The UK tax authority is increasing scrutiny of pension tax relief claims made by higher earners in an effort to “protect taxpayers’ money,” as part of a broader initiative to boost revenue collection.

HM Revenue & Customs (HMRC) announced on Thursday that starting September 1st, it has “lowered the threshold” at which claimants must provide evidence to support their pension tax relief requests. In addition, claims can no longer be made by phone and must instead be submitted online or by post.

Last year, the Labour government pledged an additional £555 million annually in HMRC funding, aiming to generate an extra £5 billion in yearly tax revenue by the end of this parliament.

HMRC said it is reducing the evidence threshold for personal pension tax relief claims following a review that found “many claims below the current evidence threshold were incorrect.” The move, it said, is intended to “protect taxpayers’ money.”

Each year, around 80,000 personal pension relief claims are submitted. HMRC’s review of claims under £10,000 showed that one in three required the claimant to amend the amount claimed.

What is pension tax relief?

Pension tax relief is a government incentive that helps you save more efficiently for retirement by reducing the tax you pay on your pension contributions. When you pay into a pension, some of the money that would have gone to HMRC is instead added to your pension pot.  

If you're a basic-rate taxpayer (20%), contributing £80 means the government tops it up with £20, so £100 goes into your pension. Higher-rate taxpayers (40%) and additional-rate taxpayers (45%) can claim back even more through their self-assessment tax return, reducing the real cost of saving even further. It’s one of the most tax-efficient ways to build your retirement fund.

Tax relief is often financially beneficial, but it is important to remember that there are limits and restrictions. For more information, check out our article on how to be tax efficient with your pension contributions.  

What’s changed?

HMRC has made a few changes to claims for tax relief on personal pension contributions which came into effect on 1st September. Below are some of the key changes.

• All pay as you earn (PAYE) claims for pension tax relief must be made online or by post and must be supported by evidence from the pension provider or employer.
• HMRC will not accept claims made via the telephone.  
• All claims must be made using HMRC’s online service or by letter; and all claimants need to provide evidence in support of their claim.  

Prior to 1 September 2025, only those claimants who met the conditions set out in HMRC’s guidance were required to provide evidence. The evidence required is a letter or statement from the pension provider or a payslip from the employer showing:

• The claimant’s full name;
• Details of the pension contributions paid and the tax year they relate to; and
• Where the claim relates to a workplace pension, that the claimant received 20% tax relief automatically from their employer.  
• Evidence needs to be provided for each tax year that a claim is made for.  

For more information please read further on gov.uk.  

If you want to find out more about how you can make the most your pension tax reliefs and allowances, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our chartered advisers to find out how we might be able to help you.

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

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

The terms advice and guidance are often used interchangeably when it comes to financial matters, but in reality, they are very different. And in today’s fast-changing financial landscape, understanding this difference is essential.

Since the introduction of the Pension Freedoms in 2015, individuals have had greater control over how and when they access their defined contribution (DC) pension pots. In response, the government established services to offer free, impartial guidance aiming to help people aged 50+ understand their options and avoid costly mistakes.

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One such service is the MoneyHelper platform, provided by the Money and Pensions Service (MaPS), previously known as Pension Wise. The idea was (and still is) to ensure people receive basic, unbiased information before making decisions about their retirement income.

As UK Pensions Minister Guy Opperman put it, “We will introduce new provisions requiring trustees of occupational pension schemes to nudge members to appropriate guidance when they seek to access their pension through the pension freedoms.”

This “nudge” while helpful, begs the question: is general guidance really enough when you're making decisions about what could be hundreds of thousands of pounds of lifetime savings?

What’s the difference between guidance and advice?

Guidance

Guidance is all about information rather than recommendations that are specifically tailored to your situation. It helps you better understand the options available, but the responsibility to decide and act lies entirely with you.

Government services like MoneyHelper for example, or your pension provider’s website may offer generalised content, online tools, or telephone support to guide you through the basics of pensions, investments, or budgeting.

In fact, anyone, including friends or colleagues, can technically give “guidance”. But remember, they aren’t liable for the outcome, and you're not protected if things go wrong.

What you won’t get from guidance:

• Personalised recommendations
• Product suggestions
• A risk assessment of your circumstances
• A regulated professional who is accountable for their advice

Advice

Advice, by contrast, is personal, specific, and regulated. When you take financial advice, you're working with a qualified and authorised Financial Adviser who assesses your entire financial situation, whether that be your goals, risk tolerance or future plans, then recommends a course of action tailored to you.

You’re also protected. Advisers are regulated by the Financial Conduct Authority (FCA) and must adhere to strict standards. If something goes wrong, you may have access to the Financial Ombudsman Service and Financial Services Compensation Scheme.

What about the cost? And is it worth it?

Guidance is usually free and is offered by government-backed services or your pension/investment provider, for example. It’s a good starting point, especially if you just want to understand your options or educate yourself.

Advice, however, is a paid professional service, and like any other expert service, the cost reflects the time and complexity involved.

There are two main types of advisers:

• Independent Financial Advisers (IFAs), who offer whole-of-market advice across a full range of products and providers. All our advisers at The Private Office are Independent Financial Advisers.
• Restricted Advisers, who are limited in the scope of advice they can give, often tied to a particular provider or product range.

Choosing the right type of adviser can significantly impact your financial outcomes. Independent advice means you're more likely to get the best solution for you rather than for the adviser’s institution. 

The rise and possible risks of AI in financial guidance

A key change in the advice landscape is the increasing use of Artificial Intelligence (AI), particularly Large Language Models (LLMs) like ChatGPT and other advanced systems. 

Using LLMs as a substitute for regulated financial advice carries several risks. To be balanced, however, on one hand, there are benefits, including speed, ease of access and lower (or no) cost. But the pitfalls are real and therefore need to be carefully considered.

Here are some of the potential risks:

1. Inaccuracy & outdated / partial information
   LLMs may rely on data that is not fully up to date, or doesn’t reflect recent regulatory, tax or product changes. They also generate plausible‑sounding but false or misleading information, known as hallucinations, from time to time.
2. Lack of holistic view
   AI tools typically only see what you tell them. They can’t pick up life‑events you haven’t mentioned, emotional preferences, long‑term goals, or unexpected future needs. A human adviser can ask probing follow‑up questions to uncover things you may not have thought to tell them.
3. No regulatory protection
   Advice from AI tools is not regulated in the way financial advice from an FCA‑authorised adviser is. If things go wrong, there is no ombudsman to make claims, no compensation scheme, and no requirement that those giving the advice act in your “best interests.”
4. Overconfidence & misplaced trust
   Because LLMs are good at generating fluent, confident text, people may overestimate their reliability.
5. Potential for financial loss
   Applying generic or inappropriate advice could cost money e.g. picking wrong investment vehicles or mismanaging tax implications.

The value of advice is still stronger than ever 

It can often be a daunting task for individuals to think about their financial futures. Working with a qualified financial adviser can help to alleviate the burden of worry, become better educated on their finances and receive actionable advice on how to improve their situations.

An update to the International Longevity Centre’s research showed the long-term value of advice:

• Advised individuals can be up to 24% better off after a decade compared to those who don’t take advice.
• The benefits are especially strong for those with modest wealth, proving that advice isn't just for the wealthy.
• Those who seek advice regularly (e.g. annually) see even stronger outcomes over time. 

In Summary – Guidance vs Advice

You get what you pay for, and when it comes to your lifetime savings and financial future, that advice could make all the difference.

Start with a free, no-obligation consultation

If you’re thinking about the next stage in your financial journey and want trusted, independent advice, get in touch to arrange your free consultation with a qualified adviser. 

At The Private Office, we offer chartered, independent, whole-of-market advice, recognised as the gold standard in the industry. If you have £100,000 or more in pensions, savings or investments, you can start with a free initial consultation (worth £500) with one of our regulated Financial Advisers.

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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 or cashflow modelling.

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.