible individuals to retrospectively fill gaps in their National Insurance record for the period covering April 2006 to April 2016. This extension was intended to give people more time to fill gaps in their National Insurance record that would otherwise prevent them from accessing the full State Pension.  

Plugging the gaps online

Earlier this year, the government launched a tool enabling people to pay to fill in gaps online. So far, more than 10,000 payments totalling £12.5m have been processed, according to figures from HM Revenue and Customs (HMRC). However, many still have gaps in their National Insurance record and are at risk of losing out on their full State Pension.  

• Key figures from the new online service shows the majority of customers (51%) topped up one year of their NI record
• the average online payment is £1,193
• the largest weekly State Pension increase is £107.44

After the 5 April 2025 deadline, people will only be able to make voluntary contributions for the previous 6 tax years, in line with normal time limits.

About National Insurance Contributions

National Insurance is an umbrella term for universal health care, unemployment benefits and the public pension programme.

National Insurance contributions are a form of tax that employees and employers pay to the government through payroll deductions. NICs are paid automatically through the PAYE (Pay As You Earn) system, which deducts an amount based on a percentage of your income, and this generally continues until you reach retirement age. Employees are able to make additional voluntary payments to increase the pension amount that they will be entitled to receive.  

NICs are collected in order to fund various state benefits, such as the NHS and state pensions.  

There are many reasons why you might have gaps in your NICs. If you were unemployed, in education, took a career break to raise a family or even if you were not earning enough, you may have periods where no NIC payments were made. You need to have been paying NIC for at least 10 qualifying years in order to receive any kind of State Pension, and you need to have been paying for a full 35 years to receive the maximum amount possible.

If you’re thinking about your retirement options and would like to speak to someone to map out your financial future, why not get in touch. We’re offering anyone with £100,000 or more in pensions, savings or investments a free review worth £500.  

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

In order to prepare for later life, we’re often told to put aside as much as possible into our pension pots. But is it possible to overpay into our pensions? And can this have a knock-on effect when it comes to the tax we pay?

It’s important to know the rules around how much you can pay into your pension, and the tax considerations. 

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What is the pension annual allowance?

In the UK, there is no limit on the amount of money taxpayers can pay into their pension annually. However, there is a limit to how much you can contribute tax-efficiently. 

Whenever you pay into your pension, you get tax relief from the government. How this tax relief manifests will depend on your tax banding and your pension scheme. Most employers operate a salary sacrifice arrangement, which provides you with income tax and NI relief at source, regardless of your tax-banding. However, if you pay privately into a pension, the tax treatment is slightly different. Basic rate tax relief (20%) is applied to the contribution, meaning higher and additional rate taxpayers, are still owed a further 20% and 25% tax relief respectively. This relief must be reclaimed by the individual separately via a self-assessment tax return.  

The pension annual allowance is currently £60,000. This allowance is inclusive of personal contributions, employer contributions and any government tax relief you receive. Contributions which exceed the Annual Allowance (AA) will be subject to a tax charge, known as an Annual Allowance charge, which is the removal/reclaim of any tax relief applied to the excess.  

However, it is important to note that if your income is less than £60,000 per annum, you are restricted to contributing up to a maximum of 100% of your relevant UK earnings (unfortunately, rental income and dividends don’t count).

Equally, if your ‘adjusted income’ exceeds £260,000 per annum, you may be subject to the Tapered Annual Allowance (TAA), which sees your annual allowance reduced by £2 for every £1 of adjusted income above £260,000. Therefore, for adjusted income £360,000 per annum or above, your annual allowance is reduced to £10,000 per annum. 

Can you carry forward unused annual pension allowance? 

In certain circumstances, you may be able to carry forward annual pension allowances from up to three previous tax years. In this instance, you are given permission to exceed your annual allowance and still receive tax relief. 

To benefit from carry forward, you must meet the following conditions: 

• You have been a member of a UK pension scheme (not including State Pension) in each of the years you wish to carry forward from.
• You must have fully utilised your available Annual Allowance in the current tax year first
• Unused Annual Allowance is then drawn from the furthest year first I.e. 2021/22 is the third year back from the current tax year.
• You cannot contribute more than 100% of your relevant UK earnings in a given tax year. I.e. if your gross earnings are £70,000, this would be the total pension contribution you can make in the current tax year, regardless of whether your available carry forward allowances are higher. 

What is the Lump Sum Allowance and Lump Sum Death Benefit Allowance? 

The Lump Sum Allowance (LSA) refers to the maximum amount of tax-free cash that can be taken across all of your pension arrangements throughout your lifetime (including lump sums from defined benefit pensions). 
Whilst the previous Lifetime Allowance (LTA) was abolished as of 6th April 2024, it does still have some relevance.

The LSA is capped at £268,275, which is 25% of the old Lifetime Allowance (£1,073,100)

The Lump Sum Death Benefit Allowance (LSDBA) refers to the total amount of pension wealth that can pass tax-free by way of a ‘death benefit lump sum’ to your chosen beneficiaries on death before the age of 75.

The standard LSDBA uses the value of the former Lifetime Allowance - £1,073,100. However, if you hold transitional protection, protecting your Lifetime Allowance at a higher value, this remains the appropriate figure.

For example, if you hold Fixed Protection 2016, your LSDBA will remain at the higher protected amount of £1,250,000.

Should your total pension wealth exceed the ‘standard’ or ‘protected’ amount on death before age 75 and your pension is paid as a lump sum, your beneficiaries would be subject to income tax at their highest marginal rate on the excess.

If, however, your pension is passed to your beneficiaries as a pension, rather than a lump sum, the amount will not be tested and remains tax-free on death before age 75.

The rules remain the same on death post-75, in that any pension benefits passed as either a lump sum or as a pension will be subject to income tax at your beneficiaries highest marginal rate, either on payment (if received as a lump sum), or upon withdrawal (if received as a pension).

The Benefits of Pension Contributions

Pension contributions come with several valuable benefits that make them an attractive option for long-term savings:

• Tax Relief: Contributions are tax-efficient, with immediate relief for basic rate taxpayers and the ability to reclaim additional tax relief for higher and additional rate taxpayers (20% and 25% respectively).
• Employer Contributions: Some employers offer generous contributions above the statutory minimum (3%), effectively increasing your retirement savings at no extra cost.
• Investment Growth: Pensions are invested in markets and have the capacity to grow over time. Returns are compounded which can be enhanced by regular contributions.
• Inheritance Benefits: Defined Contribution pension benefits sit outside your estate, meaning they are not subject to inheritance tax on death, resulting in a potential 40% tax saving.
• Financial Security in Retirement: Maximising your pension contributions throughout your working life helps ensure you have sufficient income to meet your lifestyle requirements in retirement. For most people, the full State Pension (£221.20 per week) is unlikely to be sufficient alone to meet expenditure requirements. 

How much should I pay into my pension? 

How much you should pay into your pension will depend on a number of factors, including your age, earnings and financial goals. 

According to Fidelity International, a rough rule of thumb for determining your ideal pension contributions is to aim to save 10 times your pre-retirement income salary by the age of 67. So, if your average salary is £40,000, it’s recommended that you aim for a pension pot of around £400,000.  

Others say that you should aim to save 12.5% of your monthly salary. If your employer offers a more generous contribution than the statutory 3% then this figure can be reduced accordingly.  

Beyond these generalised points, however, there are a number of factors influencing the amount you should pay into your pension. Below are some of the most important: 

• What is your target income for retirement?   
• What age do you plan to retire? / What timeframe does this give you to save?
• What is your state of health/family history?  
• What level of income/expenditure are you expecting in retirement?  
• Do you have other assets/income that can support you in retirement?  
• Target income is often considered the amount you will need to maintain your current lifestyle. To get an idea of this, you can add up your current monthly expenses and deduct any that will no longer apply by the time you reach retirement (mortgage, commuting costs, etc.).
• Adding in any extra money you anticipate needing - This is for things like holidays, home renovations, or supporting family members, hobbies and interests.  
• Increases to inflation - The cost of living typically doubles every 25 years, so it’s worth incorporating this into any financial projections.  
• Length of retirement - This is a combination of the age you intend on retiring at and how long you expect to live. The latter is obviously a little less predictable, but you can find a good estimate by considering lifestyle factors and family history.
• How much state pension you will receive - If you qualify for the full new state pension, you will receive £221.20 per week, or £11,502.40 a year for the tax year 2024/25. This is not likely to be enough to live on but could be a good top up tp your personal pension pot and other savings and investments. 

Despite the pension annual allowance of £60,000, if you’re getting close to retirement age, it may still be worthwhile making contributions in excess of this. Despite the annual allowance charge that would apply (ignoring any carry forward allowances), pensions offer additional tax benefits on death, sitting outside of your estate, so they can usually be passed onto your loved one's tax-efficiently.

It’s worth bearing in mind that pensions cannot be accessed before age 55 (57 from 2028), unless you are diagnosed with terminal illness. Therefore, it is important to maintain sufficient funds that can be easily accessed in the short and medium term to facilitate expenditure.  

Does my employer have to pay into my pension? 

By law, all employers must offer a workplace pension scheme. This means that three bodies contribute to your pension: you, your employer, and the government. 

If you qualify for automatic enrolment, then your employer is obliged to enrol you into a pension scheme and make contributions to your pension. If your employer is not obligated to enrol you by law, then you can still opt into their pension scheme — and your employer cannot stop you. 

However, they do not have to contribute if you earn an amount equal to or less than £520 a month, £120 a week or £480 over 4 weeks. 

Once you’re enrolled in your employer’s pension scheme, they must, by law, punctually pay at least the minimum contributions to the pension scheme, allow you to opt out of the pension scheme and refund you the money you’ve paid into it (if you do so within 1 month). Plus, they have to allow you to re-join the scheme at least once a year if you have previously opted out. 

Under no circumstances can your employer try to encourage or coerce you into opting out of the scheme, terminate your employment or discriminate against you if you decide to stay in a workplace pension scheme. Nor can they insinuate that somebody is more likely to get hired if they choose to opt out of the pension scheme or end a workplace pension scheme without automatically enrolling all members into another one. 

So in summary, there is no limit to how much you can pay into your pension. However, the limit for tax free contributions is £60,000 annually, which is known as the pension annual allowance, or 100% of relevant UK earnings (whichever is the lower figure). Exceed this, and you’ll be expected to pay an annual allowance charge. 

How can we help? 

Here at The Private Office, our experienced pension planning advisers can provide you with clear advice on your options for your pension, tailored to your unique circumstances and individual needs. Get in touch to arrange a free initial consultation.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.  

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Investment returns are not guaranteed, and you may get back less than you originally invested.  

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. 

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What does Rachel Reeves’ first budget have in store for your finances, and what action should you take now to protect against the possible changes?

When Keir Starmer stood in the garden of Downing Street on 27 August, he spoke of ‘Fixing the Foundations’ of the country and of a ‘£22 billion black hole in public finances’.  This has led commentators to conclude that if tax rises weren’t planned in Rachel Reeves’ first budget before, they certainly will be now.

When is the Autumn Budget?

The Autumn Budget will take place on 30th October 2024.

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What is likely to be in the Autumn Budget?

When Labour ran for election, they ruled out raising taxes on ‘working people’ and specifically pledged not to increase Income Tax, National Insurance, VAT or Corporation Tax.  This potentially limits the taxes they can look at (though we would expect Income Tax thresholds to remain frozen until 2028 as announced by the previous government) and we have summarised our views on these various taxes below:

Pensions

Though this would technically be a change to income tax, one possibility for the Government would be to reduce tax relief on pension contributions for high earners.  We already have the pensions’ ‘annual allowance’; which limits pension contributions for very high earners, but there is currently the opportunity for those paying higher rates of income tax, but with overall income below the threshold required to have a tapered ‘annual allowance’, to benefit from significant tax relief and the Government could look to limit this.

Another potential change to pensions is reviewing their beneficial tax treatment upon death, where they fall outside the individual’s estate for inheritance tax purposes and can be passed to future generations at attractive rates of tax.  Though taking action in the anticipation of potential future legislation changes would be inadvisable, if changes to pension death benefits are announced in the budget, financial plans will need to be reassessed.

Finally, the 25% tax free lump sum available from pensions has been talked about as an ‘at risk’ benefit for years, but it would certainly be viewed as unfair if this was targeted now, given that people have been saving towards retirement expecting to benefit from this.  Additionally, changes to the ‘Lump Sum Allowance’ have only just come into force in the current tax year and the Government has already said it will not be reintroducing the Pensions’ Lifetime Allowance, so they may be reluctant to tamper with this area further.

Capital Gains Tax (CGT)

With capital gains above the £3,000 annual exemption taxed at just 10% for basic rate tax payers and 20% for higher rate tax payers (higher rates apply for second property sales), there are rumours that the Government will review CGT rates. 

However, HMRC’s own projections indicate equalising capital gains tax and income tax rates could actually reduce the Government’s overall tax take, given this would discourage individuals from selling assets (and crystallising gains) so they may instead decide to retain them.

Additionally, it should be noted that cost prices for capital gains tax purposes are currently rebased on death (meaning gains essentially die with the individual) and if this was changed, financial plans would need to be revisited.

Inheritance Tax (IHT)

With the UK inheritance tax rate currently 40%, it is somewhat surprising that the tax only raises c. £7bn p.a. (of a total tax take of c. £1trillion in 23/24).  The reasons for this are the various reliefs available, including:

The ability to gift unlimited amounts to individuals with, broadly speaking, no tax consequences if the donor lives seven years following the gift).

The ability for couples to pass up to £1m between them tax free to direct descendants upon death.  

The Government could look to limit some of these reliefs and with £1 trillion of wealth expected to change hands in the UK in the 2020s alone, according to the Financial Times, the Government could see this as an area to focus on.

How will the Autumn Budget affect me?

We of course do not know what changes will be announced in the Autumn Budget on 30th October and, crucially, from when they take effect. 

So, what can you do to protect your wealth? 

This means there may or may not be time to take action following the budget, and while we would discourage taking action on the basis of rumours, there are actions that can be taken before the budget to take advantage of reliefs that are available now but could be at risk post 30 October.  

To speak to an Independent Financial Adviser about how the Autumn Budget might affect you and any actions you could consider ahead of the budget, please contact us for a free initial consultation.  

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The details in this article are for information only and do not constitute individual advice.

The Financial Conduct Authority (FCA) does not regulate estate planning, tax or trust advice.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

A popular question often asked by clients is whether they should contribute into a pension or invest in a property portfolio to fund their retirement.

The reality is there are pros and cons for each investment vehicle, so it’s important to look at these along with how returns compare over the last ten years. The landscape has also changed considerably over that period. Property investors have faced higher borrowing costs, changes to landlord taxation and additional regulation, while pensions have also been affected by changes to allowances, tax rules and how they may be treated for inheritance tax purposes. These developments can all influence how suitable either option may be as a way of funding retirement.

Here we break down the key differences to help you understand which route may be better suited to you. This will depend on your tax position, time horizon, need for flexibility, appetite for investment risk and how involved you want to be in managing your retirement assets.  

Please note: We would always recommend speaking to a financial expert before making a decision.

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Pension

What are the advantages of a pension compared to property?

Personal pension contributions attract income tax relief at your marginal rate. This means for basic rate taxpayers, an £80 personal pension contribution is usually topped up to £100 by the Government under the relief at source method. Your contributions can also help you reclaim certain tax allowances, such as the personal allowance, tax free childcare, and child benefit entitlement. If you’re a higher rate taxpayer, you can claim an additional 20% or even 25% tax relief if you are an additional rate taxpayer, subject to your earnings and available pension allowances. Scottish taxpayers may have different income tax rates and relief positions.

Employer pension contributions are essentially ‘free money’ as your employer is providing this as an additional benefit in your remuneration package. Often, if you don’t take up the contributions, they won’t provide an alternative income instead. Business owners can reduce their Corporation Tax liability by making contributions into their own name, provided the contribution is allowable and meets HMRC’s rules, including the requirement that it is made wholly and exclusively for business purposes.

The standard pension annual allowance is currently £60,000 for the 2026/27 tax year, although this can be reduced for high earners or for people who have already flexibly accessed a defined contribution pension. This makes pensions particularly useful for retirement planning, but also means contribution levels should be checked carefully.

Salary sacrifice can still improve the position for some employees and employers because it may reduce National Insurance costs. However, from 6 April 2029, salary sacrificed pension contributions above £2,000 a year are due to become subject to employee and employer National Insurance. This does not remove income tax relief on pension contributions, but it may reduce one of the current advantages of salary sacrifice.

Any investment growth is free of Income Tax and Capital Gains Tax. Usually, up to 25% of the value can be withdrawn tax free in retirement, but the standard lump sum allowance is now £268,275 unless you hold relevant protection.

A pension also gives you the ability to invest in a diversified range of assets, including cash, fixed interest, shares, commercial property funds and other investments. Further diversification can be achieved by spreading assets geographically. This is different from directly buying a residential buy to let property, which is generally not something a pension can hold without tax consequences.

There is also flexibility to draw an income in retirement through various methods such as a lifetime annuity, fixed term annuity and flexi access drawdown. This means a pension can be shaped around your retirement income needs, rather than relying on rent, property sales or borrowing against a property portfolio.

Pensions have historically been a useful way to pass on wealth, because many unused pension funds have sat outside the estate for Inheritance Tax purposes. This position is changing. From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a person’s estate for Inheritance Tax purposes.  

What are the disadvantages of a pension compared to property?

You are unable to access your pension funds until age 55. This will be increased to age 57 from 6 April 2028, unless your plan has a protected pension age or another exception applies.

The value of your pension is subject to investment risk, though this mainly relates to defined contribution pensions as defined benefit pensions will provide a guaranteed payment regardless of the market. Depending on how much you spend and how long you live for, your pension pot could be exhausted during retirement if it is not managed appropriately.

Legislation can be complex, and rules are often changed. Recent changes to the lifetime allowance, pension death benefits and salary sacrifice show why retirement planning should be reviewed regularly rather than treated as a one-off decision.

Ongoing charges will apply. These can include pension provider or platform charges, investment related charges and financial adviser fees.

Property

What are the advantages of property compared to a pension?

Property can offer potential for capital appreciation over the long term, as well as the opportunity to outperform inflation over longer periods. It can also feel familiar because it is a physical asset that you can see and understand more easily than some investment funds.

There is potential for a regular rental income stream. This can provide cashflow which can be reinvested into property or other assets. According to UK Finance, the average gross buy to let rental yield in the UK was 7.21% in the first quarter of 2026, compared with 6.93% in the same quarter a year earlier. This is a gross figure, so it does not reflect mortgage interest, tax, insurance, maintenance, letting fees or void periods.

Property can also act as a diversifying asset as part of an overall investment portfolio, which means that it may behave differently from stock market investments. Property improvements can add to the value or increase rental yields, although the cost, tax position and local market demand all need to be considered.

What are the disadvantages of property compared to a pension?

If capital is required, it can often be a lengthy process to release equity. Unlike a pension fund or ISA portfolio, a property cannot usually be sold in small parts, so access to money can be less flexible.

There are high initial costs, including legal fees and stamp duty. In England and Northern Ireland, buyers usually pay a 5% Stamp Duty Land Tax surcharge on top of the standard residential rates if buying an additional residential property. Scotland and Wales have their own property tax regimes, with separate additional property rules.

There is also potential debt if you require a mortgage to fund the purchase. Higher borrowing costs can reduce rental profit and place pressure on cashflow, particularly if there are void periods or unexpected repairs.

Property management can be a hassle, stressful and time consuming. Paying a professional will eat into your rental yield. Maintenance also needs to be handled swiftly, with the costs funded by you.

The tax treatment of buy to let property has become less generous over time. Income Tax relief on residential property finance costs is restricted to the basic rate of Income Tax. This means higher rate and additional rate taxpayers do not usually receive relief at their full marginal rate on mortgage interest.

Capital Gains Tax (CGT) will be applied on any profit when sold, unless reliefs apply. For residential property gains, the current CGT rates are 18% for gains falling within the basic rate band and 24% for gains above this, after any available annual exemption. Property held until death will also usually be included as part of your estate for Inheritance Tax purposes.

Which has performed better – pensions or property?

A common issue UK property investors face is that the value of their portfolio is influenced by the UK economy, local demand, mortgage costs and sentiment.

Investing through a pension can be a much simpler way to diversify globally and across different asset classes through a basket of funds. This can help smooth out country specific issues and benefit from growth in other economies.

Past performance is not a reliable indicator of future performance.

The latest available figures still show global equities materially ahead of UK residential property capital growth over the last ten years, although the comparison is not perfect. The MSCI World Index returned 239.65% on a cumulative basis over the ten years to 31 August 2026. Over a similar ten year window, the average UK house price increased from £213,927 in June 2016 to £272,000 in June 2026, which is an increase of around 27%.

This does not mean pensions will always beat property. The MSCI World figure includes investment returns from global listed companies and assumes the index return, while the house price comparison is based on average UK residential property capital growth only. It does not include rental income, borrowing, maintenance costs, tax, insurance, purchase costs or selling costs.

Rental income can form a significant part of the overall return from a property investment and should be considered alongside any increase in the property’s value. Zoopla data from 2026 puts the average gross rental yield across the UK at 5.8%, although this varies considerably by location. Average gross yields range from around 5.1% in London to 7.9% in the North East.

However, gross rental yield is not the same as the return an investor ultimately keeps. Mortgage costs, tax, maintenance, management fees and periods without tenants can all reduce the income received. For a fair comparison with pension investment returns, both the rental income generated and any change in the value of the property need to be taken into account, alongside the costs of owning and running it.

Should I invest in property or a pension?

Both investment vehicles provide different advantages and disadvantages, as detailed above, and each can have a place within a diversified portfolio. A pension will often be attractive because of tax relief, employer contributions, investment diversification and retirement income flexibility. Property may appeal to investors who want a tangible asset and are comfortable with borrowing, landlord responsibilities and a less liquid investment.

As each of our personal circumstances can vary widely, it is important to seek advice. An independent financial planner will be able to help you establish which solution is most suitable for your own personal needs. If you’d like to speak to one of our expert advisers, why not get in touch for a free initial consultation, to see if we can help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate estate planning, tax advice or most types of buy to let mortgages.

Your property may be repossessed if you do not keep up repayments on your mortgage.

Investment returns are not guaranteed, and you may get back less than you originally invested.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.  

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. 

Approaching retirement can be a bittersweet thought. On the one hand there is excitement about never having to work again, and on the other, concern as to whether you’ve done enough to have a comfortable retirement. Many individuals suffer from anxiety over the decisions that need to be made relating to life after work, for example:

• "How much do I need to have a good quality of life and meet my expenditure needs?”
• “Is now the right time to retire?”
• “Will my investment returns sustain my expenditure?”
• “How do I even access my pension?”
• “What happens to my pension when I die?
• “Do I have enough in my pensions and other savings?” 

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And the list goes on. In particular, workplace pensions that have been left to evolve over time with no proper management, may no longer meet the needs of the scheme member i.e. you. So, what are the key factors to consider before moving your pension to another provider, so you can ensure your pension can benefit you and your financial plans? Here's our top 5 considers before moving your pension.

Important Information: This article does not delve into the considerations for Defined Benefit (Final Salary) Pensions – transfers of these schemes are far more complex and require specific financial advice.

Retirement Benefits – How can I access my pension funds at retirement?

Understanding the type of pension you have will determine the options relating to how you can access your pension. Here are the main methods to access your pension for retirement:

Annuity 

Use your pension pot to buy an annuity, which provides a guaranteed income for life or a fixed term. This income can either be level or index-linked to keep up with inflation. 

Flexi-Access Drawdown (FAD) 

This allows you to take your benefits from your pension either a bit at a time or all in one go. This can be beneficial, for example, where you require different amounts from your pension at different times during your retirement, or where you expect your income tax band to change over the course of your retirement.

UFPLS (Uncrystallised Funds Pension Lump Sum)

This option allows you to take a lump sum whereby 25% will be tax-free and 75% will be taxable. Each scheme will have its own rules on if you can take multiple lump sums from your pension or only a single lump sum.

Unfortunately, not all pensions are equal, and therefore some of your pensions may have the full suite of options and some may have limited options, therefore it is important you understand what options are specifically available across each of your pensions. This could determine how you can draw an income in retirement. It’s also important to think about what options are suitable for you as a person, for example, if you are risk-averse and want a secure, fixed income for the rest of your life, annuities are a viable solution. However, if you are unsure how much income you will need in retirement and if you expect your spending requirements to change, one of the flexible options could be more beneficial, or the combination of the two.

Investment Choices – What funds can I invest into?

Pensions offer many different investment options and number of funds that you can invest in. Typically, Self-Invested Personal Pensions (SIPPs) offer the most diverse and wide-ranging fund selection (4,000+). Whereas large workplace pension providers may offer funds that are specific only available to the pension scheme and provider, restricting your choices of investment. You need to decide what your short- and long-term objectives are and whether your pension caters to your risk appetite with the funds available, as this will evolve over time.

Fees & Charges – Will the new pension be more expensive than my existing one?

Before moving your pension, you should always evaluate the costs associated with each scheme. Not all pensions operate the same charges; so, it would be prudent to look at the charges schedule for the new provider and scheme. Typical charges to check for include:

• Initial set-up fees
• Annual Management Charges (AMC) for the investments you might choose
• Platform fees for the service/ongoing administration involved
• Charges for specific transactions – transfer penalties, early withdrawal fees, switching investment funds
• Trading fees for the buying and selling of investments within fund

Death Benefits – Can my loved ones access my pension funds upon my death?

Leaving your pension behind after death is a very common occurrence, given that pensions remain outside of individuals estates for Inheritance Tax purposes. Therefore, you want the beneficiaries of your pension to be able to access your pension in an accessible and tax-efficient manner. The main ways to access pensions on death include: 

• Lump sum return of fund – This is the value of the pension on death which is paid as a lump sum to your nominated beneficiary.
• Beneficiary Drawdown – This allows you to pass on your pension to your beneficiary so that they have the option of drawing benefits from it as and when required.
• Annuity – On death, the value of your pension can be used to purchase an annuity from your pension provider. This will provide a secure regular income for your beneficiary.

Pension Guarantees – What benefits could I lose on transfer?

Some pensions come with a guarantee, which can impact the amount of income you receive when you retire. These ‘safeguarded’ benefits might include a guaranteed annuity rate (GAR) or a promised minimum level of income (guaranteed minimum pension). These benefits are valuable in most cases so it’s important to take them into account when assessing your options, given that these guarantees are rarely retained when transferring to another provider. These can be very complex so it’s sensible to seek financial advice on these benefits.

Having the wrong pension scheme for your requirements can be detrimental to your overall retirement plans. Having a financial adviser can help you navigate through the quirks and nuances of pension schemes and help simplify the complexities, to ensure you are appropriately positioned for your long-term needs and objectives. If you would like to learn more about the suitability of your pensions and its suitability for your needs, why not get in touch and speak to one of our experts

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The details in this article are for information only and do not constitute individual advice.

The Financial Conduct Authority (FCA) does not regulate estate planning, tax or trust advice.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

On the run up to retirement, many over 55s are opting to manage their finances without professional guidance, a decision that carries significant risks. According to research by Canada Life, a staggering 79% of individuals in this age group are navigating their retirement plans independently, without seeking financial advice. This DIY (Do-it-Yourself) approach contributes to nearly 29% of retirees finding their reality falling short of their dreams.

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Common pitfalls in planning for retirement: 

Many retirees are finding themselves unprepared for the financial realities of retirement. 

Factors contributing to this gap between their expectations and reality involve a failure to account for several critical aspects:

1. Health issues: The Canada Life study found that 36% of retirees reported experiencing unexpected health issues disrupted their retirement plans.
2. Inflation: About 21% of respondents did not factor in inflation, leading to a decline in purchasing power over time
3. Unforeseen expenses: Unexpected bills and expenses caught 13% of retirees off guard, indicating a shortfall in financial preparation.
4. Underestimating financial needs: A significant 11% of retirees underestimated the amount of money needed for a comfortable retirement.

This study underscores the critical importance of thorough and pragmatic financial planning before retirement. Tom Evans, Managing Director of Retirement at Canada Life, emphasises that through consulting a qualified financial adviser, retirees can address these factors proactively, ensuring more secure and fulfilling retirement.

Hurdles faced during retirement:

While understanding the pitfalls before retirement is essential, navigating the hurdles during retirement—such as managing your expenditure, income strategy, and adapting to legislative changes—requires ongoing attention.

Expenditure:

During retirement your needs will evolve, influenced by factors like inflation, healthcare costs, and lifestyle changes. The Pension and Lifetime Savings Association’s Retirement Living Standards study offers a helpful guide, showing that a couple aiming for a comfortable retirement might need an annual income of around £59,000, while a moderate lifestyle requires about £43,100 per year. Whilst this provides a good benchmark, your spending and goals are unique. As a result, it is essential to identify your specific expenditure needs and assess if they are sustainable throughout your retirement.

Income:

Strategising how to draw upon your assets to support your retirement is equally important. Ensuring that your assets work hard for you and that your funds are used in a tax-efficient manner is crucial. Retirees may have multiple income sources, across cash, pensions, ISAs, bonds and rental properties. Effective planning not only ensures tax efficiency but also can helps maintain or increase income potential during retirement. Seeking advice on how to take an income from your pensions and other assets is critical, as planning for the next two or three decades leaves little room for mistakes. 

Legislative Changes:

Recent and potential future changes to pension legislation, can profoundly affect retirement planning. Staying informed about these updates is crucial, however navigating these changes within the complex retirement planning landscape can be challenging. In these cases, working with an adviser can be hugely beneficial to provide guidance on how to adjust your plans to mitigate any negative impacts from legislative shifts and take advantage of any new opportunities that arise. 

A recent example of a significant change is the removal of the lifetime allowance. This legislation introduced two new allowances that affect the amount of tax-free lump sums or tax-free death benefits available from a pension. With the new Labour Government expected to release a budget this Autumn, it will be crucial to consider how these changes impact your retirement planning and to strategically respond accordingly.

A successful retirement plan isn't just about reaching a financial goal before you retire—it's about maintaining that security and adapting to changes throughout your retirement years. Regularly reviewing your expenditure, income strategies, and staying informed about legislative changes ensures that your plan remains robust and effective. 

Value of Advice:

Financial advice is of course not free so while many can see the benefits of receiving advice, the cost associated may be a driver behind why people are choosing to DIY (Do It Yourself) their plans. According to a report by the International Longevity Centre - ILC, individuals who receive professional financial advice are, on average over a decade, nearly £48,000 better off in pensions and financial assets than those who do not.  The study showed that the combined benefits of financial advice over a ten-year period are approximately 2,400% greater than the initial cost of the advice. This significant return on initial cost underscores the value of seeking professional guidance.

In summary, retirement involves many challenges, and the importance of robust financial planning cannot be overstated. Opting for professional guidance rather than navigating these waters alone could significantly improve your financial well-being during retirement and equip you with strategy to manage potential pitfalls effectively. Working with an adviser can ensure that as you transition away from work, you can feel confident in your future, providing you with peace of mind for a comfortable and fulfilling retirement.

If you’re thinking about your own future, we’re currently offering anyone with £100,000 or more in savings, pensions or investment a cash flow review worth £500. Why not get in a touch for a free initial consultation to see how we might help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.

The value of your investments can go down as well as up, so you could get back less than you invested.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

The Pensions and Lifetime Savings Association, representing UK pension schemes, has called on the Government to increase the minimum contribution level after concerns around the number of people not prepared for retirement.

Currently the level is set to 8% of pensionable earnings, defined as a worker's basic salary excluding bonuses, commission, and overtime. Of this, employers are required to contribute at least 3%, while employees contribute 5%. It was proposed to increase this to 12% of total salary over the next decade, with employees and employers each contributing an equal share.

The annual retirement report, published this week by Scottish Widows, reveals that the percentage of people not on track for even a minimum retirement lifestyle has risen from 35% to 38% during the last year, equating to an extra 1.2 million people.

The Proposals

The proposal to raise the minimum contribution level from 8% to 12% with a 50/50 split is intended to enhance the retirement savings of over 15 million private sector employees. The proposals also include measures to help workers track their pensions when they change jobs, introduce value for money tests for pension schemes and include initiatives such as helping employees keep track of their pensions when they move jobs.

Industry professionals highlighted the urgency of increasing minimum contributions, which currently stand at 8% of pensionable salary, of which companies must pay at least 3% and employees 5%.

The Government announced that its pension bill measures could add an extra £11,000 to the pension pot of an average worker, although no supporting analysis was provided to explain how this figure was calculated. The bill includes an initiative to ensure schemes offer “value for money,” with underperforming funds being removed from the market.

The Government stated that these measures would “enable security in retirement” while allowing pension schemes to invest in a broader range of assets, which should, in turn, help to promote economic growth.

Currently, most people are left on their own to navigate the complex retirement income market. If you’re interested in how to manage your pension contributions to ensure the best possible wealth protection for you or your family, we can help. Give us a call on 0333 323 9065 or book a free non-committal initial consultation with a member of our team to find out more. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

As expected, Keir Starmer’s Labour party have won the 2024 General Election with a landslide victory, but what could this mean for your finances and when will any changes be implemented?

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Taxation

In terms of taxation, the introduction of VAT on Private School fees is expected, though there will likely be complexities around the implementation of this change.  Beyond this, the Labour Party have said they will not increase taxes on ‘working people’, indicating income tax, national insurance and VAT are unlikely to increase in the short term, though it is understood Labour will retain the Conservative Party’s plans to freeze income tax thresholds until at least 2028.  However, there has been no such pledges in respect of capital gains tax or inheritance tax, so these are areas Starmer’s new government may look at.

Pensions

Regarding pensions, the subject of reintroducing the Lifetime Allowance (LTA) for Pensions has been a hot topic since it was announced in the 2023 Spring Budget that the LTA was to be abolished.  At the time, Labour pledged to reintroduce the LTA, but it is difficult to see how this could be implemented in practical terms given the abolition has now taken place and additionally, Labour are keen not to disincentivise Doctors who have reached the limit from working.  Labour have now indicated they will in fact not reintroduce the LTA, but they have pledged to conduct a detailed review of pensions, so it will be interesting to see the outcome of this review, specifically whether there will be any changes to tax relief on pension contributions, the taxation of pension death benefits or the 25% tax free lump sum.

When might changes be implemented?

In terms of a timeframe for any changes to be implemented, Labour have committed to including a forecast from the Office for Budget Responsibility (OBR) in their first budget, as they look to distance themselves from the approach taken by Liz Truss, who famously did not utilise the OBR’s analysis ahead of her disastrous “mini-budget” in September 2022. Given the OBR require 10 weeks’ notice to provide their forecast, the Budget is therefore unlikely to be delivered before mid-September 2024.

If you would like to discuss the implications of the new government for your finances, please get in touch to arrange a free consultation with one of our Independent Financial Advisers.

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The opinions shared in this article are solely those of the individual and they do not necessarily reflect those of The Private Office.

Please note: This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. The Financial Conduct Authority (FCA) does not regulate tax advice. Investment returns are not guaranteed, and you may get back less than you originally invested.

Being self-employed offers the unique opportunity to ‘be your own boss’, but this comes with its own responsibilities and challenges.

Alongside the operational implications of working for yourself or running a business, navigating the world of taxes as a self-employed individual can be complex, and if you don’t manage your tax affairs correctly, this could result in costly penalties. Being on top of your tax planning and being aware of and navigating around potential pitfalls whilst making use of valuable allowances is therefore critical for any self-employed person.

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Income Tax and the 60% ‘trap’

A benefit of being self-employed is being able to claim allowable expenses against your taxable income, which can significantly reduce your tax bill. This can range from office costs such as rent, to business-related travel expenses, and professional fees such as accountancy fees.  

It is however important to be aware of tax traps that you may fall into, such as the 60% income tax ‘trap’. This is a band of earnings between £100,000 and £125,140 where you will effectively experience an income tax rate of 60%. This is because for every £2 you earn over £100,000 per annum, alongside being subject to income tax at 40%, you lose £1 worth of your £12,570 tax-free Personal Allowance. Within this banding of earnings, you will also be subject to national insurance contributions of 2%, given a combined rate of income tax and national insurance contributions of 62%. Known as the 62% tax trap.

One of the main levers you can pull to help reduce your tax liability and help you avoid this trap is increasing your pension contributions, as this reduces your ‘adjusted net income’. Pension contributions can effectively receive tax relief of 60% within this band of earnings. As an example, for a higher rate taxpayer earning £110,000, a £10,000 gross pension contribution will effectively only ‘cost’ £4,000, once all income tax relief (totalling £6,000) is received.

National insurance contributions and your State Pension entitlement

For the employed, as the case with income tax, national insurance contributions are typically taken directly from gross earnings, hence there is no need to calculate your national insurance liability due each tax year. For the self-employed, it is critical to make sure you calculate your correct national insurance liability, otherwise you may end up paying too little or too much national insurance contributions.

You must tell HMRC when you become self-employed, as most people pay any required class of national insurance contributions through a self-assessment tax return. There are two types of national insurance contributions you may have to make as a self-employed individual, which will depend on your profits for the tax year.

If your profits are £6,725 or more a year:

• Class 2 national insurance contributions are treated as having been paid, hence do not have to be paid.
• If your profits are more than £12,570, you must pay class 4 contributions. For the 2024/25 tax year, you’ll pay 6% on profits between £12,570 and £50,270, and 2% on profits over £50,270.

If your profits are less than £6,725 a year:

• You do not have to pay anything, but you can pay voluntary class 2 contributions.
• The class 2 rate for the 2024/25 is £3.45 a week.

One potential pitfall in planning is that if your profits are below £6,725 a year, and you do not make voluntary class 2 contributions, you may not receive a ‘qualifying year’ towards your national insurance record. In more challenging lower profits years, it therefore may be wise to pay voluntary contributions (totalling £179.40 a year currently) in order to access a potentially higher state pension entitlement along with other state benefits.

You may also have ‘gaps’ in your national insurance record for previous years, where profits were below the threshold for receiving a qualifying year’s credit. This could result in a reduced State Pension. However, you may be able to pay voluntary contributions to plug any gaps. It is therefore worthwhile checking your national insurance record, which can be done online on the government gateway, to see if you have any gaps, or how much it will cost to pay voluntary contributions and if you’ll benefit from paying voluntary contributions.  

Have you built up enough wealth in a private pension?

Employers are obliged to automatically enrol their employees into a workplace pension plan, but if you’re self-employed then it’s up to you to set up a private pension plan. Some self-employed people say their business is their pension and can be sold when they want to retire. However, this can be a high-risk strategy, and if your business goes under, not only have you lost your job, but also your potential pension fund.

It is therefore important to be diligent with pension saving if you are self-employed. One strategy may be to allocate a proportion of your income, or a fixed amount each month, to a private pension plan. This way any pension saving may be ‘automatic’ and builds good saving discipline.  

This approach can be combined with lump sum pension contributions. This type of planning is often undertaken towards the end of a tax year when there is a better understanding of earnings for the year, which may be more appropriate for those with more variable earnings year on year.    

Each year, as a self-employed individual, you will have an ‘annual allowance’ for pension contributions that are eligible for tax relief, as is the case for personal pensions in general. The annual allowance is currently set at £60,000 per tax year, although your tax relievable pension contributions will be restricted to 100% of your profits if your profits are lower than £60,000 in a tax year. 

If your earnings are over £260,000 as a self-employed person who is therefore not receiving employer pension contributions, your annual allowance may be ‘tapered’ down to as low as £10,000 per tax year.

It can also be possible to make use of any unused annual allowance from the previous three tax years, known as ‘carry forward

Registering for VAT

You must register for VAT with HMRC if your annual turnover in a year exceeds £90,000, or if you expect your annual turnover to go over £90,000 in the next 30 days. This threshold was recently increased from £85,000.

The registration timeline is within 30 days from the end of the month in which you exceed the threshold. For example, if total business sales in the previous 12 months exceed £90,000 on 14th March, you will have until 30th April to register.

Should I set up a limited company?

Setting up a limited company means your company’s finances are independent from your own. If you choose to be a sole trader, you only need to register with HMRC and complete a personal self-assessment tax return. If you are setting up a limited company, you’ll need to register the business with Companies House and with HMRC for tax purposes.

With a limited company, as the business is a distinct separate legal entity, the company’s finances are separate from the shareholders’ or directors’ personal finances, so you are only responsible for the amount of money you put into the business. As a sole trader, you are responsible for both personal and business debts, so personal assets such as your home could be at risk if something goes wrong.

Forming a limited company does come with incorporation costs, along with additional responsibilities such as filing annual accounts and management responsibilities. Being a sole trader comes with few formalities in comparison.  

A sole trader is typically a more straightforward approach and involves limited paperwork and obligations, but you might be at a disadvantage when it comes to benefiting from tax reliefs and being more tax efficient. The business structure that is the best option for you ultimately will depend on your personal circumstances, with both advantages and disadvantages to each approach. 

It's all about the planning

Whether you are a sole trader or run a limited company, it is crucial to work closely with professional advisers to ensure that you are mitigating tax as far as possible, as well as making use of valuable tax allowances. Alongside helping put in place a suitable financial planning approach, we can make suitable introductions to accountants and solicitors where appropriate.  

As a business owner you may be working tirelessly to create and grow a legacy to give you financial freedom. Our expert business financial advisers can help you accomplish these goals and work with you to protect the legacy you’ve worked hard to achieve.  

Please do therefore get in touch for a free initial consultation if you have any concerns surrounding tax planning as a business owner. We’re offering anyone with £100,000 or more in pensions, investments or savings a free cash flow review worth £500. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice. 

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. 

After years of frozen thresholds, reduced personal allowances and fiscal drag, tax planning for high earners has become increasingly important. The Autumn Budget 2025 and Spring Statement 2026 added further pressure, particularly for those with larger pension pots, higher value homes, investment income or estates already close to inheritance tax allowances.

A ‘high earner’ in terms of tax used to be reserved only for someone earning a very large salary, but now someone earning over £50,270 can fall into higher rate tax bands, while those earning more than £100,000 can lose their personal allowance entirely. The £12,570 tax-free Personal Allowance reduces (tapers) by £1 for every £2 you earn over £100,000. By the time your adjusted net income reaches £125,140, your allowance drops to zero.  

For people with significant assets, the challenge is wider than income tax alone. Pensions, property, investments and inheritance tax all need to be considered together. 

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Tax can have a big impact on your ability to preserve and grow your savings and investments in retirement. As such, one of the main focuses when advising clients, is creating a plan that helps them achieve their objectives in the most tax-efficient manner. There are several ways to reduce the tax you pay on your annual income, especially if you’re in the higher or additional rate tax bracket.

What are the main taxes?

Income tax

Income tax is a tax imposed directly on your personal income. In simple terms, it is paid at rates between 0% and 45% dependent on which of the income tax brackets you fall into.

Once your earnings exceed your personal allowance, you are required to pay tax on the following sources of income:

• Income from employment
• Income from pension
• *Interest on savings
• Property rental income
• Employment benefits
• Income from a trust

*Interest would only be taxable above the personal allowance, the starting rate and personal savings allowance.

As of the 2026/27 tax year:

• The personal allowance remains at £12,570
• Basic rate tax (20%) applies to income from £12,571 to £50,270
• Higher rate tax (40%) applies from £50,271 to £125,140
• Additional rate tax (45%) applies from £125,141+

These thresholds are now frozen until 5 April 2031, further extending the impact of fiscal drag.

Dividend Tax

The dividend allowance remains £500, but dividends above this are taxed at 10.75% for basic rate taxpayers, 35.75% for higher rate taxpayers and 39.35% for additional rate taxpayers. From April 2027, tax on savings interest and property income is also due to rise by two percentage points.

If you are a Scottish taxpayer, income tax bands differ from the rest of the UK, so regional rules should be factored into your planning. 

Capital Gains Tax

Capital Gains Tax (CGT) is paid on the profit made when you dispose of certain assets, such as shares, second homes, or other investments held outside of a tax-efficient wrapper.

For 2026/27, the CGT annual exemption remains £3,000, much lower than £12,300 in 2022/23. Gains above the allowance are generally taxed at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers, depending on how the gain falls across your tax bands. 

Inheritance Tax

Inheritance Tax (IHT) is a tax on the value of an estate upon death or on certain gifts made during your lifetime.

• The nil-rate band remains at £325,000
• *The residence nil-rate band offers an additional £175,000 if passing a home to direct descendants
• The standard rate of IHT is 40%, or 36% if at least 10% of the net estate is left to charity

*To qualify for the Residence Nil Rate Band (RNRB), an estate must pass a residential property (or equivalent assets if downsized) to direct descendants. The deceased must have lived in the home at some point, and the net value of their total estate must be under £2 million.

From 6 April 2027, most unused pension funds and pension death benefits will be brought into a person’s estate for IHT purposes. This is one of the biggest upcoming changes for high earners, as pensions have often been used as an efficient way to pass wealth to the next generation.  

Options to consider may include reviewing beneficiary nominations, drawing pension income differently, lifetime gifting, life insurance cover, charitable giving, trust planning where suitable, and using other assets before pensions. The right approach will depend on income needs, tax position, health, age, family circumstances and estate value.

High value property is also becoming a bigger issue. The proposed mansion tax, formally expected to be a High Value Council Tax Surcharge, is due to apply from April 2028 to homes in England valued above £2 million. For high earners with substantial property wealth, this could add an annual cost and may influence gifting decisions, estate planning and whether it remains practical to retain a family home. 

How to reduce taxable income as a high earner

Reducing your taxable income can be one of the most effective ways to lower your overall tax bill. For high earners, this might mean utilising pension contributions, salary sacrifice, or charitable giving to stay within lower tax bands or reclaim lost allowances.

Reducing adjusted net income below £100,000 can help restore some or all of the personal allowance. Keeping income below £80,000 may reduce or remove the High Income Child Benefit Charge, while keeping income below £50,270 may help avoid higher rate tax. 

Why is tax planning important?

Tax planning involves minimising tax liabilities by utilising allowances,  exemptions, and tax reducers to lower the tax you pay, so it should be an essential part of an individual’s financial plan.

For high earners, planning is particularly important because several thresholds interact. These include the personal allowance taper above £100,000, the High Income Child Benefit Charge above £60,000, the tapered pension annual allowance for the highest earners, the £2 million IHT residence nil rate band taper and the future inclusion of pensions in estates from April 2027.

What is higher rate tax?

For 2026/27, higher rate tax begins with earnings between £50,271 and £125,140, which are taxed at 40%. Those earning above £125,140 are taxed at 45%. Because thresholds are frozen until 2031, more people are likely to pay 40% or 45% tax even if their real spending power has not improved.  

Those earning less than £50,270 and more than £12,571 will pay the basic rate of tax at 20%. Most people do not pay income tax on the first £12,570 they earn because this falls within the personal allowance. Income above this is then taxed in bands. 

High earners cutting pay: should you consider it?

Some high earners are now deliberately cutting their pay or exchanging salary for pension contributions or other benefits as a strategic way to reduce tax liability. This is often done through salary sacrifice or personal pension contributions, which can lower your taxable income, increase pension savings, and in some cases reclaim lost allowances such as the personal allowance or avoid additional tax charges like the High-Income Child Benefit Charge.

Salary sacrifice is especially valuable for high earners because it can provide both income tax and National Insurance savings. It may also allow an employer to pass on some or all of its own National Insurance saving into the pension. For those affected by the personal allowance taper, it can be particularly powerful because reducing adjusted net income can improve the effective rate of relief.

However, this benefit is changing. From April 2029, the National Insurance exemption for employee pension contributions made through salary sacrifice will be capped at £2,000 a year. Contributions above that level can still be made, but the National Insurance advantage will be reduced. This is likely to affect high earners most because they are more likely to sacrifice larger sums into pensions.

Ways to reduce your income tax bill

There are a few ways in which you can reduce your income tax bill. Broadly, they are as follows:

Contribute to your pension

Pension contributions remain one of the most effective tax planning tools for high earners. Contributions usually receive basic rate relief automatically, with higher and additional rate relief claimed through self assessment where appropriate.

The pension annual allowance remains £60,000 for 2026/27, although it can be tapered for the highest earners. ‘Carry forward’ may allow unused annual allowance from the previous three tax years to be used, provided the rules are met and the individual has enough relevant UK earnings.

For those earning between £100,000 and £125,140, pension contributions can be especially valuable. This is because the personal allowance is reduced by £1 for every £2 of income above £100,000, creating an effective marginal tax rate of up to 60%. A pension contribution can reduce adjusted net income and potentially restore some or all of that allowance. 

Contribute to your pension via salary sacrifice

You can ask your employer to enter into a salary sacrifice contribution arrangement to your pension, which will reduce the amount of money subjected to the highest rate of income tax (or various rates depending on the tax bands the income falls into after the sacrifice), along with also providing valuable National Insurance savings. This can become quite complicated, and more details can be found on the government website.

A notable additional benefit of salary sacrifice arrangements is that depending on your employer, they may pay the National Insurance Contributions savings they make from the forgone salary into your pension.

Do take care though as the government is planning to make changes to how salary sacrifice for pension contributions work from April 2029 by capping the National Insurance (NI) exemption to £2,000 per year.

Make full use of your ISA annual allowance

ISAs remain a valuable way to shelter income and growth from tax. The overall ISA allowance remains £20,000 for 2026/27. From April 2027, the Cash ISA limit for those under 65 is due to fall to £12,000, although the overall ISA allowance is expected to remain £20,000. 

Up to 60% tax relief available when you invest in a pension

Investing in your pension pot is an attractive option to increase your savings in a tax efficient way. We actively encourage clients, when suitable, to contribute regular amounts to their pension to not only build up their pension pot but also to benefit from tax efficiencies.

For those earning between £100,000 and £125,140 you could be in the 60% tax trap. But this also presents an opportunity when it comes to saving for retirement. If you have taxable income in this range, you can effectively receive income tax relief of 60% on your pension contributions as this is the marginal rate of tax paid on earnings within this band. This is due to the impact of your personal tax allowance of £12,570 being reduced by £1 for every £2 you earn over £100,000 meaning the allowance is reduced to zero when your income reaches £125,140. A pension contribution within this band of earnings effectively reclaims part, or all, of your personal allowance thus increasing the rate of tax relief to 60%.

How to avoid the High Income Child Benefit Charge

For 2026/27, the High Income Child Benefit Charge applies where the higher earning partner has adjusted net income above £60,000. The charge removes 1% of Child Benefit for every £200 of income above that level, with the full amount effectively lost once income reaches £80,000. Pension contributions and Gift Aid donations can reduce adjusted net income, which may reduce or remove the charge. 

The benefits of charitable giving

Giving to charity can reduce income tax and, in some cases, inheritance tax. Through Gift Aid, a charity can claim an extra 25p for every £1 donated by a UK taxpayer. Higher and additional rate taxpayers can then claim further relief through self assessment.

Charitable giving can also reduce IHT if at least 10% of the net estate is left to charity, as this can reduce the IHT rate from 40% to 36%. 

Tax relief schemes and other allowances

Venture Capital Trusts (VCT), Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) investments can offer valuable income tax relief, although they carry higher risk and are not suitable for everyone. For 2026/27, EIS relief remains 30% and SEIS relief remains 50%, while VCT income tax relief has reduced from 30% to 20% from 6 April 2026. 

These investments can appeal to high earners who have already used pensions and ISAs, but they should only be considered as part of a diversified plan and with appropriate advice.

Don’t invest unless you are prepared to lose all the money you invest. This is a high risk investment and you are unlikely to be protected if something goes wrong. 

But, as higher risk investments they are not suitable for all investors. There is a chance that all of your capital could be at risk and you should not invest into these types of plans without seeking expert advice from a reputable firm of independent advisers such as The Private Office.

How we can help

If you would like to find out more about how The Private Office can help with personalised tax efficient financial planning, please enquire for a free initial consultation with one of our Independent Financial Advisers.

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The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

The content in this article is for information only and does not constitute individual financial advice.

The value of your investments can go down as well as up, so you could get back less than you invested.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.

Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation. 

The Financial Conduct Authority (FCA) does not regulate estate planning or tax advice.

VCTs are high risk investments and there may be no market for the shares should you wish to dispose of them. You may lose your capital.