Author: Talking Finances

There’s more to being a successful investor than following the latest market trends and tips. Setting out a strategy that’s right for you could allow you to balance risk against your goals.

Last month, you read about the importance of defining what success means for you. With your goals outlined, you can start to think about an investment strategy. Here are some of the factors you may need to consider.

The guide to creating an investment strategy that suits your needs

To be a successful investor, you may think you simply need to choose the “best” shares that will deliver the highest returns. However, it’s impossible to consistently pick the top performers, as numerous factors affect outcomes.

Indeed, according to research from Schroders (29 August 2024), in 12 of the 18 years between 2006 and 2024, no US stock that was a top 10 performer in one year also made the top 10 the following year. Even staying in the top 100 was rare – an average of 15 companies each year managed to do so for two consecutive years.

Instead, creating a strategy that suits your needs could provide long-term investment success. The following steps could help.

Go back to your investment goal

In last month’s blog, you read about why it’s important to set an investment goal. As you start to think about your investment strategy, going back to your goal may be useful.

Your goal might affect factors such as your investment time frame or the level of risk that is right for you.

Decide how much you will invest

To create an investment strategy, you need to define your starting point.

• How much do you plan to invest?
• Will you invest a single lump sum or drip-feed investments over a longer time frame?

Answering these two essential questions could help you compare the expected returns with the amount you need to reach your goals.

Understand your risk profile

All investments carry some risk. However, risk can vary significantly between opportunities, and it’s important that you select investments that align with your risk profile.

As a general rule, the longer your money is invested, the more risk you can take. This is due to a longer time frame providing more opportunities for investments to recover if they experience a dip.

However, time frame isn’t the only factor to consider when deciding how much risk is appropriate. You may also factor in the other assets that you hold, your reason for investing, and your ability to withstand financial losses. Your financial planner can work with you to help clarify your risk profile.

As well as financial factors, you might also want to consider your investment mindset. If you’re worried about losing money and could respond emotionally if markets experience volatility, you might opt for a more risk-averse approach. Again, your financial planner can offer guidance about what’s right for you and give you confidence in your investment strategy.

Ensure your investments are diversified

Once you’ve created an investment profile, you may start to look at what investments align with it.

Rather than investing in a handful of assets, most investors can benefit from diversifying their investment portfolio. This means investing in a range of asset classes, regions, and sectors.

Diversifying allows you to spread investment risk. So, if one company performs poorly, this may be balanced out by stability or gains in other areas of your investment portfolio.

Investment funds might provide a simple way for investors to diversify their portfolios. A fund will pool your money with that of other investors to invest in a range of companies and assets in line with its objectives.

Working with a financial planner who understands your goals means they can advise you on which investments or funds could create a balanced portfolio that’s right for you.

Contact us to talk about your investments

If you’d like to work with us to create your investment strategy, or have us review your existing one, please get in touch to arrange a meeting.

Next month, read our blog to find out what comes after creating your investment strategy – for many investors, it involves patience and focusing on their end goal.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Any links will direct to a third-party website and Talking Finances is not responsible for the accuracy of the information contained within linked sites.

When chancellor Rachel Reeves delivered the Budget in November 2025, you might have breathed a sigh of relief that Income Tax rates weren’t increasing. However, fiscal drag could still harm your finances over the long term.

Fiscal drag occurs when tax thresholds aren’t increased in line with wages or inflation, and is sometimes dubbed a “stealth tax”. Over time, more people are dragged into a higher tax bracket, so tax revenues increase without the government officially raising tax rates.

Income Tax thresholds are frozen until April 2031

In the Spring 2021 Budget, then Chancellor Rishi Sunak announced that the Personal Allowance and the higher-rate threshold would be frozen for four years.

This freeze has been extended several times, most recently by Reeves. The latest update means the thresholds for paying Income Tax will remain as they are until April 2031.

In the 2025/26 tax year, the Income Tax thresholds in England, Wales, and Northern Ireland are:

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	More than £125,140	45%

 

On the surface, freezing the thresholds might seem as though it will make little difference to your Income Tax liability.

However, the Office for Budget Responsibility (26 November 2025) calculates that freezing personal tax thresholds will raise an additional £8.3 billion in tax revenue by 2029/30, with £7.6 billion of this coming from Income Tax.

It’s estimated that the freeze will push around 920,000 workers into the higher-rate Income Tax band, and an additional 4,000 workers into the additional-rate band.

Fiscal drag could affect other areas of your finances

It’s not just the Income Tax thresholds that are frozen.

During the Budget, Reeves announced she had also extended the freeze on Inheritance Tax (IHT) thresholds by a year to April 2031.

This means that as the value of your assets rises, more of the wealth you leave behind for loved ones could be liable for IHT. So, it might be important to review your estate plan and consider how you might pass on wealth tax-efficiently.

In addition, the total ISA subscription limit is also frozen at £20,000 until 2031. Notably, there were greater changes affecting Cash ISAs unveiled in the Budget. From April 2027, the amount you can place in a Cash ISA each tax year will fall to £12,000 for savers under 65.

The Junior ISA subscription limit is also frozen at £9,000 until 2031.

The Budget documents suggest the IHT threshold freeze will raise £2.355 billion in tax by 2029/30, while the ISA subscription limit freeze will boost the Treasury by £605 million over the same period.

Other tax thresholds haven’t officially been frozen but have failed to keep pace with inflation.

For example, the annual exemption is an amount you can gift each tax year and will be considered immediately outside of your estate for IHT purposes. In 2025/26, the annual exemption is £3,000 – it’s been at this level since 1981.

According to the Bank of England’s inflation calculator, if the annual exemption had increased by inflation each year, it’d be worth more than £11,600 in November 2025.

A financial plan could help reduce your tax liability

You can’t change the tax thresholds, allowances, or freezes, but there might be steps you can take to reduce the effect they have on your finances.

For example, you might choose to increase your pension contributions to reduce your taxable income. This could prevent you from being dragged into a higher Income Tax band. While your take-home pay would be lower, it could support your retirement goals and manage your tax liability.

We can help you understand your current tax position and what steps you might take to reduce your overall tax liability, with your circumstances and goals in mind.

Please contact us to speak to a member of our team.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

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.

Any links will direct to a third-party website and Talking Finances is not responsible for the accuracy of the information contained within linked sites.

In the Autumn Budget 2025, the chancellor announced that Inheritance Tax (IHT) thresholds would remain frozen for a further year, until 2031.

Upcoming changes will also see unused pensions included in an estate for IHT purposes for the first time from April 2027.

These measures could see estates facing a larger IHT liability, or coming into the scope of IHT when they may previously have been exempt.

Research has suggested that families concerned about being caught in the IHT net are taking steps to mitigate their bills. According to MoneyAge (6 October 2025), 23% of people are planning to give away money to reduce their IHT bill, with 8% saying they would even give away their home.

While gifting can help to lower your IHT liability, it’s not always a simple or straightforward solution.

Read on to discover five things you need to know before you consider gifting as part of your financial strategy.

Understanding the current Inheritance Tax landscape can help you clarify whether your estate is likely to incur any liability

There are a number of rules surrounding IHT, and having a grasp of them can help you decide whether gifting could be a beneficial option.

The current nil-rate band, the amount you can pass on free from IHT, is set at £325,000 (now frozen until 2031). This means that anything above £325,000 will be taxed at 40%.

However, the residence nil-rate band offers an extra allowance of £175,000 if you leave your main residence to your children or grandchildren (this can include those you’ve adopted or fostered, or stepchildren).

Together, these two thresholds mean that you could have an estate worth £500,000 free from IHT.

In most cases, anything you leave to your spouse or civil partner, even above the threshold, is free from IHT.

You can also transfer your allowances to your spouse or civil partner when you die, or they can do the same for you. This means that, in some cases, a couple could have a £1 million estate they can leave without generating an IHT bill.

Gifting is a popular way to reduce the value of an estate to bring it below these thresholds.

However, it’s not as simple as just giving your money away, and the government has introduced rules to prevent people from simply offloading their wealth to avoid IHT.

1. Gifts aren’t automatically exempt from Inheritance Tax

You can gift up to £3,000 annually free from IHT, and you can also make smaller one-off gifts of up to £250 per person. Gifts of any amount to your spouse or civil partner are also IHT-free.

Gifts above £3,000 are usually known as potentially exempt transfers (PETs), which means they only become fully exempt from IHT after seven years.

In some cases, PETs can be eligible for taper relief over the seven years, with the level of IHT applied dropping incrementally until it reaches 0%.

Another option is to make regular gifts, as opposed to lump sums, out of your everyday income. These can be tax-free if they meet three specific criteria.

• They are regular, forming part of your normal expenditure.
• Gifts are made from your income, such as pension, rental, or dividend income.
• You can still maintain your usual standard of living after making the gift.

Talk to us to find out if making any of these gifts could help to lower your IHT liability.

2. Gifting could potentially affect your long-term finances

You need to give careful consideration to how much you’re gifting, so that your generosity doesn’t leave you short in later years.

The rising cost of living means you may need to factor in an increased income to cover your everyday expenditure and household bills.

Health and care costs are another significant later-life consideration. It’s impossible to know if you’ll need care, or to what extent, but care costs in particular can really whittle away your wealth.

According to the UK Care Guide (1 October 2025), the average cost of a live-in home carer ranges from £650 to £1,500 per week, while average care home fees range from £27,000 to £39,000 per year, with costs rising further if you need nursing care.

It’s always a good idea to talk to your financial planner before gifting, to ensure your strategy is robust enough to withstand inflation and potential care costs.

3. There could be challenges associated with gifting certain assets

While gifting your home may seem both extremely generous and a logical way to mitigate IHT, there can be some complications you need to navigate.

If you plan to continue living in your home, this will be considered a “gift with reservation of benefit” and will still count as part of your estate for IHT purposes.

However, if you pay full market rent (not just a nominal amount), this can remove the property from your estate, but you need to be willing and able to make rental payments.

4. Is the gift right for your loved ones?

While gifting is a generous gesture, it’s always worth checking that it won’t backfire. For example, if you make large gifts to your adult children, they could potentially push them into a higher tax bracket or make them no longer eligible for benefits.

If you gift them your property, as well as the issues outlined earlier, they could face a Capital Gains Tax (CGT) bill if it isn’t their main residence and they sell it.

Doing some due diligence before making any gifts can ensure they’re beneficial for the intended recipient.

5. Could there be a more tax-efficient way to pass on your wealth?

Gifting isn’t always the most tax-efficient way to pass on your wealth, either. In some cases, putting some of your wealth into a trust can be an option to remove it from your estate.

You could also take out a life insurance policy, which is then written in trust. The policy would then pay directly to the trustees, rather than your estate, and can be used to pay an IHT bill.

Trusts can be extremely complex, and we’d always urge you to take financial advice before proceeding.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. 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 estate planning, tax planning, or trusts.

With the festivities of 2025 now at a close, you’ve likely already started thinking about the year ahead.

Indeed, 2026 brings the opportunity to reflect on what you hope to achieve over the coming months.

You may wish to become more active, better manage your finances, or simply dedicate more time to your hobbies. Whatever you want to achieve in 2026, setting yourself goals is an admirable way to start the year.

However, setting goals for yourself is only half the battle. Sticking to them as the year progresses can be just as challenging, if not more so.

Thankfully, there are practical ways to stay on track and ensure your goals become a reality. Continue reading to discover seven motivational tips to help you achieve your ambitions in 2026.

1. Be realistic about your goals

One of the most effective ways to maintain motivation is to ensure your goals are attainable from the start.

While it can be tempting to set life-changing targets, expectations that are too high could quickly lead to frustration.

Instead, you may want to consider your current lifestyle before deciding on goals. This could help you set realistic milestones you can steadily progress towards without feeling overwhelmed, giving you a better chance of sticking to your goals through the end of the year.

2. Start small and work your way up

If your attainable goals feel daunting, consider breaking them into smaller, more manageable steps.

For instance, if you aim to be more active, you don’t need to commit to an intense workout every day.

Instead, you could start with a short walk or a brief exercise session to help you build a consistent habit without excessive pressure.

As these smaller actions become part of your daily routine, you can gradually increase your efforts, bolstering your confidence over time.

3. Measure your progress

When you’re working towards a long-term goal, it’s easy to lose sight of how far you’ve already come.

Measuring your progress can provide a helpful perspective and remind you that your hard work is already paying off.

You could keep a journal or use a dedicated app to track your achievements. Simply seeing a physical record of your consistency can be incredibly rewarding, especially when your motivation starts to fade.

4. Celebrate the wins, no matter how small

It’s vital to recognise your successes as you move through 2026, rather than waiting until the end of the year.

Acknowledging even small milestones can provide positive reinforcement that keeps you moving forward.

For example, you might have reached a savings milestone or completed a month of healthy eating. Taking the time to reward yourself can make your journey more enjoyable and remind you that your efforts are worthwhile.

5. Be kind to yourself if you falter

Despite your best intentions, there may be times throughout the year when your plans don’t go perfectly.

However, it’s vital to note that temporary setbacks don’t mean you’ve failed. Think of it this way: if you are managing to achieve your goals more than 70% of the time, you would still be doing enough to get a first in university.

You shouldn’t be overly critical if you do drift from your goals from time to time. Instead, be kind to yourself, as this could help you preserve your energy for future progress, rather than dwelling on the past.

6. Ask yourself “why?”

Thinking carefully about the underlying reasons for your goals can offer a powerful boost to your motivation.

When you feel you’re drifting from your goals somewhat, reminding yourself of the positive impacts they’ll have on your life could help you stay disciplined.

For instance, if you’re looking to manage your finances better, your “why” might be the peace of mind that typically comes with financial security.

Keeping this purpose at the forefront of your mind could make the journey more meaningful.

7. Picture the end result

As the months pass, you might find it helpful to visualise what your success could look like at the end of the year.

This can be especially beneficial when you start to feel distracted.

Picturing the confidence, health, or security you hope to achieve could help reset your thoughts and restore your motivation.

Any links will direct to a third-party website and Talking Finances is not responsible for the accuracy of the information contained within linked sites.

Love is in the air with Valentine’s Day just around the corner. Amid planning romantic gestures, thinking about combining your financial plan with your partner’s could be valuable.

Talking about finances might seem too practical for a day that’s about celebrating love. Yet, it could support your relationship. Here are two reasons why you might want to create a single financial plan with your partner.

1. Work towards shared goals

If you’re planning to spend the future with someone, you want to ensure you’re both on the same page about your life goals. A financial plan can help you set out what these goals are and the steps you might take to achieve them.

Mismatched goals could mean you not only miss out on achieving them, but also place pressure on your relationship.

If your priority is saving for retirement while your partner focuses on spending now, it may lead to money arguments because you have conflicting goals. A financial plan can help you have important conversations about what you’re working towards.

According to a MoneyWeek article (26 August 2025), almost three-quarters of savers say they plan to rely on their partner’s pension to help fund retirement.

If these couples haven’t spoken about how they’ll create an income in retirement, they could face a shortfall and potentially financial insecurity later in life.

In contrast, if they’ve spoken about how they’ll combine their pension savings, they could approach the milestone with greater confidence.

2. Use both of your tax allowances

Many tax allowances are for individuals. As a result, by planning together, you could reduce your combined tax bill.

For example, interest earned on savings held outside of a tax-efficient wrapper, like an ISA, could be liable for Income Tax. If you’ve used your ISA allowance, which is £20,000 in 2025/26, you could place a portion of your savings into your partner’s ISA to minimise the amount of tax you pay.

Similarly, you could pay into your partner’s pension so the contributions benefit from tax relief, if you’ve already used your own pension annual allowance.

It’s important to keep in mind what would happen if the relationship broke down after you’d placed assets in your partner’s name. You might decide it’s not the right option for you, even if it could reduce your tax bill.

If you’re married or in a civil partnership, planning together could come with other tax benefits as well.

For example, if you or your partner earns below the Personal Allowance (£12,570 in 2025/26), you may be able to transfer some of the unused amount to reduce the amount of Income Tax you pay as a couple overall.

Additionally, when you’re creating an estate plan, you can pass on assets to your spouse or civil partner without being liable for Inheritance Tax (IHT). Unused IHT allowances can also be passed to your spouse or civil partner to increase the amount they can leave to loved ones before IHT might be due.

Creating a financial plan with your partner could help improve your tax position now and in the future. However, it’s important to note that taxation can be complex, so seeking professional advice can help you understand what steps may be appropriate for you.

Your financial plan can be tailored to suit you and your partner

Combining your financial plan with your partner’s doesn’t mean that you have to merge every aspect of your finances. You can create a balance that’s right for you.

Some couples prefer to share all assets, while others are more comfortable if some assets remain theirs. You might even decide to keep hold of all your individual assets and use a financial plan to ensure you’re both working towards the same future.

A financial plan can be tailored to you and adjusted as your goals and relationship change.

Get in touch to talk about combining your financial plans

Whether you want to combine finances completely or keep some assets separate, we can help you and your partner create a financial plan that suits your relationship. Please contact us to arrange a meeting.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

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.

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.

Any links will direct to a third-party website and Talking Finances is not responsible for the accuracy of the information contained within linked sites.

A third of people don’t know how much they need to contribute to their pensions every year to create a comfortable retirement, according to a MoneyAge article (11 November 2025).

Striking the right balance with pension contributions is important. Contribute too little, and you could leave yourself short in retirement. If you contribute as much as possible to your pension now, you might miss other goals or place pressure on your day-to-day budget.

So, asking “how much should I be paying into my pension each year?” is sensible.

You might have read answers to this question that apply a general rule to everybody, such as a certain percentage of your income or a target amount you should have at a particular age.

However, the reality is that there isn’t a simple answer that can be applied to everyone. A range of factors, from your current age to your desired retirement lifestyle, will affect how much you need in retirement.

Here’s a step-by-step guide on how to calculate what you may want to add to your pension.

1. Review your current pension and other assets

If you’re already contributing to a pension, or have in the past, gather your statements so you can understand your current position. The savings you’ve already made will act as a foundation for your future contributions.

Don’t forget to check for lost pensions. According to Pensions UK (24 October 2024), as much as £31.1 billion is sitting in unclaimed pension pots across the UK. Take some time to check if you’ve got any gaps – you might find a lost pot that could boost your retirement.

In addition to your pension, you may have other assets you plan to use to fund retirement, such as savings or investments held outside a pension, which you may want to include in this step.

2. Decide when you’d like to retire

When you want to retire will have a direct effect on how much you’ll need to save. If you hope to retire early, keep in mind that you’ll need to create an income for longer, and you may not receive any State Pension until you’ve been retired for some time.

3. Set out your desired retirement lifestyle

To accurately set a pension target, you need to understand what kind of lifestyle you hope to enjoy in retirement. If you’re envisioning plenty of luxury holidays, a new car every few years, and trips with friends, you’ll need to save more than if you’re happy with a more moderate lifestyle.

With a lifestyle set out, you can start to consider how much you’ll need as a regular income to maintain it. Remember to factor in unexpected costs and the effect inflation is likely to have on your cost of living.

With an estimated required annual income, you can work out how much you’ll need in your pension by considering how long you’ll spend in retirement.

It’s wise to look beyond the average life expectancy, as doing so could leave you facing financial difficulty if you live for longer. The Office for National Statistics life expectancy calculator (14 February 2025) suggests a woman aged 65 has an average life expectancy of 88. However, there’s also a 1 in 4 chance she’ll celebrate her 94th birthday.

4. Review how your pension will grow

The good news is you don’t need to contribute the total amount you need to secure your desired lifestyle.

First, your pension contributions benefit from tax relief at your marginal rate of Income Tax.

Assuming you don’t exceed the pension Annual Allowance (£60,000 in 2025/26 or 100% of your annual income, whichever is lower), you’d only need to contribute £80 to increase your pension by £100 as a basic-rate taxpayer. If you’re a higher- or additional-rate taxpayer, the amount you’d need to contribute would fall to £60 and £55 respectively.

Second, your pension is usually invested with the aim of delivering long-term growth.

As you’ll often be investing through a pension for decades, the compounding effect of investment returns can help your pension grow significantly over time.

However, it’s important to note that investment returns cannot be guaranteed.

5. Assess how much your pension contributions need to be

With all this information, you can work backwards to calculate how much you’d need to add to your pension each year to achieve your desired lifestyle.

Using a cashflow model as part of your financial plan can help you bring all this data together and visualise how your wealth might change. For example, you might model how your pension would grow if you increased your contributions by 2% compared to 4%.

You can also model other scenarios, such as the age you’ll retire and changing your income needs.

Regular pension reviews can help make sure you’re on track. The outcomes of a cashflow model cannot be guaranteed, but it can be useful when you’re trying to answer the question “how much should I contribute to my pension?” and others like it.

Work with us to create a retirement plan

Calculating how much you should contribute to your pension each year is just one part of your retirement plan. You might also need to know how the money will be invested when it’s in your pension, or how to access the savings when you’re ready to create an income.

We can work with you to create a complete retirement plan to prepare for the next chapter of your life.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

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.

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.

The Financial Conduct Authority does not regulate cashflow modelling.