An inheritance is often a moment of mixed emotions. It represents a significant financial event, but it is also a legacy from someone you cared for. This gift comes with a profound sense of emotional and financial responsibility. While, in some cases, it can feel like a life-changing opportunity, a survey by Capital Group reveals a less optimistic picture: a staggering 60% of those who have inherited wealth regret how they handled it. This widespread sentiment of dissatisfaction is a stark reminder that managing a sudden financial windfall, especially one rooted in such a personal loss, is more complex than it seems.

The Finfluencer trap and under-utilised funds

In today's digital age, it's easy to get lost in a sea of social media “finfluencers” promising quick and easy investment tips. The study revealed that a larger number of millennials turn to these online personalities for advice than to professional financial advisers, 27% versus 18%. While it might be tempting to get your advice from a flashy online personality, a costly mistake could be the result.

It’s not just bad advice causing the problems. A large portion of inherited capital is simply sitting still. The research showed that only 22% of inherited funds are invested in securities or mutual funds, and a mere 11% are put into a pension fund. This inertia means the money isn't working for you. In fact, due to inflation, it might even be losing value. It's no wonder that a third of inheritors wish they had invested more.

The UK's wealth transfer is underway

The UK is on the cusp of an unprecedented generational wealth transfer, with an estimated £5 trillion in assets set to be passed down over the next two decades. This monumental transfer presents an incredible opportunity, but as the survey data shows, many people are unprepared to navigate it alone.

While many people rely on lawyers and accountants to handle the initial succession process, these professionals may not be the best source for long-term investment advice. The survey found that while three out of five people used lawyers and almost half used accountants, only 15% consulted a financial advisor. However, the benefits of professional guidance are clear: 78% of those in the UK who did seek advice felt better informed about managing their new wealth.

Working with a qualified financial adviser can help you make the most of an inheritance. They can provide a personalised roadmap for long-term growth, tax efficiency, and helping you to shape and achieve your financial goals.

Turning your inheritance into a lasting legacy

The lesson from this research is clear: to avoid future regrets, seeking professional financial advice is essential. This ensures that the wealth you've received is not only protected but positioned for sustainable growth. Don't let your inheritance sit idle. With the right strategy, you can transform what could be a significant gift into a lasting legacy.  

Note: The findings were from a survey of 600 high net worth individuals across Europe, Asia Pacific and the US by investment manager Capital Group. 

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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 or trust advice. 

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

New regulations being considered could restrict the ability of parents to make unlimited tax-free gifts to their children. If the rumours are true, these regulations will be announced during the upcoming autumn Budget on 26 November.  

The Treasury is reportedly looking at introducing a lifetime cap on the value of gifts an individual can give away to reduce their inheritance tax liability. This move, along with potential changes to capital gains tax, is said to be under consideration by Chancellor Rachel Reeves as she seeks to address a potential fiscal deficit ‘black hole’ of up to £50 billion in the upcoming autumn Budget.

Currently, an unlimited amount of money and assets can be gifted to friends and relatives without incurring inheritance tax, under the condition that the transfer happens at least seven years before the person giving the gift passes away. This is known as the ‘7 year rule in inheritance tax’.

In short, a ‘taper tax rate’ of between 8% and 32% is applied to gifts given between seven and three years before death. Money given less than three years before is taxed at the full inheritance tax rate of 40%.

Essentially, the proposed lifetime cap on gifts would enable the Treasury to exercise yet another avenue of tax collection from gifts given by parents to children many years earlier than before.  

There have also been rumours that the 7 year rule could be extended to 10 years, in a further bid to increase tax take.

What is inheritance tax?

Inheritance Tax (IHT) is a tax levied by the Government on the estate of a deceased person in the UK. This includes all of their assets including property, personal belongings and investments.  

However, this levy only applies to the total value of the estate that exceeds the IHT threshold or ‘nil-rate band’. As of the 2025/26 tax year, the threshold is set at £325,000. Anything above £325,000 could be subject to up to 40% inheritance tax and anything below this threshold is tax-free. Those passing down their main residence to direct descendants also have an additional allowance of £175,000. This means up to £500,000 per person or £1million for a married couple, can currently be passed down free of inheritance tax.

Currently, pensions are exempt from inheritance tax but from April 2027, pensions will form part of your estate for inheritance tax purposes. This means that after April 2027, inheritance tax may also need to be paid on your pension when you die (depending on the overall taxable value of your estate). 

If you’re interested in how to manage the potential inheritance tax bill on your estate, 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 experienced 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.

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

The Government, following consultation, has now confirmed legislation on a significant change to how pensions will be treated for inheritance tax (IHT) purposes. 

From April 2027, most unused pension funds will count as part of a person’s estate when they die. This means that for the first time, inheritance tax may be due on pension pots left to loved ones. It marks a major shift in how pensions are used in estate planning and will have important consequences for those who had hoped to pass on their pension savings free of Inheritance tax.

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This will be of particular concern to those with larger pension pots or those who have been deliberately preserving their pensions to pass on their wealth. If that’s you, or someone in your family, it’s well worth taking time now to think about how to adapt your financial planning strategy. Speaking to your financial adviser will help clarify what steps you should take.

Who will be responsible for the reporting and payment of inheritance tax on unused pension funds?

Before consultation, the government proposed pension scheme administrators (PSAs) should both report and pay IHT on unused pension funds. After feedback following the consultation, the policy was changed so that personal representatives (i.e estate executors or administrators) will be responsible for reporting and paying IHT on unused pension funds - in line with standard inheritance tax procedures. Payment will be a joint and several liability with the beneficiaries, once death benefits are appointed to specific beneficiaries.

A new scheme will be established which will allow beneficiaries to request payment of IHT liabilities to HMRC directly from the pension fund (like the direct payment scheme), but the payment will be limited to liabilities due on pension funds and not the entirety of the estate. More details are awaited on the scheme. In addition, this change means that pension scheme administrators will be able to distribute benefits from the pension fund to beneficiaries before probate is obtained on the deceased's estate.

This does add a layer of administrative complexity post death and does mean that if you hold pensions benefits across a variety of different providers it could create a headache for your personal representatives and hinder speedy settlement of benefits. Where appropriate, consolidating existing pension pots during your lifetime into one provider will certainly help ease this process.  

Will my spouse or civil partner be subject to an IHT liability when inheriting my pension?

The scope of what types of pension benefits will be included in the new IHT regime has been confirmed and we now know that unused pension funds passed to a surviving spouse or civil partner will be exempt. Payments from death in service benefits, if you die whilst employed, are also exempt, even if they are written under a pension trust. Also scheme pensions paid from an occupational scheme to a surviving spouse or joint life annuities, where the income continues to be paid to a surviving spouse or civil partner, are also exempt.

Will beneficiaries face both inheritance tax and income tax on inherited pensions?

Potentially, yes. From April 2027, the value of the unused pension will form part of the estate for IHT purposes. If the deceased was aged 75 or over, any money their beneficiaries withdraw from the pension will also be subject to income tax. That means in some cases, the combination of inheritance tax and income tax could result in a significant chunk of the pension pot being lost to tax. In certain instances, the total tax take could reach as high as 67%.

Should people use their pensions during their lifetime instead?

It’s a question many will be asking. If a pension is likely to face inheritance tax when they die, does it make sense to start drawing from it now? The answer isn’t straightforward and needs to be considered on a case-by-case basis.  On the one hand, reducing your pension before death could lower the potential IHT liability. On the other hand, taking large withdrawals now might push you into a higher income tax bracket, especially if you’re still working or have retired with significant defined benefit pensions in payment. You’ll also need to think about whether you might need those funds later in life. Advice tailored to your specific requirements will be required to ensure that you make a fully informed decision in this regard.

Could annuities be part of the answer?

One option that may be worth considering is using part or all of your pension to buy an annuity. This turns your pension into a guaranteed income during your lifetime, which means there would be less left over in your pension pot to be subject to IHT post death.

Annuities aren’t for everyone, but they can, especially later in life, provide peace of mind and help reduce inheritance tax exposure at the same time. What’s more, annuity rates are generally higher for older individuals, which makes them potentially more attractive for clients aged 75 and over.

However, once again, suitability is down to your own individual circumstances and will require individual advice.  It should be noted that certain features which can be added to annuities are already subject to IHT e.g. guarantee periods and valuation protection payments, unless paid under discretionary powers.

Could insurance help cover the inheritance tax bill?

Another strategy might be to take out a whole of life insurance policy, written in Trust, designed specifically to cover the inheritance tax due on your pension. This means your beneficiaries effectively receive the full value of the pension, and the tax bill is paid separately from the insurance proceeds. You could even consider using pension withdrawals to fund the insurance premiums – although this too could trigger income tax, so it’s important to weigh up the costs and benefits carefully. It’s not a one-size-fits-all solution, but it could be worth exploring as part of a broader plan.

Family tax planning strategies

Planning as a family can make a real difference. For instance, if you have more income than you need to live on, you could potentially use the ‘normal expenditure out of income’ exemption to gift money each year without it being counted for inheritance tax. Children could then use those gifts to make their own pension contributions. If they’re higher rate taxpayers, they’ll also benefit from income tax relief over and above the basic rate relief received automatically at source.  In effect, this helps reclaim the tax you’ve paid on your pension income into tax-efficient savings for the next generation.

Coordinating this kind of plan with a solicitor ensures everything lines up with your will and long-term succession goals.  It will also be necessary to take specialist tax advice when seeking to use the ‘normal expenditure out of income’ exemption.  

Looking ahead

This change to inheritance tax on pensions is one of the most important shifts in estate planning in recent years. It brings pensions into line with other assets for tax purposes and will impact many families who had relied on them as a tax-free way to pass on wealth. While the new rules may feel like a blow, there are still a number of ways to plan effectively. Whether it’s exploring annuities, considering insurance, or using income to support family gifts, there are strategies available.

The key is to start planning now for 2027. Speaking to your financial adviser will help you understand the best course of action based on your age, pension size, and goals for your estate. With the right approach, it’s still possible to make your pension work hard for you and your family – both now and in the future.

If you’d like to learn more about how we can minimize the potential tax bill on your estate, why not get in touch for a free initial consultation.

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This article is for information only and does not constitute individual advice. The information provided in this article is based on the current allowances and legislation and is subject to change.

The Financial Conduct Authority (FCA) does not regulate trust or tax 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 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 tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.

Inheritance Tax receipts reached £2.2bn in Q1 (Quarter 1) of the 2025/26 tax year.

This marks a £100m or 4.8% rise compared with the same period last year, according to the latest figures published by HM Revenue & Customs (HRMC), extending a run of record-breaking receipts year-on-year.  

HMRC pointed to higher asset values (such as property), a greater number of wealth transfers after death, and the continued freeze on tax-free thresholds as key factors behind the rise. The substantial increase follows ongoing momentum despite a recent cooling in the property market.

What is inheritance tax?

Inheritance Tax (IHT) is a tax levied by the Government on the estate of a deceased person in the UK. This includes all of their assets including property, personal belongings, and investments.  

However, this levy only applies to the total value of the estate that exceeds the IHT threshold or ‘nil-rate band’. For the current 2025/26 tax year, the threshold continues to remain at £325,000.

As of the 2009/10 tax year, the threshold has continued to remain at £325,000. Anything above £325,000 could be subject to up to 40% inheritance tax and anything below this threshold is tax-free.

Traditionally pensions have been exempt from inheritance tax but, from April 2027, pensions will no longer have this exempt status. This means that inheritance tax may have to be paid on your outstanding pension pot when you die.

Why are IHT receipts always on the rise?

The number of estates across the UK that are being pulled into the IHT net are increasing each year.  

Total IHT receipts collected by the Government has been steadily on the rise since the IHT threshold freeze. This was initially announced by the then Chancellor, Rishi Sunak, in his 2021 Budget. The Budget outlined that the IHT threshold would be frozen for five years until 2026. However, after ex-Chancellor Jeremy Hunt’s 2023 Autumn Statement, it was confirmed that the freeze would be extended a further two years until April 2028, and then after Rachel Reeves’ 2024 Autumn Statement, this was extended once again a further two years until April 2030.

Due to wage inflation coupled with increasing property value across the UK, the freeze essentially means that a greater number of people will cross the inheritance tax threshold each year. Many have been calling this move an example of ‘stealth tax’, as the freeze ultimately means an increasing number of Britons will fall into the tax threshold each year until the freeze ends in April 2030, and by then the Government will have collected billions in extra inheritance tax.

The inheritance tax allowance of £325,000 increased from £312,000 on 6 April 2009.  This means the IHT nil rate band has now been frozen for over 14 years and will continue to be frozen until at least 5 April 2030. That’s a staggering 21 years of frozen allowances.  

If you’re interested in how to manage your inheritance tax 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 for information only and does not constitute individual advice. The information provided in this article is based on the current allowances and legislation and is subject to change.

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

Over the past few years, millions of people across the UK have found themselves quietly paying more tax, even if they haven’t seen a single change to their tax rate. This subtle yet powerful shift in the nation’s tax landscape has not been driven by headline-grabbing announcements, but rather by what are commonly referred to as “stealth taxes.” These measures raise government revenue not through overt rate increases, but via frozen thresholds and shrinking allowances, often going unnoticed until the financial pinch begins.

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A surge in pensioners paying higher tax

New figures obtained from HM Revenue and Customs under the Freedom of Information Act reveal just how widespread this issue has become. According to Steve Webb, former Pensions Minister, the number of pensioners now paying income tax at the higher (40%) or additional (45%) rates has more than doubled in just four years. In 2021/22, around 494,000 pensioners were affected; today, that number has surpassed one million.
Even more revealing is the total number of pensioners paying income tax at any level. This has risen from 6.7 million to 8.8 million over the same period, an increase of nearly a third. This is not due to tax rate hikes, but instead to frozen thresholds and rising pension income pushing more retirees into tax-paying brackets.

How fiscal drag is quietly hitting retirees

At the heart of this trend is a phenomenon known as “fiscal drag.” This occurs when tax thresholds remain static while incomes, particularly pensions, increase with inflation. The personal allowance and higher-rate threshold have both been frozen since 2021 and are expected to remain frozen until 2028. During this time, state and private pensions have risen, mainly due to inflation and the government's commitment to the triple lock.
From April 2025, the full new state pension rose to £11,973, just below the £12,570 personal allowance. This means that for anyone with a modest workplace or private pension on top of their state entitlement, paying income tax has become the norm rather than the exception.

More than just Income Tax

Crossing into higher-rate tax bands doesn’t just mean paying more on income, it also has knock-on effects for other allowances. For instance:
•    The Personal Savings Allowance is halved from £1,000 to £500 for higher-rate taxpayers.
•    The Dividend Allowance has been reduced in recent years, currently sitting at just £500 (down from £2,000 in 2022).
•    The Capital Gains Tax exemption was halved to £3,000 from April 2024, falling from a high of £12,300 in 2022/23 tax year.
For those crossing into the additional rate tax band (which was lowered from £150,000 to £125,140 in 2023/24) these allowances are cut even more sharply. In the case of savings interest, the Personal Savings Allowance is removed entirely.

Rising Tax bills for savers and investors

Stealth taxation is not just affecting pensioners. The Personal Savings Allowance has remained unchanged since it was introduced in 2016. For years, with ultra-low interest rates, this wasn't a major issue. But the tide has turned.
With the Bank of England increasing interest rates to tackle inflation, savings accounts are now generating more interest and more tax. In the 2022/23 tax year, 1.77 million people paid tax on their savings interest, up from just 970,000 the year before. HMRC reports that the amount raised from this alone more than doubled from £1.2 billion to £3.4 billion.
In the 2023/24 tax year, an estimated 1.9 million people paid tax on their savings interest, up from 1.77 million the year before and just 970,000 in 2021/22. According to HMRC the amount raised from tax on savings interest surged to a record £9.1 billion, more than double the £3.4 billion collected in 2022/23, and over seven times the £1.2 billion from 2021/22. Projections for 2024/25 suggest that over 2 million savers will pay tax on interest, with HMRC expecting to collect £10.4 billion.

A Growing Inheritance Tax catch

Another stealth tax that continues to ensnare more households is Inheritance Tax (IHT). The nil-rate band for IHT has been frozen at £325,000 since 2009. Over this time, property and asset values have risen dramatically. As a result, more estates now breach the threshold and face IHT liabilities. Although, in 2017 the Residence Nil Rate Band was introduced which permitted individuals, passing down their main residence to direct descendants, an additional allowance of up to £175,000. Meaning, for married couples/ civil partnerships up to £1million could be passed down free of IHT. However, those estates of over £2 million would be subject to tapering. You can read more about this here.

In 2024/25, IHT receipts hit a record £8.2 billion. With the freeze extended until at least 2030 and no indication of major reform, families are increasingly vulnerable to unexpected tax bills, even those with relatively modest estates.

What can be done? The case for proactive planning

While stealth taxes are largely outside of our control, their impact doesn’t have to be. With careful planning, it’s possible to reduce unnecessary tax exposure and protect long-term wealth. Strategies may include:

• Making full use of ISAs for tax-free savings and investments
• Structuring pension drawdowns to minimise tax liabilities
• Gifting assets in a tax-efficient manner to reduce IHT exposure
• Reviewing income regularly to avoid crossing thresholds unnecessarily
• Increasing pension contributions to lower taxable income through salary sacrifice.

Each individual’s situation is different, and the tax system is becoming increasingly complex. For many, professional advice can help clarify their position and create a clear, forward-looking financial strategy.

60% tax trap

For those earning between £100,000 and £125,140, the tax system becomes especially punitive. In this income band, individuals lose £1 of their tax-free personal allowance for every £2 earned above £100,000, effectively creating a 60% marginal tax rate. This stealthy threshold has increasingly drawn in middle- and upper-middle earners, particularly as it hasn’t been adjusted for inflation since 2010. Despite rising wages and fiscal drag, the government has so far resisted reform, leaving many professionals facing disproportionately high tax bills.

Staying ahead in a shifting tax landscape

As the government continues to rely on threshold freezes to raise revenue without increasing tax rates, more households, particularly pensioners, will feel the squeeze. These are not sudden shocks, but slow, creeping changes that can significantly erode financial wellbeing over time.

Understanding the full picture and taking early, informed action is key. Whether you are drawing a pension, managing savings, or planning your estate, speaking with a qualified financial adviser can help you navigate the challenges ahead and ensure your finances remain aligned with your goals.

If you’re concerned about an increasing tax burden on your wealth why not get in touch and speak to one of our financial advisers 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 information in this article is based on current laws and regulations which are subject to change as at future legislations.

A pension is a long-term investment. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

Managing your finances can often feel straightforward, particularly when it comes to day-to-day budgeting or saving for short-term goals. But some financial decisions carry long-term consequences that are far from simple. In these instances, the stakes are higher, the options more complex, and the implications far-reaching - not just for you, but for your family too. These are the moments when seeking professional financial advice is not just sensible but crucial.

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Advice on estate planning

Gifting Property to Your Children:

One of the most common motivations for gifting property is to help children onto the housing ladder or to reduce the value of an estate for inheritance tax purposes. However, this seemingly generous act can trigger unexpected tax complications and financial risks if not handled carefully.

Transferring ownership of a property can have implications for capital gains tax, especially if it is not your main residence. When considering inheritance tax, if you gift a property that is worth more than your Nil Rate Band (NRB) or joint NRB (or joint owners, usually both parents) then if you pass away within 7 years, the beneficiary of the house is liable to pay the 40% inheritance on the value of the gift above the NRB. This provides complications to the beneficiary as they may be forced to sell the property or have to set up a regular arrangement with HMRC to pay the inheritance tax due.

In addition, should you continue to live in the property after gifting it, you may fall foul of the “gift with reservation” rules, which mean that HMRC could still treat the property as part of your estate for inheritance tax purposes.

Moreover, giving away significant assets could impact your financial security in later life. Once a property is legally transferred, you lose control over it. This can be detrimental to your later life planning such as paying for care costs. If your child were to go through divorce, bankruptcy, or pass away unexpectedly, that property could become part of a legal or financial settlement. These are difficult possibilities to consider, but failing to plan for them could create avoidable hardship.

Seeking financial advice can provide you with peace of mind when gifting away assets, ensuring that they are absolutely surplus to your requirements and allow you to plan appropriately.

Passing on wealth:

Estate planning goes far beyond writing a will. It involves a careful review of your assets, liabilities and how best to pass on wealth to future generations in a tax-efficient manner. Inheritance tax, currently charged at 40 per cent on estates over £325,000 per individual, can significantly reduce the value passed to your heirs if not planned for in advance. Also, for those passing down their main residence to direct descendants, an additional £175,000 Residence Nil Rate Bands (RNRB) per individual is available (on net estates valued up to £2 million), meaning up to £500,000 for an individual or £1 million for married couples/civil partners could be passed down free of inheritance tax.

A direct descendant is classified as your spouse/civil partner, children (adopted, fostered and stepchildren) and grandchildren.

From making use of available allowances and reliefs, to setting up trusts or using life insurance to cover tax liabilities, there are many tools available to reduce the impact of inheritance tax. Missteps can lead to unintended tax bills, loss of asset control, or disputes among beneficiaries.

Advice using equity release

Equity release has become an increasingly popular option for those seeking to unlock the value in their home without selling it. Whether you're looking to supplement your pension income, fund home improvements, or gift money to family, releasing equity can be appealing. It’s even an option for some with large estates looking to lower the value of their estate for inheritance tax purposes. However, it's not a decision to take lightly.

Equity release products, such as lifetime mortgages, can have long-term financial consequences. While you do not need to make monthly repayments, interest is typically rolled up and added to the loan, which can significantly reduce the value of your estate over time. If not for the intended purpose of lowering your estate, this may impact what you are able to leave behind for your loved ones and could also affect your eligibility for means-tested benefits. In order to have maximum benefit from a lifetime mortgage for inheritance tax (IHT) your estate needs to be more than the sum of the NRB and RNRB.

It is essential to assess your overall financial situation to decide whether equity release is the right fit, or if there are more appropriate alternatives available.

Advice on planning for retirement and managing pensions

Pension planning is another key area where financial advice can make a substantial difference. For many, pensions represent the most significant savings pot outside of property, yet they are often misunderstood or neglected. As retirement approaches, knowing how to draw down your pension in the most tax-efficient way becomes increasingly important.

There are several options available when accessing your pension, including taking a tax free lump sum, setting up drawdown arrangements, or purchasing an annuity. Each comes with its own set of implications for tax, investment performance, and long-term income security. Without clear guidance, it’s easy to make choices that could result in paying more tax than necessary or even running out of money later in life.

Financial advice is particularly important when consolidating multiple pensions, especially if you are considering transferring your defined benefit schemes to a drawdown arrangement or the current scheme provides guaranteed income features such a Guaranteed Minimum Pension (GMP) benefit. It’s vital to evaluate the advantages and disadvantages of consolidation and help you build a sustainable income plan for your retirement years.

Advice on understanding the value of cash in retirement

In retirement planning, maintaining a cash reserve is crucial to safeguard your financial future, especially when facing market volatility. This strategy helps manage ‘sequencing risk’.

Sequencing risk is the risk of receiving lower or negative returns early on in your retirement due to market downturns when you begin drawing an income from your investments. The negative impacts of sequencing risk can have the effect of eroding your savings at a faster rate and can potentially increase the chances of running out of money.   
Holding a cash reserve equivalent to one to three years' worth of living expenses provides a buffer during market downturns. Instead of selling investments at a loss, you can draw from your cash reserves, allowing your investment portfolio time to recover. This approach helps preserve the longevity of your retirement savings.

Making the most of what you have

Life is full of financial crossroads - some expected, others less so. Selling a business, receiving an inheritance, going through a divorce, or receiving a medical diagnosis can all bring sudden and significant changes. In times like these, a financial adviser can act as both a guide and a steady hand, helping you navigate uncertainty with confidence.

Even if you’re not facing a major life event, periodic check-ins with a financial adviser can help ensure you remain on track toward your goals. Whether you're planning for retirement, helping your children financially, or simply looking to make smarter investment decisions, the right advice can help you make the most of what you have.

At its core, financial planning is not just about numbers. It’s about peace of mind, protecting your loved ones, and creating the future you want to see. For the decisions that matter most, getting expert advice can be one of the most valuable investments you make.

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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.

Levels, bases and reliefs from taxation may be subject to change.

Using equity on your home will affect the amount you are able to leave as an inheritance. Any means tested state benefits (both current and future) may be affected by any equity released. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

The Financial Conduct Authority (FCA) do not regulate estate, cash flow planning, will writing or tax and trust advice.

Just over two years ago, my colleague, Daniel Blandford, wrote an article highlighting the different types of gifting which are possible, all with a view to reducing the value of estates, thus reducing Inheritance Tax (IHT).

Since then, the net has tightened even more on IHT planning following the Labour budget last autumn. As was announced in that budget, from April 2027, all Defined Contribution pension plans (personal pensions and SIPPs (Self-Invested Personal Pensions) will also be subject to IHT. And although this announcement is still going through consultation with the exact details on how it will work yet to be announced, for many, this is an estate planning body blow, particularly if these plans were destined to be passed down (IHT free) to the next of kin. These pensions can still be passed to the surviving spouse free of IHT as this qualifies for the inter-spousal exemption rule. But for the children (or other beneficiaries) this is bad news.

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Overnight, many SIPP holders effectively saw their chargeable estates increase by the value of the pension (assuming death post April 2027). IHT planning, therefore, has become more important than ever.

Daniel pointed out the various gifts available and I would urge you to revisit this article. The ‘Gifting Top 6’ lists the six most commonly utilised forms of gifting.

What I would like to focus on in this article, however, is the often overlooked No 5 on this list, being ‘Gifts from Income’.

Gifts from surplus income

The rules for Gifting from Income are more opaque than the other rules and, for this reason, it is probably the most underutilised method of gifting. However, in certain circumstances, it can be the most effective method of all, particularly with individuals with large incomes.

Most people are aware of the fact that gifts can be made, and it is necessary to survive for seven years before the gift is considered to be outside of the estate. This is the ‘Lifetime Gifts’ referred to in Daniel’s article and for non-trust based gifts, these are referred to as Potentially Exempt Transfers or PETs. Gifts to Absolute/Bare Trusts are also PETs.

The Gifting from Income rules mean that gifts which qualify for this type of gifting are immediately exempt and the seven-year rule does not apply.

In essence, gifting from income is permissible for net excess income that is considered to be surplus to requirements after the donor’s regular expenditure needs have been met. In other words, the gifts must not, in any way, impact on the gift-givers standard of living. There is no upper limit on the amount of gifting that can be made.

The gifts must also form part of a regular pattern of the gift-giver’s payments. There also needs to be evidence of this (e.g. a standing order). HMRC do not specify over what period the gifting needs to be but, generally speaking, three to four years is considered to be necessary. Single, one-off gifts are unlikely to qualify but, even then, not necessarily if the single gift can be seen as part of a regular pattern.

Because the rules are opaque it is imperative that all gifts must be clearly documented, especially as the exemption can only be claimed on death. This will also be important for the personal representatives or executors who, on death, will be required to complete Form IHT 403 in which all gifts and transfers need to be detailed.

Any regular gifts need to be made from regular income such as earned income; rental income, dividends and pension income. These are all considered to be income for this purpose but ‘Income’ from investment bonds or Discounted Gift Trusts will not qualify as this is deemed to be capital (albeit regular capital income). Any gifts made from capital or selling down capital will not qualify and are likely to be PETs.

The fact that pension income qualifies for this purpose, opens up the possibility of utilising SIPPs, as a regular drawdown can be initiated which would be considered regular income and, if surplus to needs (mentioned above) it could be gifted. Admittedly, this would require income tax to be paid on the drawdown. If you are a 40% income taxpayer, then the income tax would be the same as the IHT which (after April 2027 following the consultation and then implementation of the changes announced in the autumn budget) would be due. At first sight this might appear to be a no win situation as the income tax is the same as the IHT but, remember that your next of kin (if you die after age 75) would also have to pay income tax on anything drawn down from the inherited SIPP, on top of the IHT. So, for children who inherit a parent’s pension they would end up with 48% of the inherited amount (if basic rate taxpayers) and only 36% if they are higher rate.

Gifting from drawdown now would also mean that your children (or other beneficiaries) would not have to wait until death to start benefitting from inheritance.

Inheritance tax life insurance

There is also the possibility of using pensions to start drawdown and use the net income to fund a whole of life insurance plan, designed to pay a tax-free lump sum directly to your next of kin on death, which would compensate them for the IHT lost. Again, the premiums payable would probably be made out of excess regular income and would, in most cases, be immediately exempt and would not fall into the seven-year rule requirement. Our investigations into this area indicate that for many people, this exercise considerably increases the net money in hand to the next of kin compared to doing nothing.

Financial Advice is key

Labour tax plans and budget changes demonstrate the rules governing inheritance and taxation are in constant flux. Early planning is critical to ensure that your hard-earned wealth benefits those you care about most, rather than being diminished by unnecessary tax bills. Whether you are planning to pass on your estate or a beneficiary preparing for an inheritance, acting today could hopefully safeguard your family's financial legacy for generations to come.

There are many variables in this subject and tailor-made solutions will vary from person to person. If you’re concerned about IHT on yours or your loved one's estate and want to learn more, why not get in touch for 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.

The information in this article is based on current laws, taxation and regulations which are subject to change as at future legislations.

A pension is a long-term investment. The fund value may fluctuate and can go down. 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 cash flow planning, estate planning, tax or trust advice.

As many as 1 in 50 people who have paid inheritance tax are missing out on a valuable inheritance tax exemption that could reduce their tax bills by tens of thousands of pounds, according to recent data released by HM Revenue & Customs (HMRC).

The ‘gifts out of surplus income’ rule allows individuals to make regular financial gifts without triggering the seven-year inheritance tax rule. Despite this, figures obtained from HMRC through a Freedom of Information request revealed that only 480 estates used this relief in 2021–2022, just 1.7% of the 27,800 estates that paid inheritance tax that year. In comparison, 510 estates claimed the relief in 2020–2021, and 500 did so the year before.

With Labour planning to include pension pots in inheritance tax from April 2027, experts believe this underused exemption may gain more attention. The Office for Budget Responsibility expects that 9.7% of estates will pay inheritance tax by 2029-2030, up from % currently.

A Treasury spokesman said: “We continue to incentivise pensions savings for their intended purpose – of funding retirement instead of them being openly used as a vehicle to transfer wealth – and more than 90% of estates each year will continue to pay no inheritance tax after.”

To find out more about inheritance tax, why not download our free Inheritance Tax guide or read  ‘How much inheritance is tax free’.

What is inheritance tax?

In simple terms, inheritance tax is a tax on a deceased person’s estate and some lifetime gifts, savings, investments, property, and possessions are all included, along with any other assets they may have – once funeral expenses and any debts have been taken out of the equation.

However, this levy only applies to the total value of the estate that exceeds the IHT threshold or ‘nil-rate band’.

As of the 2025/2026 tax year, the threshold is set at £325,000. Anything above £325,000 could be subject to up to 40% inheritance tax and anything below this threshold is tax-free. Homeowners receive an extra £175,000 allowance, and couples can combine their thresholds to pass on up to £1 million tax-free.

The ‘gifts out of surplus income’ rule

While gifts made more than seven years before death are automatically exempt, there is also a £3,000 annual gift allowance for one-off occasions. Additionally, if individuals can show the gifts were made regularly and didn’t impact their standard of living, those payments are also excluded from inheritance tax.

If you’re interested in how to manage your inheritance tax 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.

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

Following the latest Bank of England base rate cut on 8th May of 0.25%, to 4.25%, many households and investors are wondering what the implications might be for their financial plans. And if the forecasts are to be believed, it won’t be the last one. While that might sound like good news for borrowers, it’s not such a rosy picture for savers. And for those with investments, pensions or mortgages, now could be the right time to give your finances a once-over. 

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Good news for borrowers – not so great for savers 

For savers, the prospect of a lower base rate is generally unwelcome. Interest paid on savings accounts typically tracks the base rate to some extent, and we had already seen a downturn in fixed-term savings rates, in anticipation of the base rate decision. Variable rates are likely to follow suit now the rate cut has happened.  

Providers often anticipate base rate cuts and adjust their offerings accordingly, meaning the window to secure attractive rates may be closing. So if you’ve been toying with the idea of locking in a fixed rate, you may want to get on with it. There’s a decent chance that what’s on offer now won’t be around much longer, and holding off could mean settling for less.   

Take a look at our Best Buy tables to see the best rates available.

Investors: time to get your money working again? 

Over the last couple of years, rising interest rates made cash a pretty comfortable place to sit. But if those rates are now heading south, we expect more people to look again at the stock market, to stay ahead of inflation and keep their money working harder.  

From a broader investment standpoint, lower interest rates can be a boost to asset prices as borrowing becomes cheaper, for individuals and businesses, and the returns from cash become less attractive. That often supports growth in certain sectors and can offer opportunities for investors who know where to look.

For those who don’t know where to look, the investment experts at TPO can help. We take this kind of market insight into account when reviewing and managing client portfolios - helping investors stay aligned with their goals, even as economic conditions shift.

That said, keeping enough cash on hand for short-term needs is still vital - maintaining a sensible cash buffer remains important to provide flexibility and peace of mind during periods of market volatility. It means you’re not forced to sell investments during market dips.

Thinking about an annuity? Timing matters 

If you’re nearing retirement and considering buying an annuity, the base rate change is something to pay close attention to. Falling interest rates tend to drag annuity rates down with them, meaning the income you can secure for life may end up being lower than it was just a few weeks ago. And with annuities enjoying something of a resurgence recently, it’s not just about whether you buy one – it’s also about when you do and how you go about it. The key here is not to take the first offer from your pension provider. There are often better deals available elsewhere, particularly for those with any health issues - even minor ones can make a difference.  

Deciding whether an annuity is the right option is not always straightforward, and making well-informed choices in retirement is essential. This is an area where professional advice can be invaluable. 

Mortgage holders could benefit - but make the most of it 

Mortgage holders may view a base rate cut more favourably. Those on variable rate deals or trackers will likely see their monthly payments fall, while those due to remortgage could benefit from lower rates than might otherwise have been available.  

But don’t just enjoy the lower cost and leave it at that. If your mortgage is more affordable, why not consider overpaying a little each month (if your lender allows) or using the extra cash to top up your pension or ISA? It’s all about making your money stretch further while the opportunity’s there, to make your future financial position healthier.  

For many, the value of impartial, expert advice cannot be overstated. Whether you are planning for retirement, managing investments or looking to optimise your savings, a tailored financial plan can offer both clarity and confidence.  

If you’re unsure how the recent base rate decision might affect your financial plans, or if you simply want to make sure you’re on the right path, now may be the ideal time to get in touch. 

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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.

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

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

Question: As I was a bit late getting organised, I put £20,000 into an easy-access cash ISA at the end of the last tax year in a last-minute effort to use up my allowance, but now I’d like to move it to a fixed-rate ISA. Are there any restrictions on transferring it so soon? And will the transfer affect this year’s ISA allowance?

It was a smart move to make use of your ISA allowance before the end of the last tax year—especially with increasing speculation that the current £20,000 cash ISA limit could be reduced in the near future. Every year, many people miss out simply by not acting in time, so even a last-minute deposit means you’ve managed to make the most of your tax-free savings allowance.

Choosing an easy access ISA was a sensible decision too. It gives you the flexibility to pause and reflect on how and when you might need access to that money - perfect for reassessing your financial goals without locking anything in immediately.

Now to your question - yes, you absolutely can move funds from an easy access ISA to another ISA, even if you just opened it. There’s no minimum time you need to hold the funds before transferring. You can choose to transfer the full amount or just a portion, either to a new provider or within the same one, especially if they’re offering a competitive fixed rate that fits your needs. But it’s always wise to shop around to get the best returns. You can find our best buy tables here.

Just one crucial reminder: always transfer using your new provider’s official ISA transfer process. Withdrawing the money yourself and redepositing it could strip away the tax-free status and use up part or all of the new year’s ISA allowance.

For those who have already opened the current year’s cash ISA, following the ISA rule changes introduced in April 2024, you now have even greater flexibility when it comes to transferring. Unlike before, when only full transfers of the current year’s ISA were allowed, you can now make partial transfers too - giving you more control over how you manage your savings.

Importantly, as you managed to open and deposit cash into your ISA ahead of the end of the tax year on 5th April 2025, you can still deposit up to £20,000 until 5th April 2026, as well as transferring last year’s easy access ISA.

That said, it’s worth getting a move on - both with transferring your existing ISA and opening a new one. There’s a lot of talk in the markets about possible interest rate cuts in the near future. If you’re considering locking into a fixed rate, now might be the time to act before the most attractive deals disappear. Fixing your rate now could help protect your savings from potential rate drops, giving you the chance to enjoy inflation-beating, tax-free interest over the term.

And remember, using your new ISA allowance sooner rather than later means you start earning tax-free interest earlier, which could make a meaningful difference over time. 

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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 advice. 

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