Spring Statement: key updates to be aware of
The Chancellor Rachel Reeves has delivered her Spring Statement to Parliament, giving key economic and spending updates on the UK economy.
Reeves acknowledged difficulties facing the UK Government’s budget thanks to global economic forces, such as Donald Trump’s trade tariffs.
As such, the so-called ‘fiscal headroom’ – which is the amount of extra cash available for Government spending - had all but disappeared. This is chiefly caused by higher Government and debt repayment rates.
In order to tackle this, the Chancellor has enacted a range of spending cuts both to the Government’s administration and the welfare bills. The Government intends to enact 15% cuts to ministry budgets, reducing civil servant headcounts and making other efficiency savings.
For welfare, stricter rules and limits on welfare payment increases are being implemented to achieve £4.8 billion in cuts.
OBR forecasts inflation issues ahead
As part of the Chancellor’s updates, the Office for Budget Responsibility (OBR) provides its economic forecasts for the economy. This dictates much of what the Government is able to achieve in terms of spending, investing and borrowing.
Worryingly the OBR has cut its GDP growth forecast for the UK economy in 2025 from 2% to just 1%. This is a problem for the Government because it means that it can expect to take less tax thanks to a slower economy.
Alongside this slowdown, the OBR has also forecast that inflation is only set to fall to the Bank of England’s target of 2% by 2027 – staying higher than expected for longer. Again, this is an issue for the Government because it means interest rates will stay higher in order to slow down price increase. This will keep the Government’s cost of borrowing higher too.
However, one small ray of sunshine amid the gloom is wage increases. Average wage rises mean that by 2029, working people could be £500 per year better off after factoring in inflation, according to the Government’s interpretation of OBR’s estimates.
Self-assessment tweaks
The Government has announced some small tweaks that could be of relevance to some families, especially those who have earners that have to fill out self-assessment tax returns.
The Government is set to make penalties for late assessment filing harsher. This includes increasing the penalty for over 15 days late up from 2% to 3% of the tax owed. For 31 days or more, it is set to jump to 10% per annum from just 4% - a significant increase.
Elsewhere, the Government has said it is making it easier for households who have to pay the High Income Child Benefit Charge to report their tax liabilities. From Summer 2025 these families will be able to use a digital system to repay through PAYE, instead of having to fill out a tax return every year.
ISA reforms
There were no major announcements that could directly affect financial portfolios in this update, with areas such as pensions and tax rates left untouched.
However, there was one small notice in the Spring Statement documents that could be something to watch out for in future. This relates to the ISA allowance.
There was significant speculation ahead of the Spring Statement that the ISA allowance would see a cut to the level of cash that could be saved into a tax-free account. Specifically, it was suggested that the annual cash ISA allowance would be cut to just £4,000. However, such a specific policy was not announced.
That being said, the documents published by the Treasury did in fact contain more information on the potential reform. The Government has committed to a review of the ISA system, with a view to encouraging retail investments and supporting growth.
While we don’t yet have a clear picture of what this reform could look like, it is a hint at the Government’s thinking on the future of the ISA system.
If you would like to discuss any of the issues raised in this piece and how it could affect your long-term finances, don’t hesitate to get in touch.
The importance of remaining calm with your finances
It is hard to remember a time when there has been so much speculation on geopolitical and global economic events. This creates trepidation about what may happen next.
Hardworking people with growing portfolios are growing increasingly concerned about Government-driven changes to their pension funds, inheritance tax, income tax levels, planning for long-term care and how this will all impact their investments and savings.
This is then being catastrophised by the news media, which is leading people to make knee-jerk reactions while not having a full understanding of the potential implications of their actions.
Fear of losing everything or desire for a quick win can cloud even the sharpest minds. Behavioural experts often point out that humans are wired to react strongly to threats, whether it’s a sabre-toothed tiger or a stock market dip.
The problem is these knee-jerk reactions rarely serve us well in the modern financial world. Selling off investments during a dip or chasing a ‘hot tip’ from the news often leads to regret. Recognising these emotional triggers is the first step to overcoming them.
While we recognise that global, and national, events do matter – what is all too easy to forget in 2025 is that the jeopardy and noisiness of the world’s problems are greatly amplified by the technology at our fingertips.
From social media to live news phone notifications – it is possible to be completely overwhelmed by information, 24 hours a day, seven days a week.
But (and shout it from the rooftops if needs be) it is essential not to make rushed, panicked decisions based on hearsay, conjecture and short-term events. Advice should always be sought before making any decisions.
There is an extraordinary amount of noise – from social media to the TV, newspapers to the pub. All of these can affect our decision-making and capacity to remain calm. This is especially difficult to overcome when finances are at stake.
Keep this in mind: no matter what is happening out there, your personal situation is your own, not anyone else’s. You need to make decisions based on a cool, calculated assessment of what is in your best interests – today and into the future.
Consider the pros and cons and all of the options available before making any decisions.
Key tips
So how can we go about making more measured decisions and plans? Finli has some core rules of thumb to stick with:
- Work with your financial planner alongside your accountant and solicitor to build a long-term financial plan that you understand and are comfortable with.
- Be flexible and recognise that life happens and change is inevitable. Putting in place a professional long-term financial plan will give you the peace of mind that you have that has these scenarios and issues prepared for and managed.
- Focus on the long-term and not day-to-day events.
- The person at dinner, down the pub, the taxi driver – or even in the press – doesn’t necessarily know more than you. A little knowledge can be very dangerous. If you’re unsure, seek professional advice. That is what it is there for.
See the wood through the trees
In the last five years, we have seen a global pandemic, regional wars, chopping and changing of Government and Prime Ministers and disruptive politics around the world.
But many of our clients have seen positive returns on their investments. This, in short, is how you can see the wood through the trees.
In fact, the UK stock market FTSE 100 has reached record highs as has the S&P 500 in the last 12 months.
The real truth here is that geopolitical, economic and other major world events have always happened. There has never not been a time in the world when everything was relaxed, and nothing bad was happening.
Uncertainty isn’t new. The 2008 financial crisis sent markets tumbling, yet those who held steady often recovered, and then some. Go back further: the dotcom bubble bursting, the 1970s oil shocks, even the Great Depression.
Each time, panic sellers lost out, while patient investors rode the wave. History doesn’t repeat itself exactly, but it rhymes. The lesson? Markets endure, and so can your finances. If you don’t let short-term fear dictate your moves.
Investment markets and core personal financial plans have to adapt to – and frequently ignore – these events. But the longevity of a specific long-term plan is far more powerful than any short-term decision you might make in haste.
Geopolitical, economic, and other major world events have always happened and always will. What matters is how you respond.
Tune out the noise, trust your plan, and lean on professional help when in doubt. Take a deep breath, step back, and focus on what you can control. Your financial future isn’t a gamble on a short sprint; it’s a marathon – and you’re building to finish strong.
Essential tips for the end of the tax-year
You’ve probably had all the usual end-of-tax-year reminders already. These are important to heed and time is now running out to make sure you take advantage of all the headline allowances.
This includes using as much of your ISA and pension allowances as you can and managing your CGT liability.
It’s important to note with ISA and pension allowances that transfers and other activities can take time to go through. Banks can be slow to enact requests, and that can lead to missing out on essential allowances inadvertently.
That’s why it’s important not to wait till the last moment and make sure the necessary actions are taken.
Beyond these essentials, there may be some options that you haven’t considered as the end of the tax year approaches. Here are a few extra tips for this tax year and the next.
Start addressing your tax bill
More than 5 million people sending in a tax return leave it until the January deadline[1].
However, you will probably have an inkling if you’re likely to face a bigger bill this year and it’s better to address it sooner rather than later.
Your options include additional pension contributions, but also VCT contributions.
Last tax year £882 million was invested in VCTs – the third highest year on record[2]. Payments into new VCTs attract income tax relief at 30%, plus tax-free dividends and growth.
IHT gifting
Inheritance tax receipts are rising. Inheritance Tax receipts for April 2024 to January 2025 are £7 billion, which is £0.7 billion higher than the same period last year[3].
The easiest option to move money out of the inheritance tax net is to use your gift allowances. You get £3,000 every year to give to whoever you like.
You can also make regular gifts out of income. These can be as high as you like, as long as you can show that they don’t diminish your standard of living.
You can also make more substantial gifts: as long as you survive seven years, they’ll be out of the inheritance tax net. It’s worth considering your own health and even average life expectancy when planning this.
Be careful too, you may have to pay capital gains tax on the transfer if you’ve made profits. This is a potentially valuable action to plan for and make but a financial planner can help you consider the best way to go about it.
Selling loss-making assets
Investors often focus on the ‘plus’ side of the equation when managing their capital gains tax bill. They sell assets that have done well to maximise their allowance every year.
However, too often, they neglect the other side – forgetting that they can sell loss-making assets to set off against their liability.
That stock that you’ve been hanging on to hoping it may go up? There could be no point in paying a chunky CGT bill when you could just cut your losses and offset them against any gains for the year.
It may also mean you don’t have to sell assets that have performed far better.
This is a tricky one to ensure you get right though, so it’s always best to speak to a planner to ascertain the best approach is essential.
Don’t forget your children’s allowances
You can put up to £9,000 every year in a junior ISA, and another £2,880 into a junior pension (the Government will add £720 basic tax relief (20%) bringing the total to £3,600).
The effect of compound interest is powerful. Monthly savings of £250, invested at 6%, would give a child a pot of £96,800.
Try salary sacrifice
Salary sacrifice is where an employee chooses to give up part of their salary in exchange for a non-cash benefit such as holiday, pension contributions, or childcare vouchers. It has tax benefits for both employer and employee.
Companies may be looking to offer salary sacrifices to help them offset the impact of rising National Insurance allowances. It’s always worth investigating what your company offers.
It may be too late to have a meaningful impact for the 24/25 tax year, but at least you may be able to reduce your tax allowance in the year ahead.
Please note: VCTs invest in smaller higher-risk companies. They are not suitable for everyone. They are illiquid and capital is at risk. Investors should not invest money they are not prepared to lose. Tax rules can change and benefits will depend on individual circumstances. This is not advice, it simply explains the main facts. Please refer to a financial planner before making any high-risk investments.
Pensions and IHT planning – time for advice?
Planning for the future is important, and for many, pensions have been a key part of ensuring financial security for loved ones. However, with the recent changes announced in the Autumn Budget 2024, you may be wondering what this means for you and your family. These updates have understandably raised concerns, particularly around how unspent pensions will be treated for Inheritance Tax (IHT) purposes.
Unspent pensions to be brought into estates
In October 2024, Chancellor Rachel Reeves announced plans to include unused pension funds and death benefits within the value of estates for IHT purposes. For many, this news may have come as a surprise, particularly if you’ve worked hard to build a pension as a tax-efficient way to pass wealth on to loved ones. The new proposal will mean that pension administrators will be required to report and pay IHT directly to HMRC, rather than the responsibility falling on the deceased’s estate or beneficiaries.
Similarly, death-in-service benefits paid out by employers have traditionally been entirely separate from personal pensions for the purposes of calculating an IHT bill. By including death-in-service benefits and unused pensions in IHT calculations, more estates could face higher taxes.
The Chancellor also confirmed the nil-rate band (£325,000) and residence nil-rate band (£175,000) are frozen until 2030.
What Could This Mean for IHT Bills?
Below is an example of how the proposed changes could impact someone with an unspent pension pot of £500,000 at the time of death.
Before the proposed rule changes (Pre-April 2027)
- Pension Pot Value: £500,000
- IHT Liability on Pension: £0 (pensions were outside the estate for IHT purposes)
- Other Taxable Assets: £200,000
- Nil-Rate Band: £325,000
- Total Taxable Estate: £200,000 – £325,000 = £0 (no IHT payable)
- Total IHT Due: £0
Under the proposed rule changes (From April 2027)
- Pension Pot Value: £500,000 (now included in the estate for IHT)
- Other Taxable Assets: £200,000
- Total Estate Value: £700,000 (£500,000 pension + £200,000 other assets)
- Nil-Rate Band: £325,000
- Residence Nil-Rate Band: £175,000 (assuming eligibility)
- Taxable Estate: £700,000 – (£325,000 + £175,000) = £200,000
- IHT Rate: 40%
- IHT Due on Pension: £80,000 (deducted by the pension administrator before distribution)
For those with larger pension pots, the impact of these changes could be even more severe.
When are the changes being introduced?
Directly after the Budget, the government announced a 12-week technical consultation on the proposed changes (concluded 22 January). Following a review of the feedback, government consultation principles state that responses should be published within 12 weeks. By Q3 2025, the government is expected to deliver specific implementation guidance on how pensions and death benefits will be treated under the new regime, as well as how trusts will be treated according to the new rules.
Changes won’t take effect until 6 April 2027, giving you time to review and adapt your plans accordingly.
What should you be thinking about now?
When introduced, the changes will likely have the greatest impact on those with already established estate plans. A good starting point would be to review existing pension arrangements and consider how the changes could affect what your beneficiaries would receive. With the right guidance, you can ensure your estate remains tax-efficient and aligned with your goals.
What’s really important to remember though is that the IHT proposals announced in last year’s Budget are not finalised, so it’s wise to consider potential implications but await the final guidance in the Autumn before drastically overhauling plans. This still gives us ample time to make changes before implementation in April 2027.
You won’t be left in the dark about changes
According to recent research1, an estimated 8.5 million adults aged 55 or over are unaware of the pension and IHT changes announced in last October’s Budget.
It is important to be aware of potential changes and their impact and timescales, but essentially you need to feel reassured that we are monitoring developments and will keep you in touch as we know more.
You don’t have to navigate these changes alone. When we have more certainty, we may suggest you consider alternative options that ensure your estate remains as tax efficient as possible. Together, we’ll help you secure your family’s future with confidence.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.
1Canada Life
Last minute Christmas money saving tips
Christmas may be the time of joy, but January can be grim if you overspend.
The temptations are vast: from pre-Christmas party wear to Black Friday ‘sales’, presents to food and wine and the Boxing Day sales.
Here’s how to make sure you don’t have a festive hangover in the New Year.
Create a budget and stick to it
Over the course of the Christmas season every retailer is going to be looking for cunning ways to tempt you to buy.
You need firm discipline and an iron will. Set a budget for presents for each person, for Christmas dinner, for sale shopping and anything else that might arise. You’ll probably break it, but at least you’ve set yourself some limits.
It can also help to set parameters around gift giving. If you find that your circle of recipients gets bigger every year, try to manage it down, or agree to give small, token gifts with a specific limit.
You don’t want Secret Santa to become Secret Grinch, but it is worth limiting how many groups you’re in.
Beware the lure of credit
There’s no point in hunting around for the best bargains, only to put it all on a credit card, not pay it off on time and end up paying 20-25% interest.
Credit cards are useful for deferring payment, but you need a clear plan for when it falls due and how you’ll pay it off.
Project ahead to how you might be feeling on ‘Blue Monday’, the third Monday in January – and supposedly the most depressing day on the year – when you have no money, you’ve just broken your New Year’s resolutions and the credit card bill has landed.
Right-size your Christmas dinner
The Waste and Resources Action Programme found that the average person in the UK wastes around 95kgs of food every year, or 341kgs for a family of four[1].
Christmas is a major pinch point. Almost everyone over-orders and the food either goes to waste, or families spend weeks chowing down old bits of turkey, or worse, left-over sprouts.
Shopping online can instil some discipline, with fewer temptations and impulse spending.
Making the most of others’ unwanted gifts
The post-Christmas period can be a great time to bag bargains on recycling sites such as Vinted, or Vestiaire Collective as people offload unwanted gifts.
This may prove even more fruitful than the Boxing Day sales.
Savvy shopping
With Black Friday behind us, it’s easy to think there won’t be any more discounting before 25 December. But Boxing Day sales often start before Christmas.
If you know what you want to buy, you can watch out for the best prices and snap up bargains as they arise. This can also help prevent impulsive spending, the enemy of Christmas spending discipline.
Websites such as Camelcamelcamel are primarily aimed at checking prices on Amazon but provide a really good reference point on historical prices to ensure the ‘deal’ you find really is a bargain.
Alternatives which look at a wide array of online shops include PriceSpy and PriceRunner.
Remember when all is said and done, the most important rules for spending are Do you need it? and Can you afford it?
Without being too much of a Grinch, often the best way to save money is by not spending at all!
[1] https://www.wrap.ngo/resources/report/household-food-and-drink-waste-united-kingdom-2021-22
The best financial gifts you can give this Christmas
A financial gift could be for life, not just for Christmas. While it may not draw the same excited gasps as the latest Nintendo, it may have more longevity.
Here are some of the best financial gifts you could give this Christmas.
JISA or even a pension
Plenty of parents and grandparents will make cash gifts this year, which will probably be spent on, depending on the age of the child, soft toys, clothes, or games console. That’s fine, but other options may be to put some of that cash towards a Junior ISA (JISA) or even a pension.
The recipient may not be thrilled today, but they may thank you later. Currently, the annual JISA allowance is £9,000. Parents can contribute and manage these directly, although grandparents and other family members or friends will need to go via the parent to contribute.
A child’s pension could provide even longer future planning. You can put up to £2,880 into a child’s pension for the 2024/25 tax year (assuming they have no income of their own) – and anyone can contribute, including parents, grandparents, godparents or friends.
You’ll get 20% in tax relief from the Government, adding up to £720 to the annual contribution, but the real power is in the compound growth. For example, if you put in the full amount of £3,600 each year, and that accumulates 5% compound interest, then it could be worth approximately £116,000 by age 18*.
Using the same method as above, their pot could be worth £1.43 million by their 60thbirthday*. It may be too late for a thank you letter, but there is no doubt your child would be extremely grateful!
* Please note: This is not guaranteed and will depend on a variety of factors, such as charges and investment performance. Please contact your Financial Planner to discuss this further.
University fees
Everyone has a £3,000 annual gift allowance (in the 2024/2025 tax year). Putting some of this money towards university fees could be a thoughtful Christmas gift. Not only does it take money out of the inheritance tax net, it saves them potentially expensive repayments.
The maximum tuition fee will increase to £9,535 this year for a standard university course. While most UK students are eligible for tuition fee and maintenance loans, these are repaid at expensive and unpredictable rates.
The headline student loan interest rate increases in line with the Retail Prices Index (RPI), and the temporary ‘Prevailing Market Rate’ cap. As of September 2024, it stands at 7.3% and changes every year.
This is higher than most mortgage rates and most conventional loan rates and the effect of compounding can be painful. The more you can minimise the loans students need to take, the better.
If the child in question is still under 18, this can be done pre-emptively into a JISA, although the child will have access to the money at 18 so it will be their choice what to do with the money.
A good financial book
Financial books may not be everyone’s idea of a page-turner, but the best ones can be entertaining and help people manage their finances better.
‘The Psychology of Money’ by Morgan Housel comprises 19 short stories, each exploring different ways people think about money and helps people make better decisions in managing their wealth.
Other popular options include A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy’ by Burton G. Malkiel, The World’s Simplest Guide to the Stock Marketby Edward W. Ryan, a crash course on stock market essentials, The Uncomfortable Truth About Money by Paul Podolsky and Rich Dad Poor Dad by Robert T. Kiyosaki.
Should you be able to get your teen to read a book, there are plenty of financial guides out there. The Motley Fool Investment Guide for Teens, by Tom Gardner is a good place to start, as is the Teenager’s Guide to Money, by Jonathan Self
Get them started on an app
If you think a book may be optimistic, consider giving children cash through an app.
Many apps – including Revolut, Go Henry and Starling Bank – now have lessons on basic financial management, with ‘gaming’ features, such as tasks and rewards.
They can be a great way to manage money, and will often allow children to set up designated pots for different expenditure. It may teach them more than handing them a cheque.
*Based on an input of £3,600 per annum x 18 years with a compound interest rate of 5%
Trump wins the US Presidency – what it means for your money
Donald Trump has won an extraordinary victory in the US Presidential election. Here’s how it could affect your finances.
The US Presidential election has reached an extraordinary conclusion with the election of former President Donald Trump, who returns to office in January 2025 after four years away from the White House.
While the election of the leader of a foreign country is not often one to consider for our finances here in the UK, the US economy is so large and influential in global terms that it can have an impact on our daily lives.
So what are the key things to have in mind, and what could a new Trump Presidency mean for your money?
Market reaction
The most tangible impact of the Trump victory has been a noticeable and immediate response from the global bond and currency markets.
The US 10-year treasury yield, for example, moved higher once a Trump victory became clearer. This is a signal from investors that it foresees more debt-fuelled spending from the world’s largest economy, thanks chiefly to Trump’s promise of tax cuts.
Alongside this, the US Dollar surged to its highest level in two years. This is largely for the same reason as the bond yield increase – markets see more state spending on the cards.
The implication here is that more spending will lead to renewed inflation. Renewed inflation will force central banks such as the US Federal Reserve to keep its base rate higher for longer.
This unfortunately does have an impact on the UK economy – principally because so much of the world’s goods (think everything from copper to oil and beyond) are priced in dollar terms.
This would have the effect of ‘importing’ inflation to the UK because the stuff we buy as an economy becomes relatively more expensive.
For those of us who like to holiday stateside (or in any other country where the local currency is pegged to the value of the dollar) this could make trips more expensive too.
Higher interest rates
The net result then is that households in the UK could see higher inflation once again. This in turn will potentially affect the Bank of England’s rate decisions moving forward and could leave households facing higher debt costs for longer.
This is something that is now not unfamiliar to households up and down the UK who have faced a cost-of-living crisis in the past two years.
While many have had to go through the pain of remortgaging at much higher rates, many more are still in line to face rising borrowing costs for their homes, especially now if global inflation becomes more persistent at higher levels.
The one upshot with these plans is that President Elect Trump’s proposals are likely to benefit US corporations, and this in turn will potentially fuel a new stock market rally, something Trump in his previous term was always at pains to point out.
But this is ultimately speculative as we don’t know what will happen in the near- or long-term future. Markets are moved by a huge variety of factors.
For those of us considering portfolio positioning in light of these major macroeconomic events, it is essential to speak to an adviser about any concerns or other questions regarding the direction of markets. Don’t hesitate to get in touch.
Autumn Budget 2024: Key measures you need to know for the end of the tax year
Chancellor Rachel Reeves has delivered her first Budget, with a range of tax changes that could affect personal financial portfolios. Here are the key changes and what you need to know for the end of the tax year.
Labour’s first Budget since 2010 has finally arrived. Rachel Reeves spoke for more than an hour announcing major tax changes, investment plans and tweaks to Government borrowing.
The wider implications of the Chancellor’s tax raising measures are mooted to include a 0.4% increase in inflation according to the OBR, and a 0.25% bump up in interest rates.
These are largely modest given the major spending, borrowing and taxation commitments Reeves announced. But what about specific measures that could affect our end of year tax plans?
Key measures
- Capital Gains Tax
The Government has hiked capital gains tax (CGT) rates from 10% to 18% for lower earners and from 20% to 24% for higher earners. The current tax-free allowance of £3,000 remains untouched.
This stops short of proposals to equalise CGT with income tax. Rachel Reeves said in her speech that just 1% of taxpayers face a CGT bill each year, and the new rates leave the UK still competitive compared to our G7 peers.
In terms of the end of the tax year the most important consideration here is to ensure that you maximise your allowances. This goes beyond just the CGT allowance – pensions and ISA allowances remain unchanged. Housing assets within these vehicles, where possible, can mitigate some of the effects of CGT and can provide valuable protection from extra liability.
- Pensions inheritance exemption
Inherited pensions will fall under inheritance tax (IHT) rules from April 2027. From then the total value of pensions will be added to a person’s estate for IHT purposes and could significantly increase net estate values for some with large pension holdings.
Alongside this, Rachel Reeves announced that the main IHT allowances of £325,000 per person, and £175,000 including main residence, will remain unchanged until 2030. This will perpetuate ongoing ‘fiscal drag’ for estates which tip into liability for the tax. The allowances have been unchanged since 2009.
Although this change is potentially an issue for those who have planned to use their pensions to minimise IHT liability, the good news is that the plans are still more than two years away from implementation, and are subject to a consultation to iron out the details of the policy.
Like with CGT, it is important to consider where the best place for assets and other money is in light of these changes, and to ensure annual allowances are maximised.
- Other changes
The changes above are the most directly salient for long-term financial planning, but there have been other changes too that can impact our end of year planning. Those include:
Income tax: The income tax band freeze will end in 2028, returning to inflation-linked increases moving forward. This is positive as income increases will be punished relatively less and could allow for greater saving potential
Stamp Duty: The stamp duty surcharge on second homes or holiday lets was hiked from 3% to 5%, effective immediately from the day after the Budget. unfortunately this means any second home owners looking to sell were more or less immediately exposed to higher tax liabilities.
School fee VAT: The private school VAT implementation was confirmed from January 2025. Although this comes ahead of the new tax year, it is a good idea to consider as soon as possible any adjustments that need to be made to accommodate potential increases in costs if you’re paying a child’s school fees.
End-of-year tax planning
While the measures in the Budget are perhaps not as dramatic as initially feared, it is clear there will be some impact on long-term personal financial plans.
In particular, fresh considerations should be made around CGT and IHT as these are the two tweaks that most directly affect portfolios.
For CGT it is important to ensure the allowance is being maximised each year.
The change to pensions inheritance rules creates new complications and should be considered more carefully in consultation with a financial adviser. Get in touch if you would like to discuss your options.
End of tax year key checklist: get your finances ready now for the new tax year
The end of the tax year is still a few months away, but it pays to think ahead now to ensure you maximise any annual allowances. Here’s your key checklist.
The end of the tax year is still a few months away, but getting started early can help ensure you make the most of the tax reliefs and allowances that are available to you.
Of the major allowances we’re focused on four essentials for the end of the tax year (5th April 2025):
- ISA and pensions
- Capital gains tax
- Gifts (to mitigate inheritance tax)
- Wills and pension beneficiaries
- Use your ISA and pension allowances: Your ISA allowance works on a ‘use it or lose it’ basis. It’s worth squirrelling as much as you can up to the £20,000 limit (2024/25 tax year). If you’ve got the cash, top up. Alternatively, you can sell assets held outside an ISA and buy them back within an ISA - a strategy known as ‘bed and ISA’.
Using your annual pension allowance is just as important. You can get tax relief on contributions of up to £60,000 or 100% of your earnings, whichever is lower, though there is a taper in effect if your income is over £260,000. You can also carry forward allowances from the previous three years.
- Check your capital gains tax position: The worst fears on capital gains tax (CGT) have not been realised, but higher rate taxpayers will still need to pay 24% on any gains made as part of the sale of assets. Investors have two main defences against this.
The first is to use your capital gains tax allowance of £3,000 each year. This means deliberately realising gains up to the limit to ensure they don’t build up. The second is to transfer assets between spouses. Transferring assets between spouses is tax free, therefore it makes sense to equalise your assets so that you both make use of your allowances.
- Give gifts: Getting into the habit of giving gifts is an easy way to take some cash out of your estate for inheritance tax (IHT). You can give away £3,000 per year, every year.
You can also give regular gifts out of income. These can be as high as you like, providing you can show they don’t diminish your standard of living. You can also get tax relief for any gifts you make to charity.
- Check your will and pension beneficiaries: It’s good practice to check your will and the ‘statement of wishes’ on your pension from time to time.
It’s all too easy to shove them to the back of a drawer and never think about them again. Your circumstances will change from time to time, and your preferences may need to change too. Checking once a year is good practice.
The costs of childcare and the help available to young families
Childcare can be one of the biggest outlays for a family with young children. While there is help available from the Government it also pays to be aware of the limits. Here’s what you need to know.
Caring for young children comes with a high cost, but there are ways to mitigate this.
New parents may get used to the lack of sleep and endless demands, but making peace with the cost of childcare is tough.
Bills of £1,200-£1,500 a month to care for small children are commonplace. There is Government support to help, but it is not always available and parents may need to take steps to retain their entitlement.
Child benefit
Your first port of call will be child benefit. Paid every four weeks, you’ll get £25.60 a week for your first child and £16.95 a week for any children after that, for children up to 16 years old - or under 20 years old and still in education or training. This starts when they are born.
It is worth noting that if you save this, with a growth rate of 5%, it would grow to a pot of over £75,000 by the child’s 20thbirthday.
However, there are caveats. If you earn £60,000, you'll have to start paying a 'High Income Child Benefit Charge'. If your income goes above £80,000 the extra tax will cancel out what you receive in benefit.
It might still be worth claiming if one of you isn't working because it can be a means to build up National Insurance contributions, which count towards your state pension.
Subsidised childcare
Parents may also be eligible for subsidised weekly childcare. Currently, parents who work more than 16 hours a week and each earn less than £100,000 are entitled to 30 hours funded childcare a week for children three-to-four-years-old. For children over nine months 15 free hours are available.
Note this is only available in England though. Northern Ireland, Scotland and Wales all have separate and differing schemes.
From September 2025, the full 30 hours will kick in for all parents of nine months and over. There is a calculator here to find out how much you can get: https://www.tax.service.gov.uk/childcare-calc/
Under these schemes, childcare needs to be ‘approved’ to be eligible. In practice, this is registered childminders or nannies, nurseries or childcare agencies. It does not include your child’s compulsory education or private lessons during school time (for example, private music lessons during school hours).
Equally, you can only get tax-free childcare to help pay for childcare provided by a relative (for example, a grandparent) if they’re a registered childminder and care for your child outside your home.
Managing the salary cap
However, here too, parents have a salary limit, with those earning over £100,000 excluded from the initiative.
That being said, there are legitimate ways to adjust your income so that you can still claim childcare and/or child benefit. One way is through pension contributions.
Extra contributions to a workplace or personal pension scheme will reduce your overall net income. This may bring you back down below the threshold for either childcare or child benefit.
A similar effect can be achieved through a salary sacrifice scheme. These are offered by many employers and allow you to reduce your contractual income for an equivalent employer payment to your pension.
This also saves on employee and employer National Insurance contributions, so may become more popular with employers as NI rates rise. Again, this pushes your headline income lower and may put you back below the earnings thresholds.
Charitable gifts made under gift aid are another way to reduce your taxable income. Your income is reduced by the full market value of the gift. You can contribute up to 4x what you have paid in tax in that tax year.
A final option is to equalise any income-paying assets with your spouse. Transfers between spouses are free of tax. This can also bring you below the threshold on income. It is also a useful tool for making the best possible use of tax allowances more widely.
These contributions and deductions need to be made ahead of the tax year end (5 April 2025), so it is worth starting to think about them today.
Childcare costs can be a nasty shock when parents go back to work and the support from the Government can be a valuable boost. It is worth taking steps to adjust your income to retain these benefits where possible.