Your Spring Budget update – the key news from the chancellor’s statement

An external image of the Palace of Westminster in the evening

The 2024/25 tax year is just a month away, and chancellor Jeremy Hunt has delivered his 2024 Spring Budget, outlining the government’s plans for the next fiscal year and beyond.

With a general election looming – prime minister Rishi Sunak has said he will call it before the end of the year – the chancellor claimed that the government had met the prime minister’s three economic priorities laid out at the start of 2023, having:

  • Halved inflation, down from highs of 11% last year to 4% in January 2024
  • Kept debt falling in line with fiscal rules
  • Grown the economy, fully 1.5 percentage points higher than expected.

Amid this backdrop, the chancellor called this a “Budget for long-term growth”, with goals to “deliver more jobs, better public services, and lower taxes”.

Read on for a summary of some of the key measures and announcements from this year’s Spring Budget, and what they might mean for you.

National Insurance will be reduced by another 2%

Arguably the biggest announcement from the chancellor’s Budget this year is that the main rate of Class 1 National Insurance contributions (NICs) will be reduced by a further 2%.

During the Autumn Statement in November 2023, the chancellor reduced the main National Insurance rate by two percentage points, falling from 12% to 10% from 6 January 2024.

Now, this main rate will fall a further two percentage points to 8%. Meanwhile, the main rate of Class 4 self-employed NICs will fall to 6%. Both changes will take place from 6 April 2024.

According to the OBR, an employed individual with average earnings of £35,400 will save £450 a year thanks to this cut, and £900 when including the previous cut in November 2023.

Furthermore, there will be no further requirement to pay Class 2 NICs from 6 April 2024, as outlined in the 2023 Autumn Statement.

However, offsetting these tax cuts is the news that the Income Tax Personal Allowance and tax bands will remain frozen until 2028.

As wage inflation increases, this could see many taxpayers pulled into a higher tax band over the next four years, an effect known as “fiscal drag”.

The High Income Child Benefit Charge will be reformed

Having been a contentious issue for some time, the chancellor confirmed reforms to the High Income Child Benefit Charge.

This tax taper effectively reduces the amount received from Child Benefit for those earning £50,000 or more. Those earning £60,000 or more must repay all Child Benefit or opt out from payments entirely.

Crucially, this rule only applies to one higher earner per household. So, a household with one person earning £55,000 and the other £10,000 would be affected by the charge, while two people each earning £49,000 would not be affected at all.

So, by April 2026, the government will introduce a household income charge, assessing both earners’ income against the threshold, rather than just an individual higher earner’s.

Furthermore, from 6 April 2024, the £50,000 threshold will be raised to £60,000, and the top taper to £80,000. According to the government, this will see half a million families gain an average of £1,260 in 2024/25.

The higher-rate Capital Gains Tax charge for residential property transactions will be reduced

To promote the housing market and encourage more property transactions, the chancellor announced a reduction in the higher rate of Capital Gains Tax (CGT) for gains on residential property, excluding main residences.

Under the current rules, the standard higher CGT rate is 20%, with an additional 8% charged on residential property transactions. This will be reduced from 28% to 24% from 6 April 2024, encouraging landlords and second-home owners to sell their properties, with the aim of increasing the housing supply for first-time buyers in particular.

The 18% charge for gains made in the lower rate band will remain unchanged.

On top of this, the chancellor also abolished the Furnished Holiday Lettings (FHL) tax regime, removing an incentive for landlords to offer short-term holiday lets rather than long-term residential lets, and Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty regime.

Changes to how and where pension funds are invested

As part of the chancellor’s goal to channel more capital into UK equity markets, the government is working alongside The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) on the “Value for Money” pensions framework to “ensure better value from defined contribution (DC) pensions, by judging performance on overall returns, not cost”.

This looks to address where pension schemes prioritise short-term cost savings at the expense of long-term outcomes, as well as where savers may be prevented from receiving value because of a scheme’s current scale.

The FCA and TPR will have full regulatory powers to close schemes from new employer entrants or wind them up entirely if the schemes are “consistently offering poor outcomes for savers”.

The government will also seek to work with the FCA to increase UK equity allocations in DC pensions, asking pension funds to publicly disclose where this money is invested. These requirements will also extend to Local Government Pension Scheme funds.

Furthermore, the chancellor confirmed the government’s commitment to exploring a lifetime provider model for DC pensions, previously referred to as the “pot for life” in the 2023 Autumn Statement.

This would give pension savers the right to choose the pension scheme that their employer pays into, rather than being auto-enrolled into a scheme chosen by the employer.

Investments in UK-focused assets will be encouraged with the new “UK ISA”

As well as expanding pension investments into British businesses, the chancellor intends to create a new UK ISA, offering an additional tax-efficient allowance of £5,000 for investment in UK-focused assets. This is another move that aims to channel more investment into UK equities.

This will be on top of the existing ISA allowance, which remains at £20,000 for the 2024/25 tax year.

Other key changes

Fuel and alcohol duty remain frozen

Fuel duty will remain frozen for another 12 months instead of increasing in line with inflation, and the 5p cut to fuel duty, originally set to expire on 23 March, has been extended for a further 12 months. Government figures claim that this tax cut will save an average car driver £50 in 2024/25.

Meanwhile, the alcohol duty freeze will be extended until February 2025, benefiting 38,000 pubs across the UK.

Tax rises will bolster the government’s coffers

While this Budget has seen many tax cuts, the chancellor also announced measures that will see certain taxes increase.

Firstly, the government is abolishing the current tax system for UK non-doms, and replacing it with a “simpler and fairer” residence-based system.

From 6 April 2025, anyone who has been resident in the UK for more than four years will pay UK tax on any foreign income and gains, provided they have been non-tax resident for the last 10 years. In 2028/29, this will raise £2.7 billion. There will be transitional arrangements for those who have already benefited from the previous system.

There will also be a new levy on vaping products from October 2026, raising £445 million in 2028/29. Meanwhile, to encourage vaping over smoking, tobacco duty will also increase in October 2026, raising a further £170 million in 2028/29.

Household support fund extended

There will be an extra £500 million to extend the Household Support Fund in England from April to September 2024. This fund provides support with essentials such as food and utilities to vulnerable households.

Full business expensing extended, and increased to VAT thresholds

After initially making full business expensing permanent in November 2023, the chancellor announced plans to extend this to leased assets, when fiscal conditions allow for it. Draft legislation is to follow.

Furthermore, the chancellor increased the VAT registration threshold for small businesses from £85,000 to £90,000, and the deregistration threshold from £83,000 to £88,000 from 1 April. These thresholds are frozen at these levels.

Get in touch

If you have any questions about how the Spring Budget will affect you and your finances, please get in touch.

All information is from the Spring Budget documents on this page.

The content of this Spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

All the winners and losers from the 2024 Spring Budget

one girl looking envious at the delighted girl next to her on the sofa

With one eye on a forthcoming general election, the chancellor has announced a Budget aimed at generating long-term growth, with “more investment, more jobs, better public services and lower taxes”.

While the headlines will inevitably focus on Jeremy Hunt’s cut in National Insurance contributions (NICs), many less headline-grabbing messages will affect millions of families and businesses.

Read on to find out who were the winners and losers from the 2024 Spring Budget.

Winners

Working people

The chancellor said that his Budget gave “much-needed help in challenging times”, adding “if we want to encourage hard work, we should let people keep as much of their own money as possible”.

Calling NICs a “penalty on work”, Hunt announced a cut in Class 1 NICs, from 10% to 8% from 6 April 2024. These cuts follow a similar reduction in the rate of NICs announced in the 2023 Autumn Statement.

The chancellor says that these cuts, in conjunction with the reductions announced in the 2023 Autumn Statement, would mean the average worker on £35,400 would benefit from a tax cut of more than £900 a year.

He also announced that, instead of falling from 9% to 8% as previously announced, Class 4 self-employed NICs would fall from 9% to 6% from 6 April 2024. This is in addition to the removal of the requirement to pay Class 2 NICs from the same date.

He added that 2 million self-employed people would benefit, with the average self-employed person earning £28,000 seeing a tax cut of around £650 a year.

The Treasury say that this means UK taxpayers face the lowest combined basic rate of Income Tax and NICs since the introduction of the modern structure of National Insurance in 1975.

Parents earning Child Benefit

The chancellor highlighted the “unfairness” in the current Child Benefit system that means a household with two parents each earning £49,000 a year will receive Child Benefit in full, while a household earning less overall but with one parent earning more than £50,000 will see some or all of the benefit withdrawn.

Consequently, he announced a plan to move the High Income Child Benefit Charge to a “household” system from April 2026.

In the interim, from April 2024, the High Income Child Benefit Charge threshold will rise from £50,000 to £60,000 while the top of the taper will rise to £80,000. This means that the full amount of Child Benefit will not be withdrawn until individuals earn £80,000 or more.

The government estimates that nearly 500,000 families will gain an average of £1,260 in 2024/25 as a result.

The hospitality industry and their customers

In a move designed for “backing the Great British pub”, the chancellor has extended the freeze on alcohol duty. The freeze was due to end in August 2024 but has been extended to February 2025, benefiting 38,000 pubs across the UK.

The Treasury says that this results in 2p less duty on an average pint of beer than if the planned increase had gone ahead.

This measure will cut costs for breweries, distilleries, restaurants, nightclubs, pubs, and bars.

Motorists

The chancellor argued that lots of families and sole traders depend on their cars and so wanted to continue supporting motorists.

Consequently, he maintained the temporary 5p cut in fuel duty and froze the duty for another 12 months.

Hunt said that this would save the average car driver £50 in 2024/25.

Small businesses

In a boost to small businesses, Hunt announced that, from 1 April 2024, the VAT threshold would increase from £85,000 to £90,000 – the first increase in seven years.

ISA and National Savings and Investments savers

To encourage investment in small British businesses, the chancellor announced his intention to launch a new “UK ISA”.

This will enable savers to invest an additional £5,000 in a tax-efficient wrapper, increasing the total ISA subscription limit to £25,000 – assuming these additional monies are invested exclusively in UK firms.

The government will consult on the details.

The chancellor also announced that National Savings & Investments (NS&I) will launch a British Savings Bonds product that will offer consumers a guaranteed interest rate, fixed for three years.

This new NS&I product will be brought on sale in early April 2024.

Creative industries

From film to theatre and music to art, UK creative excellence is unmatched.

To support the UK’s creative industries, the chancellor announced a further £1 billion package of additional tax relief over the next five years, to boost inward investment and attract production companies from around the world.

Hunt also confirmed £26.4 million of support for the globally renowned National Theatre.

Pensioners

The Spring Budget also committed to supporting pensioner incomes by maintaining the State Pension “triple lock”.

In 2024/25, the Treasury say that the full yearly amount of the basic State Pension will be £3,700 higher, in cash terms, than in 2010.

Sellers of second homes

Capital Gains Tax (CGT) is often due when an individual sells a second home – such as a buy-to-let property or holiday home.

In a move designed to increase the number of transactions, and consequently increase the revenue from the tax, the chancellor announced he would reduce the higher rate of property CGT from 28% to 24%.

The lower rate will remain at 18% for any gains that fall within an individual’s basic-rate band.

Losers

Vapers and smokers

In an attempt to discourage non-smokers from taking up vaping, and to increase revenue for the NHS, the chancellor announced a new duty on vaping.

The Treasury says this will raise £445 million in 2028/29.

There will also be a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026 to maintain the current financial incentive to choose vaping over smoking. The government say this will raise a further £170 million in 2028/29.

Non-economy airline passengers

The chancellor announced that rates for individuals flying premium economy, business, and first class and for private jet passengers will increase by forecast Retail Prices Index (RPI) and will be further adjusted for recent high inflation to help maintain their real-terms value.

Some “non-doms”

In a move borrowed from Labour, the chancellor announced the abolition of the “remittance basis” of taxation for non-UK domiciled individuals (“non-doms”) and a replacement simpler residence-based regime.

Individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last 10 years.

This new regime will commence on 6 April 2025 and applies UK-wide – and transitional arrangements will apply.

The Treasury says that this measure will raise £2.7 billion in the year 2028/29.

Owners of holiday lets

The chancellor said that the current tax regime creates distortion, meaning there are not enough properties available for long-term rental.

Consequently, he intends to abolish the Furnished Holiday Lettings (FHL) tax regime from 6 April 2025, meaning short-term and long-term lets will be treated the same for tax purposes.

Anyone subject to fiscal drag

Freezing tax thresholds increases the amount of tax that individuals and businesses pay without nominal tax rates actually increasing. Called “fiscal drag”, this results in additional revenue to the government as more taxpayers are “dragged” into paying tax, or into paying tax at a higher rate.

Freezes in a range of thresholds mean that millions of individuals and businesses will face “fiscal drag” in the coming years.

For example, while the increase in the threshold at which small businesses and self-employed people have to register for VAT will be welcome to many businesses, the fact that the threshold had been frozen for seven years means that more businesses will likely have been forced to register for VAT than if the threshold had risen each year in line with the cost of living.

Similarly, freezes to the Income Tax Personal Allowance and thresholds mean more people will either start to pay tax, or pay more tax at a higher rate, than if these thresholds had risen in line with inflation.

Get in touch

If you have any questions about whether you are a winner or a loser from the Spring Budget, and how it will affect you and your finances, please get in touch.

All information is from the Spring Budget document published by HM Treasury.

The content of this Spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

7 historic houses to visit during Easter

The exterior of Carisbrooke Castle.

If you’re looking for a fun way to spend time with your loved ones over Easter, why not explore one of Britain’s many impressive country houses? Discover the beautiful landscapes and incredible stories while enjoying brilliant Easter activities at these seven historical homes.

1. Dunham Massey, Cheshire

Step into the 17th century in this gorgeous Georgian home and investigate their extensive collection of fascinating antiques, which reveal the history of the house. Then, explore the stunning gardens, 400-year-old mill, and ancient parklands populated with adorable fallow deer.

Dunham Massey is also hosting an Easter trail throughout March and April. Pick up your Easter Adventure pack from the welcome desk to enjoy 10 activity stations dotted throughout the 300 acre grounds to learn about the history of the house and celebrate the start of spring.

2. Longleat House, Wiltshire

If you’re interested in breathtaking Elizabethan architecture or experiencing one of the most significant private antique collections in Britain, Longleat House is the destination for you. Learn more about the history through one of their intimate guided tours or relax in their 900 acres of stunning landscaped grounds.

They also run brilliant activities all year round for your children and grandchildren to enjoy. Walk, drive, or sail through their famous safari to meet animals ranging from tiny meerkats to gigantic Asian elephants. Or if you’d prefer to avoid the mischievous monkeys, you can lose yourself in one of the world’s biggest hedge mazes or take a trip on their quaint railway.

3. Audley End House and Gardens, Essex

Turn back the clock to the Victorian era at one of England’s grandest mansions. Whether you want to experience the servant’s wing and kitchen garden or the state rooms and beautiful grounds, you can discover what life was like for both the rich and poor at this amazing country house.

This Easter, English Heritage is teaming up with Lego to transform Audley End’s historic stables into brick art. Help them bring history to life through your Lego creations, which will be transformed into mini versions by their master builders and displayed for all visitors to see.

4. Moseley Old Hall, Wolverhampton

Discover the secrets of the Elizabethan farmhouse whose priest hole and chapel attic tell the story of King Charles II’s escape. Stroll through a 17th century-style knot garden and heritage orchard while your children and grandchildren climb their three-storey tree house, and then peruse their lovely second-hand bookshop.

Moseley Old Hall is peppering their grounds with Easter-themed activities this year. Follow their trail from 22 March to 7 April for only £3, which includes bunny ears and a chocolate egg to get you in the Easter spirit.

5. Blenheim Palace, Oxfordshire

Blenheim Palace is the only non-royal, non-episcopal house in the country to hold the title of “palace”. As one of England’s largest country houses, it was designated a UNESCO World Heritage Site in 1987 and remains one of the most stunning buildings and gardens in Britain.

This bank holiday weekend, visit for their Easter Eggstravaganza. With exciting activities such as circus skills, balloon modelling, and a travelling vintage variety show, there’s plenty of fun for the whole family. You can keep your children and grandchildren busy with their egg hunt around the huge grounds while you refuel on delicious homemade food at their Walled Garden Pizzeria.

6. The Children’s Country House, Sudbury

Sitting proudly in their marvellous gardens, the incredible Sudbury Hall was the historic country home of the Vernon family. Explore their childhood museum, where you can take part in interactive activities, meet a Dalek, and be transported back in time in a Victorian classroom.

Once you’ve finished exploring the amazing building, you can enjoy a cup of tea in the Fairy Tale Forest Café and browse the Jungle Bookshop. Or if you’re looking for an adventure to keep your children and grandchildren entertained, why not book the second world war-themed Mystery Rooms Experience or get stuck into seasonal crafts at the Activity Hub?

7. Carisbrooke Castle, Isle of Wight

Nestled at the heart of the Isle of Wight, Carisbrooke Castle has been many things: an artillery fortress, a king’s prison, and a royal summer residence. Today, you can experience the spectacular panoramic views from the high castle walls, relax in the tranquil Princess Beatrice Garden, and meet the delightful Carisbrooke donkeys.

From 23 March to 14 April, you can join their Easter Adventure Quest for just £2. Hunt for clues in the castle grounds to track down the Easter eggs for a tasty chocolate treat, learning about the history of the island at the same time.

Financial stress costs UK businesses £10.3 billion a year. Could financial advice help your firm?

A financial adviser showing someone information on a tablet.

Financial worries can harm the mental wellbeing of employees, and research suggests it could negatively affect the productivity of businesses too. As an employer, offering financial advice to your team could be a win-win.

Inflation has led to the cost of living soaring, so it’s not surprising that more households are concerned about their finances. What may be unexpected is the material impact it could have on your business.

A report from Aegon found that 12% of private workers missed work due to financial concerns in 2023. On average, these employees were absent from work for 4.7 days.

Staff taking time off work when they’re financially stressed could be just the tip of the iceberg. The report found that a more prevalent issue was presenteeism – where employees attend work but experience significantly reduced productivity due to personal and health-related factors.

Indeed, almost a quarter of employees surveyed said their work productivity had declined over the last two years due to financial worries.

These lost workdays are estimated to have collectively cost UK employers £10.3 billion over the year.

As younger generations are less likely to have accumulated wealth, it’s unsurprising that workers aged between 16 and 44 are more likely to be affected by financial stress.

Offering financial guidance as a workplace benefit could be valuable to both your employees and the business. Here are three reasons why.

1. You could help employees take control of their finances

Money concerns might affect more of your employees than you think.

According to research from National Debtline, almost half of UK adults started 2024 worrying about money, with 9% stating they felt unable to cope because of their finances. As high inflation continues to place pressure on households, nearly a third expect their finances to be worse by the end of 2024.

For some employees, meeting with a financial planner could identify steps they may take to improve their financial situation, or they might find they’re in a better position than they believe. As well as supporting daily money concerns, a financial plan could also address long-term worries, like whether they’re saving enough for retirement.

You might also want to signpost employees to organisations, such as StepChange, that could offer support if they’re struggling with debt.

If employees are taking time off work or experiencing lower productivity because they’re worried about finances, offering financial advice that’s either delivered to your team or on a one-on-one basis could have a direct effect on your business’s bottom line.

2. You can use financial guidance to highlight the benefits you provide

As an employer, you might offer financial benefits to your employees. Financial guidance offers a great opportunity to draw attention to them.

Taking the time to explain perks like salary sacrifice schemes, additional pension contributions, or group protection could mean more of your team makes use of them. Some of your employees may not know about all your workplace benefits, and others might not understand why they could be valuable to them.

Other perks could support reducing financial stress among your team too. For instance, providing access to a therapist may help them learn better ways to cope when they feel stressed.

Not only could discussing perks ease some of the financial concerns your employees may be facing, but it may benefit your business too. Being aware of workplace benefits could boost job satisfaction and improve employee retention.

We could work with you to review the financial workplace benefits you offer and improve awareness of them among your employees.

3. You could demonstrate you value your employees’ wellbeing

Don’t underestimate the importance of ensuring your employees feel valued – it could play an essential part in their job satisfaction and how long they remain part of your business.

Indeed, a 2023 survey published in People Management found that half of UK workers said they would prefer to have “great relationships” at work than a 10% pay increase. Demonstrating that your employees’ concerns are important to you could help improve relationships and how they view the business.

Contact us to talk about the financial wellbeing of your employees

If you’d like to discuss how we could improve the financial wellbeing of your employees, please contact us.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Workplace pensions are regulated by The Pension Regulator.

More than 1 million investors are expected to pay Dividend Tax for the first time in 2024/25

More than 1 million investors will be hit with a Dividend Tax bill for the first time in the 2024/25 tax year, according to an AJ Bell report. Read on to find out if you could be affected and discover some of the steps you could take to mitigate a tax charge.

A dividend is a way of distributing a company’s earnings to shareholders. Usually, dividends are issued quarterly, but some businesses may pay dividends monthly or annually. So, if your money is invested in a dividend-paying company or fund, you could receive regular cash payments from them.

Dividends from investments are not guaranteed. Companies may reduce or cut dividends if profits fall or the business faces risks.

Some business owners also choose to use dividends as a tax-efficient way to extract money from the company.

Dividends may play an important role in your financial plan and could supplement income from other sources. However, changes to the Dividend Allowance could mean your tax bill is higher than expected.

The Dividend Allowance will fall to £500 on 6 April 2024

In the 2022/23 tax year, you could receive up to £2,000 in dividends before Dividend Tax was due.

The Dividend Allowance fell to £1,000 for the 2023/24 tax year. The AJ Bell report suggests this meant an extra 635,000 people paid Dividend Tax. The Dividend Allowance will halve again on 6 April 2024 to just £500 – a move that is forecast to drag a further 1.15 million investors into the tax net for the first time.

The amount of tax you pay on dividends that exceed the Dividend Allowance will depend on which Income Tax band(s) the dividend falls within once your other income is considered. For the 2023/24 tax year, the tax rates on dividends are:

  • Basic-rate: 8.75%
  • Higher-rate: 33.75%
  • Additional-rate: 39.35%.

So, even though the Dividend Allowance is less generous than it once was, the tax rate you pay could still be lower than Income Tax.

5 practical ways you could lower your Dividend Tax bill

1. Review your total income

Managing the income you receive from other sources could help you avoid a Dividend Tax bill or reduce the rate of tax you pay.

If dividends fall within your Personal Allowance, which is £12,570 in 2023/24 and 2024/25, they will not be liable for tax. Similarly, ensuring your total income doesn’t push you into the higher- or additional-rate tax bracket could mean you benefit from a lower tax rate.

2. Plan as a couple to use both of your Dividend Allowances

If you’re planning with your spouse or civil partner, it’s important to note that the Dividend Allowance is per individual.

As a result, passing on some dividend-paying assets to your partner could mean you’re able to utilise both of your Dividend Allowance and collectively receive £1,000 in 2024/25 before tax is due.

3. Hold dividend-paying assets in an ISA

An ISA is a tax-efficient wrapper for your savings and investments.

Dividends that you receive from investments that are in an ISA will not be liable for Dividend Tax and won’t impact your Dividend Allowance. In addition, the profits you make when selling investments in your ISA are free from Capital Gains Tax (CGT).

In the 2023/24 tax year, you can add up to £20,000 to ISAs.

4. Use your pension to invest for your retirement

If you’re investing for your retirement, pensions may provide you with a tax-efficient way to invest. Investments held in a pension are not liable for Dividend Tax or CGT. In addition, you’ll receive tax relief on your pension contributions.

Remember, you cannot usually access your pension before the age of 55, rising to 57 in 2028. As a result, it’s important to consider your investing goals and time frame, as a pension may not be appropriate for you.

In 2023/24, you can usually add up to £60,000 to your pension (or 100% of your earnings, if lower) without incurring an additional tax charge. If you’ve already accessed your pension flexibly or are a high earner, your pension Annual Allowance may be lower.

5. Assess alternative ways to boost your income

Dividends are a popular way to boost your income, but there are other options you might want to explore too.

For example, payouts from bonds may be classed as interest and could supplement your income. Interest may be liable for Income Tax, but the Personal Savings Allowance (PSA), the amount of interest you can earn in a tax year before tax may be due, could mean it’s a useful option for you.

Your PSA depends on the rate of Income Tax you pay. In 2023/24, the PSA is:

  • £1,000 for basic-rate taxpayers
  • £500 for higher-rate taxpayers
  • £0 for additional-rate taxpayers.

Another option is to invest in non-dividend paying stocks or funds with the long-term goal of selling the assets for profit. The money you make selling investments held outside of a tax-efficient wrapper may be liable for CGT. However, the rate you pay could be lower than Dividend Tax and the Annual Exempt Amount could help you avoid a bill.

In 2023/24, the Annual Exempt Amount means you can make up to £6,000 profit before CGT is due. This allowance will halve to £3,000 in the 2024/25 tax year.

If CGT is due, the rate you pay will depend on which tax band(s) the taxable gains fall into when added to your other income. In 2023/24:

  • If you’re a higher- or additional-rate taxpayer your CGT rate would be 20% (28% on gains from residential property)
  • If you’re a basic-rate taxpayer, you may benefit from a lower CGT rate of 10% (18% on gains from residential property) if the taxable amount falls within the basic-rate Income Tax band.

Keep in mind that investment returns cannot be guaranteed. The value of investments can fall as well as rise.

Contact us to talk about your tax strategy for 2024/25

Using tax allowances and being aware of different options could reduce your overall tax liability. Please contact us to discuss your tax strategy for the 2024/25 tax year and beyond.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

Are you risking a pension shortfall by overlooking longevity?

Multi-generation family having dinner together.

A survey suggests that some retirees could risk running out of money during their lifetime because they haven’t considered how long their assets need to last. Failing to factor longevity into your retirement plan could mean your later years don’t live up to expectations or you may face financial insecurity.

The report published in IFA Magazine found a worrying 68% of Brits have not thought about how many years of retirement they need to fund.

It’s an oversight that could mean you don’t put enough away for retirement during your working life and may not spot the potential gap until it’s too late. Or that you unintentionally withdraw too much from your pension during the start of your retirement.

The average person could spend two decades in retirement

The survey found that most people expect to retire between the ages of 65 and 69. Data from the Office for National Statistics (ONS) suggests the average person could spend at least two decades in retirement.

A 65-year-old man has an average life expectancy of 85. For women of the same age, it’s 87. As life expectancy has increased, younger generations are likely to spend even longer in retirement if they plan to stop working in their late 60s.

However, creating a retirement plan based on the average life expectancy could still leave you facing a significant shortfall.

A quarter of 65-year-old men are expected to celebrate their 92nd birthday, and 1 in 10 will reach 96. If they only planned for a 20-year retirement, they could find they don’t have enough money to maintain their lifestyle in their later years.

Similarly, a quarter of 65-year-old women are expected to live to 94, and 1 in 10 could reach 98.

Retirees today often need to consider how they’d cope financially if they live to become centenarians to create long-term financial security and peace of mind. With retirements that span decades becoming the norm, it’s more important than ever that those nearing the milestone consider longevity.

A retirement plan could help you create a sustainable income

Understanding what income you can take sustainably from your pension or other assets in retirement can be difficult. After all, you don’t know exactly how long you need to create an income for.

Another key challenge is that your income needs might not stay the same throughout retirement.

Indeed, inflation alone is likely to affect your outgoings even if your lifestyle remains the same. Even when inflation is stable, the rising cost of living may compound. The Bank of England’s inflation calculator shows how your income would need to grow to maintain your lifestyle.

Between 2003 and 2023, inflation averaged 2.8% a year. That might seem relatively small, but it can have a huge effect on your essential and discretionary spending. If you retired in 2003 with an income of £30,000, to simply maintain your spending power, it would need to have grown to more than £52,000 a year in 2023.

There are other reasons why you might want to adjust your income in retirement too, such as:

  • Changing your lifestyle
  • Paying for care
  • Financially supporting loved ones.

Working with a financial planner to create a retirement plan that’s tailored to you is a step that could ensure you’re financially secure throughout retirement and offer peace of mind.

We’ll be able to work with you to explore the different options and assess which ones are appropriate for you. For instance, if you’re worried about running out of money and would prefer a reliable income, we may offer advice about annuities, which could provide a guaranteed income for the rest of your life. Or if you want to take a flexible income that you can adjust to suit your needs, we can work with you to understand how you might manage risks.

A retirement plan may also address concerns you might have, such as how your partner would cope financially if you passed away or what would happen if your investment portfolio experienced volatility.

Contact us to discuss how you could create financial security in retirement

The thought of running out of money in your later years could make planning your retirement seem like a daunting prospect. Luckily, we’re here to offer you guidance as you near the milestone and then settle into your new life.

As part of your retirement plan, we’ll help you consider how to create long-term financial security using your pension and other assets, as well as other areas, from how you could improve your tax efficiency to setting out your wishes in a will.

Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.