In the UK, the interest you earn on savings can count as taxable income once it reaches a certain threshold.  

The amount you can earn before you reach this threshold is known as the ‘Personal Savings Allowance’. This is the amount of savings interest you can earn before tax is applied, depending on your Income Tax band.  

It is different from your HMRC ‘Personal Allowance’, which is the amount of income you can earn each tax year before paying Income Tax. The two are often confused, but they do different jobs. Your Personal Allowance covers income more broadly, while your Personal Savings Allowance is specifically about interest earned on cash savings. 

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The basics about savings and tax

Contrary to what many people assume, savings are not always tax free. In the UK, the interest you earn on your savings can be taxable, depending on how much you receive and your Income Tax band. Many savers will not pay any tax, but it is still important to understand the limits.

The good news is that the rules are a bit more generous than many people realise. Before savings interest is taxed, several allowances may come into play. Your Personal Allowance can help, there is a starting rate for savings in some cases, and most savers also have a Personal Savings Allowance. Together, these can mean you earn some interest without paying any tax. And everyone can also take advantage of the Individual Savings Account (ISA) where any returns are free of any tax.

What types of savings interest are taxed?

The main type of savings income people think about is interest from bank and building society accounts, and that certainly can be taxed. But savings income is wider than that. It can also include interest from some credit union accounts and certain other savings products that pay interest outside a tax sheltered wrapper. In practice, if a product pays you interest and it is not a tax efficient account such as an ISA, there is a good chance it needs to be considered.  

By contrast, interest earned inside an ISA does not count as taxable savings income. That is one of the reasons ISAs remain so useful, especially for higher earners or for people with larger cash balances who may go over their allowance elsewhere.

The tax treatment of children’s savings can also be different in some cases, especially where money has been given by a parent, so that is another area where it pays to be careful.  

What is a Personal Savings Allowance?

The Personal Savings Allowance is the amount of savings interest you can receive each tax year before tax becomes due. It is linked to your Income Tax band rather than being the same for everyone. Basic rate taxpayers can earn up to £1,000 in savings interest tax free. Higher rate taxpayers have an allowance of £500. Additional rate taxpayers do not get any Personal Savings Allowance.  

This allowance has become especially important in recent years because higher savings rates have pushed more people above it. Someone with a modest savings balance in cash may never notice the rules. Someone with a larger emergency fund or house deposit can cross the line much more quickly once interest rates start to rise. That does not mean saving is a mistake, but it does mean the tax position is worth checking.  

How your personal savings allowance works

Your allowance is based on your highest rate of Income Tax. To work that out, HMRC looks at your other income and your savings interest together. That means your tax band is not judged in isolation from your savings. If your earnings already put you in the higher rate band, your Personal Savings Allowance is £500. If your income places you in the additional rate band, it will be nil.  

There is also a starting rate for savings, which can help people on lower incomes. If your non savings income is low enough, you may be able to earn up to £5,000 in savings interest at a 0% starting rate. This is separate from the Personal Savings Allowance and can sit alongside it. In the right circumstances, that means someone with a lower income may be able to receive more interest before any tax is due.  

What your Personal Savings Allowance includes

Your Personal Savings Allowance applies to savings income such as bank and building society interest. In simple terms, it covers the interest you receive from taxable savings accounts. HMRC says you should add the interest you have received to your other income when working out your tax position, which shows that the allowance is about savings income.

What does not need to be included is interest from tax free wrappers such as ISAs, because that interest is already outside of the tax net. It also does not mean all investment returns are treated the same way. Dividends, for example, have their own separate rules, and gains on investments follow different tax rules again. That is why it is important not to lump all savings and investments together as though they are taxed in the same way.  

Exceeding your Personal Savings Allowance

If your savings interest goes above your Personal Savings Allowance, the excess is taxed at your usual rate for savings income. So a basic rate taxpayer would generally pay 20% on the amount above the allowance. A higher rate taxpayer would generally pay 40% on the excess. Additional rate taxpayers will also face a tax charge on all of their taxable savings interest at 45% because they do not receive the allowance.  

It should also be noted that the tax rates on cash savings is increasing by 2% from 6th April 2027. So, a basic rate taxpayer will pay 22%, a higher rate taxpayer will pay 42% and an additional rate taxpayer will pay 47% on any taxable interest.

The Personal Savings Allowance can be used up more easily than people expect. As mentioned earlier, a large cash balance held for security can produce a sizeable amount of interest when rates are decent.  

As an example. If your savings account is paying you 4.0%, you only need a balance of £25,000 to use up the whole of your basic rate allowance of £1,000 in a year. Everything above that £1,000 will be taxed.

In some cases, savers who have never had to think about tax on their interest before may suddenly need to. That is often the point where a review of account structure, ISA use, and wider financial planning becomes worthwhile.  

Paying tax on savings interest

Banks and building societies pay interest gross, which means without deducting tax first. If tax is due, HMRC will usually collect it later. For many employees and pensioners, that is done by changing the tax code so the right amount is collected through PAYE. If you complete a Self Assessment tax return, savings interest is usually dealt with there instead.  

That system can feel easy when it works properly, but it still leaves room for mistakes. If HMRC does not have the right information, or if your circumstances change during the year, the amount collected may not be exactly right. That is one reason it is sensible to keep an eye on how much interest your accounts are generating rather than assuming everything has been sorted automatically.  

It is worth noting that most banks and building societies tell HMRC how much interest they have paid to their customers, so trying to ‘hide’ from HMRC is not advisable.

How to pay tax on savings and investments

As mentioned above, if you already file a Self Assessment return, you normally declare your taxable savings interest there. If you do not complete Self Assessment, HMRC may adjust your tax code to collect what is owed. Where tax has been deducted and should not have been, you may be able to reclaim it, including through form R40 in the appropriate cases.  

The key point is that savings and investments should not be looked at in isolation. Cash interest, ISA allowances, dividend income, and other taxable returns all interact with your wider financial picture. A decision that looks sensible on one account can become less efficient when you step back and look at your full position. Good planning is often less about chasing the highest headline rate and more about keeping more of what you earn after tax. 

Speak to an expert to protect your savings

Tax on savings is not always complicated, but it is easy to misunderstand. A lot depends on your income, your tax band, and where your money is held. What seems like a small detail can make a real difference once balances grow or interest rates improve. And don’t forget, using any unused allowance your spouse has can help minimise your tax bill when working as a couple.  

Speaking to an expert can help you understand whether you are likely to pay tax, whether your cash is in the right place, and whether you could make better use of wrappers such as ISAs. The aim is not to make saving feel difficult. It is to help you keep your plans efficient, avoid unpleasant surprises, and make sure more of your money keeps working for you. 

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

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

The rate of inflation in the UK has risen to 3.3% in March 2026, up from 3% in February, according to figures released from the Office for National Statistics (ONS).

The ONS collected their data for this month’s inflation figure in the middle of March, meaning that these figures reflect the first few weeks of the Middle East conflict. They offer an early snapshot of the trend we might expect in the coming months as the economic impact of the war begins to be reflected in real terms.  

Prior to the conflict, expectations were that the Bank of England would begin cutting UK base rates over the course of the year. However, concerns around rising inflation have led to suggestions that rates could remain unchanged, or potentially be pushed higher. 

Source: ONS, Bank of England - 2026.

The Monetary Policy Committee (MPC) are due to meet next week to decide whether to increase the current rate of inflation, which currently sits at 3.75%.  

What is driving the inflation increase?

At least in part as a knock-on impact from the conflict in the Middle East, many prices have seen noticeable increases.  

Fuel costs jumped sharply, climbing 8.7% compared to the previous month. This marks the steepest monthly rise since June 2022, which was the period following Russia’s invasion of Ukraine.

Looking at the annual picture, prices were up 4.9% in the year to March, representing the fastest rate of increase since January 2023.

For food the rates were lower, coming in at 3.7%. It can often take about a year for food supply cost changes to truly be reflected in food prices in the UK, so expect your shopping bill to continue to creep up in the coming months.

What is inflation and how is it measured?

Inflation is a measure of how the prices of goods and services have increased over time. Goods are tangible items sold to customers, such as food, while services are tasks performed for the benefit of recipients, such as a haircut. Generally, this increase is measured by considering the cost of things today compared to how much they cost a year ago. The average increase between these prices is demonstrated in the inflation rate.  

Rising interest rates directly affects the cost of living. For example, if the price of a bottle of milk is £1, and inflation is increasing by 5%, then your bottle of milk will cost you 5p more. Or, in other words, the spending power of your money has decreased by 5%.  

Ideally, the Government wants to keep inflation low and stable. The general mandated target for the Bank of England is 2%.

Anything significantly above or below this target is thought to cause issues for the economy.  

The cost of living surged in recent years, with inflation peaking at 11% in 2022 - way above the Bank of England's 2% target, partly due to the increase in energy prices following Russia's invasion of Ukraine.

While the rate has dropped, falling inflation does not mean the goods and services are coming down in price overall, it is just that they are rising at a slower pace.

Our chartered financial advisers are expert and unbiased, meaning that they can give whole of market advice, and so are best placed to give you a plan tailored exactly to your personal financial goals.  

If you’d like to know more, request a free non-committal initial consultation with one of our team or give us a call on 0333 323 9065 and get in touch. 

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This article is for information only and does not constitute individual advice. 

Inheritance and divorce can be a tricky issue. For those hoping to keep as much wealth as possible within the immediate family, across many generations and to provide for the future, the question of whether a divorced spouse can inherit this family wealth is a significant one.

If you’re a little unsure about the future of yours or your loved one’s marriage, it’s wise to know where you stand.

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Can my ex-husband claim my Inheritance after divorce?

Many families worry about whether a former spouse could benefit from wealth that was intended to stay within the family. In some circumstances, an inheritance may become relevant during divorce proceedings, particularly when the court is deciding how assets should be divided fairly between both parties.

If an inheritance has already been received during the marriage, the court may consider it when determining a financial settlement. However, this does not necessarily mean it will be divided between both parties, as several factors are taken into account, including how the inheritance was used and whether the couple’s needs can be met using other assets.

Where an inheritance has not yet been received but is expected in the near future, the court may also consider this when assessing the financial circumstances of each party. 

Are Inheritances always excluded from financial settlements?

Inheritance is often treated differently from assets acquired during a marriage. In many cases, inherited wealth may be viewed as separate property rather than a shared marital asset. However, this is not guaranteed, and the circumstances of each case will influence how the court approaches the issue.

Critically, the court’s primary focus is always on the financial "needs" of both parties. If the matrimonial assets available are not sufficient to meet the reasonable needs of both parties, such as housing and basic security, the court may override the non-matrimonial status of an inheritance and include it as part of the financial settlement. For this reason, inheritance cannot always be assumed to be fully protected during divorce proceedings. 

Understanding Matrimonial Vs Non-Matrimonial Assets

In the event of divorce, assets can be considered either matrimonial or non-matrimonial. The former includes money and property acquired during the marriage by either party, while the latter includes money and property that have come from outside the marriage – including inheritance.

• What are Matrimonial Assets? Matrimonial assets generally include property, savings, pensions and other wealth accumulated during the course of the marriage. These assets are typically considered joint property, regardless of whose name they are held in, and are therefore subject to division as part of a financial settlement.#
• What are Non-Matrimonial Assets? Non-matrimonial assets are usually assets that were owned before the marriage or that were received individually by one party during the marriage from an external source. This can include inheritance, gifts from family members, or assets that were clearly kept separate from the marital finances.

Non-matrimonial assets aren’t automatically considered as joint assets to be divided, and you may be able to exclude them completely from the divorce settlement. However, as noted above, this protection is not absolute; if the matrimonial assets aren’t enough to meet the reasonable needs of both parties, non-matrimonial assets, like inheritance or financial assistance, will likely be divided to ensure a fair outcome.

It’s also important to note that assets can change from non-matrimonial to matrimonial over time. If an inheritance, for example, was received during the marriage, the court may look at how it was used before deciding whether it might be divided or not. For example, if the money was in a joint account and used by the couple together, it may then be considered joint property to be divided. 

How can you protect your inheritance from an ex-spouse’s claims?

Protecting inherited wealth often requires forward planning. Taking steps early can help reduce the likelihood that inheritance becomes part of a future divorce settlement.

Keeping inherited funds separate from joint finances can help demonstrate that the asset was intended for one individual rather than the couple. Similarly, maintaining clear records of how inherited funds are held and used can provide valuable clarity if disputes arise.

In addition, formal agreements such as prenuptial or postnuptial agreements can set out how inheritance and other assets should be treated if the relationship breaks down.

Benefits of a pre-nuptial agreement: 

Prenuptial agreements, which are made before marriage to set out how assets would be divided in the event of a divorce, are often used to help in preserving family wealth and other contributions that parents may have made or intend to make to their children.

With a prenuptial agreement, or a ‘pre-nup’, any gifts, assets or inheritance given from a parent to their adult child will be protected after a divorce – for some parents, it’s a condition of the gift.

While a pre-nup is not technically legally binding, it’s enforced in practice as long as both parties have freely entered into the arrangement with full appreciation of what it entails and as long as the outcome would satisfy the "needs" of both parties and not leave one in real financial difficulty. The clarity and transparency that a prenuptial agreement provides ensures less chance of confusion in the event of the marriage breaking down and it can offer future security for both parties too. Pre-nups can also provide more security in international marriages – for example, determining where the divorce proceedings might take place – and when a couple has been living together before getting married.

Benefits of a post-nuptial agreement

Similar to a prenuptial agreement, there are postnuptial agreements, or a ‘post-nup’. However, unlike a pre-nup, a post-nup can be entered into any time once the parties are married.

Couples may well get post-nups if they hadn’t considered making an agreement before the marriage, if they ran out of time before getting married, or if there’s been a notable change in the financial situation of one of the parties since the marriage.

The benefits of post-nups are much the same as the benefits of pre-nups, helping to protect the parties in a marriage and make things clearer and more transparent. It can also be a good option for those couples who have been separated but then decided to work on their marriage rather than go through with a divorce. However, some people will prefer to sign off on an agreement before the marriage begins. 

If an agreement with regard to division of assets is reached upon divorce, it is essential that the terms are recorded in a Consent Order to make clear that the terms are in full and final satisfaction of all claims, and that all further financial claims a party may be able to make against the other are dismissed.  This is known as a “clean break”.

Even if terms of financial settlement are agreed and implemented, unless the terms are recorded in a Consent Order and a “clean break” obtained, it remains open for either party, even years after the divorce has been finalised, to pursue further financial provision.  Whether a party would be successful depends on the circumstances at the time the claim is made but the risk remains that further financial provision can be pursued.  This could include claims in respect of inheritance, or any other asset or income, that may be received long after the divorce.    

Other options include entering into loan agreements if, for example, a parent/family of one party makes a financial contribution and expects such contribution to be repaid i.e. it is not a gift.  In those circumstances it would be advisable to enter into a loan agreement to outline the terms of the loan and repayment.  

Finally, a further option would be to establish Trusts and place the inheritance into a Trust Fund. 

Can an ex-spouse claim on my estate after I die?

It is a common misconception that divorce ends all financial ties. In reality, a former spouse can still make a claim against your estate even long after the divorce has been finalised. Under the Inheritance (Provision for Family and Dependants) Act 1975, an ex-spouse who has not remarried may be entitled to claim against your estate if they believe they have not been left "reasonable financial provision." This risk remains unless you have obtained a properly drafted financial order (such as a Clean Break Order) that explicitly prohibits claims against each other's estates after death. For this reason, it is important to ensure that financial settlements are properly finalised and that your will is reviewed following divorce to reflect your updated wishes. 

How we can help

The financial aspect of divorce is something that can be hard to deal with, but there are ways to help protect your finances and preserve family wealth, even if you’re dealing with many generations of wealth that you need to look after for your future generations.

Here at The Private Office, we can offer advice either before marriage or when going through a divorce. The earlier you engage with us the more we can help to protect your wealth. Far better outcomes are achieved when appointing a financial adviser much sooner in the divorce process. Advice can help to understand tax implications, planning opportunities and establishing how much capital and income you need to live the lifestyle you wish to live.

If you’re looking to protect either your wealth in divorce or protect your family's inheritance why not get in touch online for a free initial consultation?

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This article is for information only and does not constitute individual advice.  The Private Office are not legal professionals, and this article has been written upon our understanding of the subject matter, as such professional legal advice should be sought prior to proceeding with any advice in this area.

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

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The start of the new tax year is often a good time to take stock of your finances, to review what you already have and consider what you need to do next. And in today’s environment, where every penny counts, making full use of the tax allowances that are still available has never been more important.

The ever-popular Individual Savings Account, or ISA is a good place to start. Like a lot of our tax allowances, the ISA allowance has been frozen for many years, so for the 2026/27 tax year, the overall ISA allowance remains at £20,000, offering one of the simplest and most effective ways to protect your savings and investments from tax on interest, dividends, and capital gains.

However, there are changes coming for those who favour the cash element of an Individual Savings Account (ISA).

Cash ISA allowance to be cut

Cash ISAs regained their popularity over the last few years, as interest rates increased, which led to savers paying more tax than they had for over a decade when interest rates were at rock bottom. There is now some £458 billion stashed away in cash ISAs, almost a quarter of the total amount held in cash savings. But for savers under the age of 65, the current tax year is the last chance to make use of the full ISA allowance for cash only deposits.

From 6 April 2027, the rules are set to change. Whilst the overall ISA allowance will remain at £20,000, only £12,000 of that can be deposited into a cash ISA for those aged under 65. To use the full allowance, the remaining £8,000 will need to be invested in a stocks and shares ISA.

To add insult to injury, at the same time that the cash ISA allowance is to be cut, the tax on savings interest will be increasing by 2%. So, a basic rate taxpayer will pay 22% on any taxable interest, it’s 42% for higher rate taxpayers and 47% for additional rate taxpayers, making the cash ISA even more valuable.

The good news is that those aged 65 and over are not affected by this change. They will still be able to place the full £20,000 into cash if they wish, a welcome exemption for older savers. But it highlights a broader policy direction, encouraging younger savers towards investment. 

A nudge towards investing

Whilst the comfort of a cash ISA is understandable, particularly in volatile times, it’s important to be aware that inflation can quietly erode the value of savings, and even with improved interest rates, cash may struggle to deliver meaningful real returns over time if inflation is higher than the interest you are earning. So, it might be worth asking yourself whether a purely cash-based approach is the right strategy for the longer term.

This is where stocks and shares ISAs come into play. They are not without risk though as values can go down as well as up. But they offer the potential for growth that cash generally cannot match over the long term, as long as you are prepared to accept the inevitable bumps in the road. You can of course, choose investments that better reflect your own personal attitude to risk, which will help minimise any potential downs and ups.

These changes could therefore be viewed as a prompt to diversify if you don’t need access to your money for the longer term, so more than five years. Using some of your ISA allowance for investment could make a meaningful difference to your future financial health. 

Use it or lose it

Given the upcoming changes, this tax year (2026/27) is an opportunity not to be wasted. If you are under 65 and prefer cash, it may make sense to maximise your cash ISA contributions while you still can.

And due to the ongoing conflict in the Middle East, with the expectation that inflation and therefore the Bank of England base rate could rise, savings rates have been increasing recently. Good news for savers, especially those who don’t also have debts.  

So, if you have funds sitting in taxable accounts, now is the time to consider sheltering them, as once the tax year ends, you can’t carry it forward.

Don’t overlook the Lifetime ISA

Alongside the standard ISA options, there is also the valuable Lifetime ISA (LISA), which is available to those aged between 18 and 39. The LISA allows you to contribute up to £4,000 per tax year, which counts towards your overall £20,000 ISA allowance and the real attraction is the generous 25% government bonus. In simple terms, a £4,000 contribution is topped up to £5,000, an immediate and very attractive return, even before any interest of investment growth is added.

Traditionally, the LISA has served a dual purpose: helping people save for their first home or for retirement. However, it is currently under review, and there is growing speculation that the retirement element could be removed going forward, making it simply a product for first-time buyers.

In the meantime, for those eligible, it remains a compelling option, particularly if you are saving for your first home.  

ISAs for the next generation

It’s also worth remembering that children have their own ISA allowance through the Junior ISA (JISA).

With a current annual allowance of £9,000 per year, the Junior ISA allows parents, grandparents, and others to build a tax-free savings pot on behalf of a child. It can be held in cash or invested, depending on your preference and time horizon.

There is, however, an important point to bear in mind: there is no access to the money until the child turns 18, at which point they gain full control of the account, which could have grown to a really significant amount. The funds become theirs to use as they wish, whether that’s for university, a car, a house deposit, or, indeed, something less sensible.

Alternatively, the funds can be rolled over into an adult ISA, retaining the tax-free status and allowing the savings habit to continue into adulthood.

For those who save for their children, it makes sense to have open conversations with them as they grow older, so that hopefully they will do the right thing with this valuable gift. Financial education is just as important as the savings themselves.

Time to take action

The beginning of the tax year is a great time to make use of your ISA allowance, for a couple of reasons.  

First, during the ‘ISA season’ of which April is the pinnacle, cash savings providers tend to compete with each other, which pushes rates higher, providing plenty of choice.

Secondly, why leave your cash in a taxable account any longer than you need to. Although often the headline rates on taxable fixed rate bonds may look higher than the same term cash ISAs, once you deduct income tax, you can earn far more in the tax-free ISA, as the table below illustrates:

Now is also a good time to review your old ISAs, to see if you could be earning more by switching. The key rule is vital though - never withdraw the funds yourself. Instead, always use the official ISA transfer process provided by your new provider, who will liaise directly with your existing bank or building society. If you take the money out and attempt to redeposit it, it could lose its ISA “wrapper” which crucially means you would forfeit the tax-free status tied to those historic allowances. Given that ISA allowances cannot be reinstated once lost, this is an irreversible and often costly mistake.  

Reviewing your old ISAs whilst making the most of your new ISA allowance means that you can make your cash work as hard as possible, particularly important if we are to see inflation spiking upwards once again.

If you want to make your cash work harder, it is important to compare rates regularly and move money when better deals arise. In a market that is shifting and where relatively small rate differences can add up to hundreds of pounds over a year, staying informed is the best way to keep your savings working as hard as possible. Check our best buy tables for the most up to date savings rates. 

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Rates correct as at 07/04/2026. 

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. 

Inflation held steady at 3% in the 12 months to February, matching expectations and unchanged from January, though it continues to sit above the Bank of England’s 2% target.

It should be noted this figure was recorded prior to the outbreak of conflict in the Middle East, which has since driven up the cost of energy and fuel, meaning inflation is expected to rise in the coming months.  

Despite the sticky 3% rate of inflation, pensioners are set to receive higher state pension payments from Monday 6 April, during the first full week of the new tax year.

The main state pension rate is set to rise by 4.8% under the ‘triple lock’ system.

This established government policy ensures the state pension increases each year by the highest of inflation, average earnings growth, or 2.5%.

For this year’s adjustment, earnings growth was the deciding factor during the key reference period used to set the increase.

This means that pensioners are actually beating the rate of inflation for the start of the new tax year. And because the average earnings growth has now fallen below 4% according to ONS figures from November 2025 to January 2026, pensioners are also set to see a bigger increase than the workforce, since wages growth for the triple lock is calculated between May and July the previous year.  

What is inflation and how is it measured?

Inflation is a measure of how the prices of goods and services have increased over time. Goods are tangible items sold to customers, such as food, while services are tasks performed for the benefit of recipients, such as a haircut. Generally, this increase is measured by considering the cost of things today compared to how much they cost a year ago. The average increase between these prices is demonstrated in the inflation rate.  

Rising interest rates directly affects the cost of living. For example, if the price of a bottle of milk is £1, and inflation is increasing by 5%, then your bottle of milk will cost you 5p more. Or, in other words, the spending power of your money has decreased by 5%.  

Ideally, the Government wants to keep inflation low and stable. The general mandated target for the Bank of England is 2%. Anything significantly above or below this target is thought to cause issues for the economy.  

The cost of living surged in recent years, with inflation peaking at 11% in 2022 - way above the Bank of England's 2% target, partly due to the increase in energy prices following Russia's invasion of Ukraine.

While the rate has dropped significantly since then, falling inflation does not mean the goods and services are coming down in price overall, it is just that they are rising at a slower pace.

Our chartered advisers are unbiased, meaning that they can give whole of market advice, and so are best placed to give you a plan tailored exactly to your personal financial goals.  

If you’d like to know more, request a free non-committal initial consultation with one of our team or give us a call on 0333 323 9065 and get in touch. 

Arrange your free initial consultation

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

At the time of writing the Middle East conflict is in full flow. The Straits of Hormuz are effectively closed, and markets are swinging on a daily basis depending upon whether Donald Trump has got out of the left hand side or right hand side of his bed. In short, no one has got the faintest idea what’s happening and by the time this article goes to print, for all I know, the war will be over, and markets would have jumped 10% or, things will have escalated and markets will have fallen 10%.

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“Don’t panic Mr Mainwaring” blurted Corporal Jones, in virtually every episode of the classic BBC comedy, Dad’s Army. Of course, no one was panicking, except for Corporal Jones himself and in this state of blind panic, he was the least likely member of the platoon to be able to resolve the predicament they happened to be in. Panicking, generally, does not lead to sound decision making and certainly not sound financial decisions.

There are plenty of reasons to ‘panic’ in today’s world (financially and otherwise) but as Corporal Jones has shown us, panicking gets you nowhere. Life goes on, and the markets go on too and the worst thing investors can do is convince themselves that “this time it’s different”, that the end is nigh and that we all need to grow carrots and store drinking water in industrial quantities.

In their 2009 book “This Time is Different”, the economists Carmen Reinhart and Kenneth Rogoff argue that investors always fall for the trap of believing that the game is up and that capitalism is over and investing is no longer viable. There are always people who come out of the woodwork at these moments in time to endorse and bolster the naysayers, not because their views are valid but because the media is prepared to give them airtime. Funnily enough, we do not hear about them much when markets are doing well which, believe it or not, is most of the time.

The peace of mind a financial plan provides

I’m not pretending that the Iran war isn’t a threat to the world economies, far from it, but I wouldn’t like to bet on markets being lower in a year’s time to where they are now. They might be, of course, but if you want to safeguard yourself against inflation, history has taught us that market exposure is the best way to do it. Cash and bonds generally lose in real terms over the long term.  

Markets tend to recover from shocks, whatever they are, and economists call this antifragility, which is the general principle that markets are able to adapt to new conditions. As one source of enterprise closes down, another one opens up and markets always sniff them out, if not immediately, then in time.

It is all well and good to say "don’t panic," but that is much easier to achieve if you actually have a plan in place. The major benefit of having a plan that you regularly revisit is the emotional peace of mind it provides. It moves you away from making knee-jerk reactions based on the morning's headlines and back towards a structured approach. If your personal circumstances change, or the government decides to shift the goalposts on taxes, a quick review of the plan will tell you exactly what needs to be adjusted. By keeping a close eye on your financial roadmap, you can ignore the noise of the markets, knowing that while the path might get a bit bumpy, you are still heading in the right direction.

What we already know

In addition to the “unknowns” (such as the Iran war), we also have the “known” events of future tax changes which are much favoured by the current Labour Government. On going stealth taxes, announced in 2021 as a short-term measure post Covid but now expected to continue until at least 2031. Dividend Tax increase and VCT relief reduction (April 2026); IHT on pensions (April 2027); Mansion Tax (2028) and Salary Sacrifice capping (2029).  

In previous articles I have highlighted the dangers of not investing. Just to remind you, in the 20 years from 1st January 2004, $10,000 invested in the S&P 500 would have grown to $66,637 (an annualised growth rate of 9.7%). Had you missed the best 10 days during that 10 years the final sum would have been $29,154 (5.5% annualised growth rate). Take away the best 20 days and it’s $17,494 (2.8%). The message is, of course, stay invested and don’t try to call the markets.

As always, the key is to ensure that you have sufficient liquidity to ride out market volatility. For clients who are nearing retirement, they enter into the ‘decumulation’  - or ‘drawing down’ - phase of their investing life. That is, the scary moment when assets accumulated over decades must now step up to the plate and start delivering actual money to ensure a comfortable retirement. If you don’t plan this properly, you become exposed to what is known as “sequence risk”. This represents a significant threat to portfolios if investments are encashed to meet ongoing expenditure during a market downturn. Risk management planning is vital in retirement to ensure you avoid this pitfall. Investment portfolios need to remain invested, to protect them from long term real value erosion, but for decumulators, the higher risk elements must still be viewed as long term and kept invested for many years, if need be, to await a recovery if the downturn is severe. That’s why the cash buffer is important!

In January 2026, markets were looking bullish, economies were generally on the up and most market commentators were positive about the prospects of equity markets continuing to do well. So, what do we do? Keep calm and carry on investing, or, to quote another Dad’s Army character, hold our heads in our hands and say “we’re doomed!”.

But whatever you decide, the best approach is to have your own personal plan in place, review it with your professional advisers and above all, don’t panic!

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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, will writing, tax or trust advice.

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

Past performance is not a reliable indicator of future performance.

Kensington & Chelsea tops the list as the UK’s most expensive inheritance tax hotspot, with an estimated £343,924 due on the average property in this area, rising to an estimated £405,211 including pensions. With property prices continuing to drive estate values above tax-free thresholds, homeowners in the London boroughs dominate the rankings. Still, high-value areas outside the capital are also pushing many families into six-figure tax bills.

New analysis reveals the regional impact of bringing pensions into inheritance tax calculations

UK inheritance tax receipts reached £8.25 billion in 2024/25, with projections exceeding £9 billion by 2026/27. This surge is driven by frozen tax-free thresholds (£325,000 until 2030/31) and rising asset and property values. Geography plays a key role, as families in southern England are far more likely to face IHT than those in northern or coastal regions, even with similar lifestyles.

By analysing land registry data for average property values* across 372 local authorities in the UK and combining this with predicted pension pot values based on median salaries in these areas, The Private Office has identified the areas of the UK where more people will face the highest estimated inheritance tax liabilities.

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The locations predicted to be hit by IHT when pensions are no longer exempt 

From 6 April 2027, most unused pension funds and death benefits will be included in an individual’s estate for inheritance tax purposes, meaning they are no longer exempt. If the total estate, including pensions, exceeds the £325,000 threshold (or up to £500,000 including a main residence if left to direct descendants), amounts above this limit will be liable for 40% IHT.

Historically, pensions sat outside IHT calculations, so this proposed change could significantly reshape estate planning and impact people very differently depending on their location. New analysis combining local property values with typical pension pots based on median earnings highlights which parts of the UK are most exposed once pensions are included.

Research shows that 152 local authorities, previously below IHT thresholds, could fall into scope due to pensions no longer being exempt. This brings a total of 288 local authorities where average property prices and pension pots could see high levels of inheritance tax payments due. 

London and the South East remain most exposed

The highest potential inheritance tax bills remain concentrated in prime London boroughs and most affluent southern areas. Kensington and Chelsea could see average estate values exceed £1.3 million, with estimated IHT liabilities above £400,000 once pensions are included. Camden, Richmond upon Thames, Elmbridge, and Hammersmith & Fulham all show projected tax bills comfortably above £200,000. Wider commuter-belt locations such as Guildford, St Albans, Windsor & Maidenhead, and Wokingham also remain firmly within taxable territory.

For those in these regions, including pensions in the estate calculation may materially increase eventual tax exposure, reinforcing the importance of proactive planning.

Note: These calculations do not take into account the Residence Nil Rate Band (RNRB) which is an extra £175,000 per person if a main residence is left to direct descendants. This is because not everyone is eligible for this additional allowance.

Mid-priced regions: where pensions could tip estates into inheritance tax

Mid-priced regions across the West Midlands, East Midlands, South West, East of England, and South Wales may experience the most meaningful shift from the 2027 reform. Average property values in these areas have historically fallen just below IHT thresholds, leaving estates untaxed. Once moderate pension savings are added, combined estate values can exceed the tax-free allowance, creating a modest but material liability.

Counties such as Warwickshire, Worcestershire, Staffordshire, Leicestershire, Derbyshire, Gloucestershire, Somerset, Norfolk, Suffolk, and parts of South Wales could face estimated IHT bills between £10,000 and £60,000. While far lower than in prime London, this represents many families’ first exposure to inheritance tax, highlighting the growing importance of location-aware estate planning.
 

Note: These calculations do not take into account the Residence Nil Rate Band (RNRB) which is an extra £175,000 per person if a main residence is left to direct descendants. This is because not everyone is eligible for this additional allowance.

This shift is significant not because of the scale of tax involved, but because it represents the first entry into the inheritance tax system for many families. Even relatively modest tax liabilities can reduce the value of intergenerational transfers, create liquidity pressures for beneficiaries, or force the sale of assets that were expected to remain within the family. As pensions move inside estate calculations, understanding true exposure and aligning retirement, gifting and estate-planning decisions accordingly becomes increasingly important. Early, location-aware planning will therefore play a key role in helping households in mid-priced regions use available allowances efficiently and protect long-term family outcomes.

Northern and Coastal Regions largely remain below the threshold

When taking pensions into account. Many northern, Scottish, Welsh, and coastal areas continue to sit below inheritance tax thresholds, even when estimated pension wealth is factored in. Locations such as Burnley, Hartlepool, Blackpool, County Durham, Inverclyde, and Merthyr Tydfil illustrate this trend, showing that estates in these regions are less likely to face immediate IHT liability. However, despite the lower current exposure, factors such as growing property values, increasing estate complexity, and potential future policy changes mean that careful planning remains important across the UK.

Inheritance tax is increasingly becoming a property tax by default. Many people don’t consider themselves wealthy, yet long-term house price growth – particularly in London and the South East – means their estates can face substantial tax bills. Without proper planning, beneficiaries may be forced to sell assets simply to settle the liability. Early advice and structured estate planning can significantly reduce the eventual tax burden.

Pensions have long sat outside inheritance tax calculations, so bringing them into scope has a major regional impact. In high-property-value areas, the effect is dramatic, but even in more affordable regions, families who previously expected no inheritance tax may now face a bill. Planning early will be crucial.

Marriage, Tax thresholds and changing demographics

Currently, married couples or civil partners can combine their inheritance tax allowances, meaning they benefit from higher thresholds. For instance, the individual nil-rate band is £325,000, plus there is the residence nil rate band of £175,000 (RNRB) if you are passing your main residence onto direct descendants such as children or grandchildren. But if you are married, you can pass your allowances to a surviving spouse to gift on their death, IHT free, which could mean gifting up to £1 million, as long as the overall estate is less than £2 million.

However, declining marriage rates and an increase in couples choosing to remain unmarried could leave more families exposed. Unmarried partners cannot combine allowances, so each person is subject to the thresholds individually. This means that even if they are leaving their estate to their long-term partner, IHT will be due on anything above £325,000. As a result, even households with moderate property and pension wealth may now fall into the 40% IHT bracket if they are not legally married.

In other words, while marriage can still provide a buffer against inheritance tax, the trend toward fewer legal unions means more couples could be caught by the 2027 reforms than in previous generations.

Why planning matters more than ever

For people in London, the Home Counties, and even mid-priced regions, inheritance tax is no longer an issue reserved for the ultra-wealthy. Long-term homeowners, particularly those who have benefited from significant property appreciation or built moderate pension savings, may now find their estates subject to substantial tax bills. The 2027 change to include pensions in estate calculations has the potential to push households that previously expected no liability into the inheritance tax net. While this may sound scary, according to HMRC, only 1 in 20 estates in the UK pays inheritance tax. There is normally no tax to be paid if:

• The value of your estate is below the £325,000 threshold known as the nil rate band
• You leave everything above the threshold to your spouse or civil partner, or
• You leave everything above the threshold to an exempt beneficiary, such as a charity or a community amateur sports club, or
• If you give away your main residence to your direct descendants, your threshold can increase to £500,000.

If you are at risk of falling into the threshold, effective planning strategies are now crucial and can include: 

• Lifetime gifting strategies: Regularly transferring assets during your lifetime, within allowance limits, can reduce the size of your estate and minimise future tax exposure. These can include gifts to children, grandchildren, or charities.
• Trust structures: Establishing trusts can help manage how and when beneficiaries receive assets while potentially providing relief from inheritance tax. Trusts can also protect assets in complex family situations or blended families.
• Pension planning: Reviewing how pension wealth fits into your broader estate plan is vital. Strategies may involve carefully timing withdrawals, considering joint spousal planning, and understanding the implications of death benefits.
• Business Relief-qualifying investments: For business owners, structuring investments to qualify for Business Relief can reduce IHT liability on certain shares and assets.
• Reviewing ownership structures between spouses: Ensuring that assets are owned in the most tax-efficient way between spouses can maximise allowances and reduce the overall estate exposure.

In short, the new rules mean that inheritance tax planning is no longer optional but a necessary part of financial management, even for households that previously believed they were unaffected. Acting early allows families to make informed, strategic choices that safeguard their estate and support the smooth transfer of wealth to future generations.

If you would like to discuss your personal financial situation, why not get in touch for a free initial conversation to see how we can help.

* Figures are based on average property prices (November 2025) by local authority. 

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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 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.

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

Rachel Reeves delivered her Spring Forecast this afternoon, which had been overshadowed before it even started by events in the Middle East.

As expected, the Spring Forecast (rather than Spring Statement as it has been referred to in previous years) did not include any fiscal changes, with Reeves previously committing to only holding one fiscal event each year, in the Autumn Budget.

By way of updates, Reeves announced that the Office for Budget Responsibility (OBR) had ‘adjusted the profile of GDP’ resulting in it downgrading its UK Growth projection for 2026 from 1.4% (as forecast in November 2025) to 1.1%, but the OBR increased its forecasts for 2027 (1.5% to 1.6%) and 2028 (again 1.5% to 1.6%).  Reeves also heralded the interest rate cuts seen in recent months, but events in the Middle East have significantly reduced the chance of a further cut in March, given the inflationary oil and gas price rises seen since the weekend.

Therefore, the most important upcoming tax changes are those we already knew about, specifically:

• A 2% increase in dividend tax taking effect on 6 April 2026.
• VCT tax relief being cut from 30% to 20% on 6 April 2026.
• Business and Agricultural Relief limited to £2.5m per individual, with effect from 6 April 2026 – this importantly increased from the previously proposed £1m and can be passed between spouses if not used on first death.
• A 2% increase in savings and property taxes taking effect on 6 April 2027.
• A cap in Cash ISA contributions of £12,000 for under 65s with effect from 6 April 2027.
• Pensions forming part of estates for inheritance tax purposes from 6 April 2027.
• A Mansion Tax being introduced in April 2028.
• Salary Sacrifice pension contributions benefiting from National Insurance Contribution savings limited to £2,000 with effect from 6 April 2029.
• Income Tax thresholds frozen until April 2031.

If you would like to discuss the impact of the above on your personal financial situation, why not get in touch for a free initial conversation to see how 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 or tax advice.

The tax return deadline for the 2024/25 UK tax year is fast approaching and must be met by 31 January 2026 for online submissions, so now really is the time to focus on getting Self Assessments filed and any tax owed to HM Revenue and Customs (HMRC) paid.  

Those that fail to file their tax return in time face an immediate £100 late filing penalty with daily penalties kicking in after three months and potentially further charges the longer it goes unpaid.

It is worth taking time over the preparation rather than panicking in the face of the upcoming deadline because mistakes or omissions can lead to overpaying your tax or having to go through corrections and potential appeals later on. If someone overpays once their return is processed, HMRC may pay a refund, but the interest they pay on their own late repayments is generally much lower than the interest they charge on your late payments.  

From early January 2026 the late payment interest rate charged on overdue tax was set at 7.75%, which is 4% above the Bank of England base rate, while the repayment interest rate paid by HMRC on refunds is 2.75%, substantially less than the charge on unpaid tax.  

The bottom line is that taxpayers should get their tax return ready well in advance of the end of January if possible. Check carefully that you are not paying more tax than necessary and settle any tax due on time.

What is Self-Assessment?

Self-Assessment is the process you go through each year where you complete a tax return and declare your income, capital gains and any other income during that tax year to HMRC, outside of income tax that is normally deducted from your wage or pension.  

Although most commonly done by those who are self-employed, anyone who has other income outside what is normally deducted from your wages and pension, need to complete a self-assessment form – which can be paper based or digital.  

Irrespective of employment status, if you have received any untaxed income before the deadline of that tax year, you may need to complete a tax return. Even if that income comes from eBay, Etsy or similar ‘side hustle’ enterprises.

When you need to submit a tax return

This tax year (2025/26) ends on 5 April 2026 and all tax returns for this year will need to be completed by 31st January 2027.

Most importantly, you must tell HMRC by 5 October if you need to complete a tax return and have not sent one before. Then there are different deadlines for different types of tax returns.

If you’re doing a paper tax return, you needed to submit it by midnight 31 October 2026. HMRC must receive a paper tax return by 31 January 2027 if you’re a trustee of a registered pension scheme or a non-resident company.  

If you’re doing an online tax return, you must submit it by midnight 31 January 2027, and if you want HMRC to automatically collect the tax you owe from your wages and pension, then you needed to submit your online tax return by 30 December 2026.

In all cases you need to pay the tax you owe by midnight 31 January 2027.  

If you’re interested in finding out more about how we can help you build a tax efficient portfolio, making best use of allowances available to you whilst ensuring your money is working hard, Why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with a member of our team.

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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 tax or trust advice.

In the Autumn 2025 Budget, Chancellor Rachel Reeves confirmed that the freeze on income tax thresholds and allowances will now continue until at least 2031. What was announcement in 2021 as a short-term measure to stabilise public finances post-COVID, will become a 10-year freeze, one of the most significant, and often unnoticed, tax policies in a generation.

This long-term freeze is what’s known as a “stealth tax” or “fiscal drag”. Instead of raising the rates you pay, the government simply keeps tax bands and allowances frozen. And as your income, pension, or savings grow with inflation, you end up paying more tax without any changes to the rules themselves. Worse still, while your income may rise with inflation, savings often don’t always keep pace, so the real value of your cash will likely be falling, making a bad situation worse.

It’s a quiet but powerful way of increasing the tax take, and it's starting to catch out more and more people, especially those who are retired or trying to grow their wealth. Although it’s reasonable to expect to pay a fair amount of tax, stealth taxes could be pushing some people over that tipping point.  

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More pensioners paying higher tax

Over the past few years, there’s been a sharp rise in the number of retirees now paying income tax, especially at higher rates.

Back in 2021, around 494,000 pensioners paid tax at the 40% or 45% rates. Fast forward to today, and that number has more than doubled to over 1.2 million, according to figures from HMRC.

And it’s not just those in the top brackets. The total number of pensioners paying any income tax has jumped from 6.7 million to over 9 million in just four years. This isn’t because tax rates have changed, it’s because pensions have gone up while tax-free allowance has stayed the same.

From April 2026, the full state pension will rise to £12,547.60, just shy of the personal tax-free allowance of £12,570. Add even a modest private or workplace pension on top, and many retirees now find themselves paying tax, often for the first time.

Why it matters for savers and investors

Being pushed into a higher tax bracket doesn’t just mean you pay more on your income, it can also reduce or remove other valuable tax allowances. For example:

• The personal savings allowance drops from £1,000 to £500 if you’re a higher-rate taxpayer, and to £0 if you’re in the top band.
• Dividend allowance has shrunk dramatically, now just £500, down from £2,000 in 2022.
• Capital Gains Tax exemption has fallen over the years to £3,000 for individuals and £1,500 for trusts

And in the 2025 Budget, the Chancellor also announced higher tax rates on savings income from April 2027, a rise to 22% for basic-rate taxpayers and 42% for higher-rate taxpayers with additional rate paying 47%.

Added to this, from April 2026, the dividend tax rates themselves are set to rise:

• For basic-rate taxpayers, the rate will increase from 8.75% to 10%
• For higher-rate taxpayers, from 33.75% to 35%
• And for additional-rate taxpayers, from 39.35% to 39.6%

These changes mean investors could face higher tax bills even on modest dividend income, especially as the tax-free allowance continues to shrink. 

The 60% tax trap

If you earn between £100,000 and £125,140, the tax system becomes especially punishing. In this band, your personal allowance is gradually taken away, so for every £2 you earn over £100,000, you lose £1 of your personal allowance.

This creates an effective tax rate of 60%, and once you factor in National Insurance, that jumps to 62% for many.

This hidden trap hasn’t been adjusted since 2010 and rising wages have brought many professionals into its grip. If you're approaching this income range or in it, planning is key as there are solutions to minimise or even mitigate against it.

Inheritance Tax: catching more estates

Inheritance Tax (IHT) is another area where frozen thresholds are bringing in more families each year.

The main threshold of £325,000 hasn’t changed since 2009, despite rising property prices. With the Residence Nil Rate Band (£175,000), for those passing down their main residence to direct descendants, a couple can pass on up to £1 million tax-free. However, this will depend on the value of the property and the overall value of the estate, larger estates may see a reduction or loss of the Residence Nil Rate Band. If the total estate is worth more than £2 million, the Residence Nil Rate Band is reduced by £1 for every £2 over the £2 million threshold. Anything above the available thresholds may face a 40% inheritance tax bill.

In 2024/25, IHT receipts hit a record £8.2 billion. With no reforms announced in the 2025 Budget and the freeze extended to at least 2031, this number is only expected to rise.

What can you do to mitigate stealth taxes?

While you can’t control tax thresholds or government policy, you can take action to protect your income and your legacy.

Here are a few of the strategies that could help:

• Use ISAs to shelter savings and investments from tax
• Structure pension withdrawals carefully to avoid unnecessary tax
• Make use of salary sacrifice where possible to reduce income and NI
• Gift assets tax-efficiently as part of longer-term estate planning
• Review your total income regularly to avoid tipping into higher brackets

These are just a few possible strategies, but a personalised, bigger financial plan should ensure your wealth is working for you and your family.

The bottom line

A decade of frozen allowances will reshape the tax landscape. For many, it’s no longer enough just to “stay under the limit”, the limits themselves are working against you.

That’s where strategic, personalised financial planning comes in. By looking at your whole financial picture, we can help you protect your wealth and plan with confidence for the future.
Get in touch with one of our financial advisers to see how we can help you navigate the years ahead with a plan that works for you. 

Arrange your free initial consultation

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. 

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.

Investment returns are not guaranteed, and you may get back less than you originally invested. Past performance is not a guide to future returns.