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Chancellor Rachel Reeves delivered the new Labour government’s first Budget on 30 October 2024. Amid the announcements were key changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT) that could affect your financial plan.

Ahead of the Budget, prime minister Keir Starmer said it would be “painful” as there was a £22 billion black hole in the public finances. Indeed, Reeves went on to announce measures that would raise annual tax revenues by £40 billion by 2030.

Some of these taxes will be paid by businesses, but others could affect your personal finances. Here are two changes you might want to consider when reviewing your financial plan.

1. The main rates of Capital Gains Tax have increased

There was a lot of speculation that Reeves would announce changes to CGT. In the Budget, she revealed the rates would indeed rise. It could mean you pay more tax than you expect when selling assets.

CGT is a type of tax you pay if you make a profit when you dispose of assets such as:

• Investments that are not held in a tax-efficient wrapper, like an ISA
• Personal possessions worth more than £6,000 (excluding your car)
• Property that is not your main home
• Business assets.

In 2024/25, you can make profits of up to £3,000 before CGT is due. This is known as the “Annual Exempt Amount”. If profits exceed this threshold, you may be liable for CGT.

The changes Reeves announced to CGT rates came into effect immediately on 30 October 2024. The rate of CGT you pay depends on your other taxable income. If you’re a:

• Higher- or additional-rate taxpayer, your CGT rate has increased from 20% to 24%
• Basic-rate taxpayer, you may benefit from a lower CGT rate of 18%, which has increased from 10%, if the taxable amount falls within the basic-rate Income Tax band.

So, it might be more important than ever to consider how to reduce your CGT liability as part of your financial plan. For example, you may:

• Spread disposing of assets over several tax years
• Focus on increasing investments held in a tax-efficient wrapper
• Pass on assets to your spouse or civil partner to make use of their Annual Exempt Amount.

We could work with you to understand if you may be liable for CGT and the steps you might take to mitigate a large or unexpected tax bill.

2. Your pension may form part of your estate for Inheritance Tax purposes

Currently, your pension isn’t usually included in your estate for IHT purposes. As a result, you may have planned to use other assets to fund your later years so you could pass on wealth tax-efficiently through your pension.

However, Reeves announced she would close this “loophole” that gives pensions preferable IHT treatment.

From 6 April 2027, your unspent pension pot will be included in your estate when calculating an IHT liability. The change could mean the number of estates that pay IHT doubles.

Under the existing rules, around 4% of estates are liable for IHT and it raises about £7 billion a year for the government. However, the Budget states that bringing pensions into the scope of IHT will affect around 8% of estates each year. Reeves added the changes would boost IHT receipts by £2 billion a year by the end of the forecast period (2029/30).

So, if you haven’t previously considered IHT as part of your estate plan, you may need to now.

The threshold for paying IHT is known as the nil-rate band and is £325,000 in 2024/25. In most cases, you can also use the residence nil-rate band if you pass on your main home to a direct descendant. In 2024/25, the residence nil-rate band is £175,000.

In addition, you can pass on unused allowances to your spouse or civil partner. In effect, that means, as a couple, you could leave behind up to £1 million before IHT may be due.

It’s important to note that both the nil-rate band and residence nil-rate band are frozen until 6 April 2030 and will not rise in line with inflation.

As a result, you might need to consider how the value of your assets will change and whether growth could affect what you’ll leave behind for loved ones.

Previously, you may have increased pension contributions to build up a tax-efficient nest egg that you could leave to your family when you pass away. A financial review could help you assess if it’s still the right option for you in light of the changes.

Get in touch to talk about the impact the Budget could have on your plans

If you’d like to discuss how the Autumn Budget could affect your finances and how you might keep your plans on track, please get in touch. We can work with you to create a tailored plan that reflects the changes and aligns with your aspirations.

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 estate planning or tax planning.

Almost four months after Labour won the general election, chancellor Rachel Reeves has delivered her 2024 Autumn Budget, outlining the government’s plans for this tax year and beyond.

Arguing that the July general election had given Labour a “mandate to restore stability and start a decade of renewal”, Reeves described it as “a Budget to fix the foundations and deliver change”.

Against a backdrop of a manifesto pledge not to increase Income Tax, employee National Insurance, or VAT, Reeves also announced that her Budget would raise taxes by £40 billion, stating that any other chancellor would “face the same reality”.

Read on for a summary of some of the key measures and announcements from this year’s Autumn Budget – the first ever delivered by a woman – and what they might mean for you.

Extra investment in infrastructure

The chancellor argued that “the only way to drive economic growth is to invest, invest, invest.”

In the run-up to the Budget, Reeves announced she was making a technical change to the way debt is measured, which will allow the government to fund extra investment. This wider debt measure will allow for more borrowing to invest in big building projects such as roads, railways, and hospitals.

It’s important to note that this additional room for manoeuvre for spending on investment projects will not be used to support day-to-day spending, as the chancellor has committed to fund that with tax receipts.

A rise in employer National Insurance contributions

As many analysts had predicted, Reeves increased employer National Insurance (NI) rates by 1.2% from 13.8% to 15%, effective 6 April 2025.

Currently, employers pay NI only above a threshold of £9,100 a year. The chancellor reduced this threshold to £5,000 a year, effective 6 April 2025. The threshold will remain at £5,000 until 6 April 2028 and then increase in line with the Consumer Prices Index (CPI) thereafter.

These reforms will raise £25 billion a year by the end of the forecast period (2029/30).

At the same time, the government is increasing the Employment Allowance.

The current Employment Allowance gives employers with NI bills of £100,000 or less a discount of £5,000 on their employer NI bill.

From 2025, the Employment Allowance will rise to £10,500. Moreover, the government will expand the Employment Allowance by removing the £100,000 eligibility threshold so that all eligible employers now benefit.

Taken together, the government says that 865,000 businesses will pay no NI contributions at all, and more than half of employers with NI liabilities will either see no change or will gain overall next year.

An end to the freeze on Income Tax thresholds from 2028

Back in 2021, the then-chancellor, Rishi Sunak, raised both the Personal Allowance and the threshold at which higher-rate Income Tax is due by £70 and £270 respectively.

Importantly, however, he also fixed these thresholds until 2026. Then, in the 2022 Autumn Statement, Jeremy Hunt extended this freeze until 2028.

Unexpectedly, Reeves decided against extending the freeze beyond 2028. From 2028/29, personal tax thresholds will be uprated in line with inflation once again.

Capital Gains Tax reforms

The chancellor announced several changes to the Capital Gains Tax (CGT) regime.

Firstly, as of 30 October, the main rates of CGT have increased. The basic rate has risen from 10% to 18% and the higher rate has increased from 20% to 24%.

The government will maintain the lifetime limit for Business Asset Disposal Relief (BADR) – formerly Entrepreneurs’ Relief – at £1 million. Meanwhile, the lifetime limit for Investors’ Relief (IR) will be reduced from £10 million to £1 million.

The BADR and IR rate of CGT will continue to be charged at 10%, before rising to 14% on 6 April 2025 and 18% on 6 April 2026.

These measures will raise £2.5 billion a year by the end of the forecast period.

Furthermore, CGT on carried interest – paid by private equity managers – will rise from 18% (basic rate) and 28% (higher rate) to 32% from 6 April 2025. There will be further reforms from April 2026 to bring carried interest within the Income Tax framework, under bespoke rules.

Changes to some Inheritance Tax reliefs

As expected, the chancellor made key announcements that could affect estate planning.

Nil-rate bands

The freeze on IHT thresholds will be extended by an additional two years, to 2030. The nil-rate band and residence nil-rate band will remain at £325,000 and £175,000 respectively.

Pensions

Reeves announced she was closing the “loophole” that gives pensions preferable IHT treatment. She will bring unused pension funds and death benefits payable from a pension into a person’s estate for IHT purposes from 6 April 2027.

The government estimates this measure will affect around 8% of estates each year.

Agricultural Property Relief

Currently, individuals can claim up to 100% relief on agricultural property (land or pasture that is used to grow crops or rear animals).

From 6 April 2026, the first £1 million of combined business and agricultural assets will continue to attract no IHT at all. However, for assets above this threshold, IHT will apply with 50% relief.

Business Property Relief

From 6 April 2026, the government will also reduce the rate of Business Property Relief from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as the AIM.

ISA subscription limits frozen until 2030

Prior to the Budget, there was speculation that the chancellor may make changes to simplify the ISA regime.

While these did not materialise, the Budget did confirm that annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.

Additionally, the starting rate for savings will be retained at £5,000 for 2025/26, allowing individuals with less than £17,570 in employment or pension income to receive up to £5,000 of savings income tax-free.

A change to business rates relief

The current business rates relief system is set to run until April 2025. It effectively serves as a reduction on business rate bills for eligible businesses, with retail and hospitality firms having been key beneficiaries.

The chancellor announced that, from 2026/27, permanently lower tax rates will be introduced for retail, hospitality and leisure properties.

Additionally, for 2025/26, some retail, hospitality, and leisure properties will receive 40% relief on their bills, up to a cash cap of £110,000 per business.

Corporation Tax capped at 25%

The government plans to support businesses to invest by publishing a Corporate Tax Roadmap. This confirms that the government will cap Corporation Tax at 25% for the duration of the parliament.

A rise in the national living wage

Reeves announced a 6.7% rise in the national living wage for workers aged 21 and over, from £11.44 to £12.21 an hour, effective April 2025. For a full-time employee earning the national minimum wage, this means a £1,400 annual pay boost and is expected to benefit more than 3 million workers.

In addition, the national minimum wage for people aged 18 to 20 will rise from £8.60 to £10 an hour. Apprentices will receive the biggest pay increase, with hourly pay rising from £6.40 to £7.55 an hour.

The announcement could significantly increase outgoings for businesses, particularly when coupled with reforms to employers’ NI.

A freeze in fuel duty

Fuel duty has been frozen since 2011, and the 5p cut brought in by the Conservatives in 2022 has been extended at every subsequent Budget.

Despite speculation that Reeves might increase fuel duty, she confirmed the freeze for another year and extended the 5p cut. This will save the average motorist £59 in 2025/26.

Second home Stamp Duty surcharge increasing

With effect from 31 October 2024, the Stamp Duty surcharge on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property in England and Northern Ireland will increase from 3% to 5%.

This surcharge is also paid by non-UK residents purchasing additional property.

Reforms to the non-dom regime

Currently, for UK residents whose main residence – or “domicile” – is elsewhere in the world, income and gains are taxed differently, depending on factors such as how long individuals are resident in the UK.

The chancellor confirmed that the tax regime for non-domiciled individuals (non-doms) will be abolished from April 2025, claiming that the rules will ensure that those who “make the UK their home will pay their taxes here”.

Moving forward, there will be a residence-based scheme with “internationally competitive arrangements” for those who come to the UK on a temporary basis.

Over the next five years, Office for Budget Responsibility (OBR) figures estimate that these reforms will raise £12.7 billion.

VAT on private school fees from January 2025

As they had promised in their election manifesto, Labour announced that, from 1 January 2025, VAT will apply to all education, training, and boarding services provided by private schools.

Additionally, the chancellor announced that she was removing business rates relief from private schools from April 2025.

An end to the £2 bus fare cap

The £2 cap on bus fares introduced by the previous Conservative administration is due to end on 31 December 2024.

Labour has announced that it will extend the cap for a further 12 months but that the cap will rise from £2 to £3.

Changes to duties for alcohol, tobacco, and vaping

The chancellor confirmed a reduction in the duty for draught alcohol, cutting duty on an average strength pint by a penny. Rates for non-draught products will increase in line with the Retail Prices Index (RPI) from 1 February 2025.

Furthermore, a new vaping duty will be introduced from 1 October 2026, standing at £2.20 per 10 ml of liquid. Meanwhile, there will be a one-off tobacco duty rise designed to maintain the incentive to choose refillable vaping over smoking.

Confirmation of the 4.1% increase to the State Pension under the triple lock

The basic and new State Pension will increase by 4.1% in 2025/26, in line with earnings growth, meaning over 12 million pensioners will receive up to £470 a year more.

Please note

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

The content of this Autumn 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.

When you read that investment markets have fallen you might feel nervous or scared about the effect it could have on your future. Emotions like these sometimes lead to impulsive decisions that aren’t always in your best interest when you consider the long term. So, read on to discover some insightful pieces of data that could help you remain calm.

Volatility is part of investing – a huge range of factors might influence whether a stock market rises or falls. However, history shows that, over the long term, markets typically go on to deliver returns.

Recently, markets experienced volatility amid fears that the US was on track for a recession. Indeed, on 2 August 2024, US technology-focused index Nasdaq fell 10% from its peak. Just a few days later, the market rallied, and it was technology firms that led the way.

Concerns about the US economy weren’t confined to the US indices either. Markets fell in Europe and Asia too. In fact, Japan’s Nikkei index suffered its worst day since 1987 following the news. Again, it didn’t take long for the markets to bounce back.

Returns cannot be guaranteed and recoveries may be over longer periods. Yet, the above example highlights how making a knee-jerk decision due to volatility could harm your long-term wealth. If you’d responded by selling your investments when you saw markets were falling, you’d have missed out on the recovery.

So, if volatility is part of your experience when investing, how can you remain calm? These pieces of data could help you hold your nerve.

1. Investment risk falls over a longer time frame

It’s important to note that all investments carry some risk. There is a chance that you could receive less than the original amount you invested. However, the level of risk varies between investments, so you could invest in a way that reflects your risk profile and financial circumstances.

Usually, it’s a good idea to invest with a five-year minimum time frame. By investing for longer, you’re giving your investments a chance to recover if they fall due to short-term volatility.

Research supports this too. Using almost 100 years of data on the US stock market, Schroders found that if you invested for a month, you would have lost 40% of the time. Interestingly, when you invest for longer, your odds of losing money start to fall.

When invested for five years, the odds of losing money fall to 22%, and at 10 years it falls to 13%. The research shows there have been no 20-year periods during the time analysed where stocks lost money overall.

You can’t rule out risk entirely, but by investing for a long-term goal, you could minimise the chance of losing money.

2. Sharp drops in the market occur more often than you think

One of the reasons investors react to market movements is that sharp falls may feel like they’re unprecedented and that you should act as a result. Yet, the Schroders research suggests that sharp falls are more common than you might think.

Analysing the MSCI World Index, which captures large and mid-cap representations across 23 developed countries, the study found that 10% falls happen in more years than they don’t. Indeed, in the 52 calendar years to 2024, investors experienced a 10% fall in 30 of them.

Even significant falls of 20% may occur more than you expect – roughly every six years.

Despite these dips, markets have delivered returns over the 50 years analysed. So, holding your nerve during these sharp falls often makes sense when you take a long-term view.

3. Periods of “heightened fear” could be more lucrative

The Vix Index measures expected volatility in the US market– it’s often referred to as the market’s “fear gauge”. It can highlight when investors perceive there is a greater risk of losing money. For example, it last reached a significant peak in May 2022 in the aftermath of the invasion of Ukraine.

Schroders has assessed how your investments would fare if you sold assets during periods of “heightened fear” to hold your wealth in cash, and then shifted back to investments when the fear receded. Taking this approach when invested in the S&P 500 – an index of the 500 largest public companies in the US – would have yielded average returns of 7.4% a year between 1990 and 2024.

However, if you didn’t let fear affect your investment decisions and remained invested, you may have benefited from average annual returns of 9.9%.

So, even when it seems like investing isn’t a good idea because of the economic environment or geopolitical tensions, it could be worthwhile taking a step back to consider what’s driving your decision.

Contact us to talk about your investments

If you have questions about investing and how it could support your financial goals, please get in touch.

Please note:

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

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.

Anchoring bias is a common cognitive phenomenon that could affect your day-to-day and long-term financial decisions. The good news is that there are ways you could minimise the effect of bias, including anchoring.

First, what is a financial bias? The term refers to mental shortcuts and errors you might make when processing financial information that may lead to “irrational” decisions that don’t align with your long-term plans. There are many different types of financial bias, so read on to find out more about anchoring bias and how to minimise the effect.

Anchoring bias occurs when you focus or rely too heavily on a single piece of information when making financial decisions. It’s a bias that could lead to you dismissing other relevant data or it could skew your perceptions when you’re assessing a financial opportunity.

By “anchoring” your views to certain data, you could make decisions that aren’t right for you.

Anchoring bias could affect your short- and long-term finances

Anchoring bias could affect your financial decisions in several ways.

When it comes to your day-to-day spending, it might affect how you view the price of items. Let’s say you’re searching for a new TV and you find one you want priced at £1,000. You don’t make the purchase right away, and a few weeks later you see the same TV is now £800.

If you anchored the value of the TV to the first price you’d seen, the new, lower price might seem like an excellent deal. Yet, if you did some further research, you might find it was overpriced at £1,000 and it’s cheaper elsewhere. So, if you acted impulsively and purchased the TV when you saw it was £800 it might not be the bargain you first think it is.

Similarly, anchoring bias could affect long-term financial decisions too.

For instance, investors might purchase stock because they believe it’s a “good” price as they’ve anchored their view of it to a particular piece of information that suggests it should be higher. Alternatively, investors might hold on to assets that are no longer right for them because they believe the value will rise despite market conditions suggesting otherwise.

In short, anchoring bias could mean your investment decisions are based on an attachment to a certain piece of information, which might not reflect reality. It could lead to missed opportunities and poor decisions.

5 practical steps that could help you reduce the effect of anchoring

1. Be aware of the effect of anchoring bias

Often, the first step to reducing the effect of anchoring bias is simply to be aware of the effect it could have. Recognising that you may judge financial opportunities based on a single piece of information could give you pause enough to reconsider your initial thoughts before you act.

2. Assess the credibility of sources

There’s so much information available that it can be overwhelming. So, taking some time to assess how credible a source is could help judge whether it’s information you want to use when making financial decisions.

It’s not just the credibility of the source you may want to weigh up either. For example, reviewing when the information was released could be just as important – basing an investment decision on the price of a stock a year ago could mean you’re overlooking more valuable, recent figures.

3. Carry out further research

In addition to reviewing key pieces of information you already have access to, carrying out further research is often useful.

Let’s say you’re making a large purchase for your home, you’ll often shop around to see which retailer is offering the best deal. Taking the same approach for other financial decisions could also help you make better decisions for you.

4. Focus on your long-term plans

Focusing on your long-term plans or budget could reduce the chance of you acting on impulse because you’ve seen what seems like an excellent opportunity at first glance.

Whether a retailer has cut the price of that TV when compared to your anchor or the latest technology company’s shares are falling, take a step back and ask if it fits into your plans – is this potential opportunity right for you and how would it affect your finances?

5. Work with a financial planner

Sometimes an outside perspective could help you see where financial bias, including anchoring bias, could be clouding your judgement. As a financial planner, we’re here to work with you to create a long-term plan that considers your aspirations. Having a plan that’s been tailored to you could help you reduce the influence of bias and make better financial decisions for you.

Please contact us to talk to one of our team or 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.

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.

New research and real-life case studies have recently revealed that it’s possible to slow – and even reverse – your biological age.

Read on to discover more about how your biological age is measured, and six simple steps you could incorporate into your routine to enhance your life.

What is your “biological age”?

We’re used to measuring our lives in chronological age, or the number of years we’ve been alive.

But your biological age – which refers to how old your cells and tissues are based on physiological evidence – might be lower or higher than your chronological age, depending on your health.

For example, people who are sedentary, chronically ill, or in poor physical condition might have a higher biological age than someone healthy and fit, even if they both have the same chronological age.

Your biological age may even be able to predict whether you’ll develop diseases such as diabetes or dementia, or how long you will live.

6 practical ways you could lower your biological age

Much of how you age is influenced by genetics beyond your control. But your lifestyle can also have a huge impact.

Switching to a healthier lifestyle and taking control of these factors could help you to become “younger”.

So, if you want to start reducing your biological age, read on to discover the six areas you may want to focus on.

1. Eat healthier

Choosing to eat healthy meals can help to reduce your biological age by giving your body the nourishment it needs to thrive.

The NHS recommends a daily calorie intake of 2,000 calories for women or 2,500 calories for men. However, this might be influenced by other factors such as medical issues, so it’s important to stick with what your doctor recommends.

An easy way to start eating healthier is to aim to eat five portions of fruit and vegetables and drink eight glasses of water a day.

2. Reduce stress

Long-term stress can cause many health problems that could increase your biological age, so it’s important to take time for yourself and remove yourself from people or situations that are causing you chronic stress.

There are several ways you can manage stress, including:

• Practising self-care
• Speaking to a therapist
• Spending time on your hobbies
• Connecting with your loved ones.

Stress can be most overwhelming when we feel like we have no control over it.

Taking back control of your life and actively making changes to improve your mental and physical health is one of the best things you can do to improve your emotional and physical wellbeing.

3. Exercise regularly

The NHS recommends that people between the ages of 19-64 should do at least 150 minutes of moderate intensity activity or 75 minutes of vigorous intensity activity per week, as well as muscle-strengthening exercises.

Taking a brisk walk, cycling to work instead of driving, or dancing around your kitchen a few times a week can help you cut your risk of heart disease and reduce your biological age.

4. Quit smoking and drink less

Drinking excessively and smoking can damage your body in irreparable ways.

Quitting smoking and ensuring you stay within the recommended number of units a week and having rest days between consuming alcohol can help your body to recover and will lower your biological age.

5. Ensure you’re sleeping well

Adults should get between seven and nine hours of sleep every night.

Sleeping more or less than this can increase your risk of cardiovascular disease, diabetes, and other health issues, all of which can increase your biological age.

One of the easiest ways to improve your sleep hygiene is to go to bed and wake up at the same time every day, including weekends. This will train your body to fall asleep faster and you will find yourself waking up feeling more refreshed.

6. Improve your environment

Your physical environment refers to where you live, work, and spend significant amounts of time.

While this can be the factor you have the least control over, it is important to try and keep your environment as safe as possible.

The amount of pollution and other contaminants you are exposed to daily can damage cells and increase your biological age.

For example, if you live in a busy city, it might be worth counteracting some of the effects of pollution by wearing a face mask in public. Or, you might choose to use an air purifier in your home.

Figures suggest that millions of retirees are deciding to return to work for a variety of reasons. While it could be beneficial and support your wellbeing, it may complicate your tax liability. Read on to find out the areas you might want to consider if you’re thinking about re-entering the workforce.

A Legal & General study revealed that 2.8 million UK workers over 50 have returned to work after previously retiring.

While money was a key motivator for 37% of those returning to work, other reasons were sometimes just as important. Indeed, 62% said a desire to stay mentally active was a factor influencing their decision, and 32% said work gave them a sense of purpose.

Interestingly, just 3% plan to return to work full-time. Instead, the majority plan to balance work and their personal life to create a lifestyle that suits them. That might include working part-time or carrying out seasonal work that fits around other goals.

If you’re considering returning to work in some form after your retirement, here are two important tax considerations to weigh up.

1. You may need to consider multiple sources of income when calculating Income Tax

If you’re returning to work, you might have several income streams that you need to consider to effectively manage your Income Tax liability.

You might need to calculate the income you receive from:

• Employment
• State Pension
• Defined benefit pensions
• Defined contribution pensions

As Income Tax is calculated based on your total income, you may need to consider how your income from all of the above, as well as other sources, adds up. Otherwise, you could end up with an unexpected tax bill, especially if you cross tax thresholds without realising.

As a result, you might choose to defer your State Pension or pause the income you receive from your personal pension so your total income doesn’t exceed the threshold for paying the higher- or additional-rate of Income Tax.

There could be other ways to supplement your income without increasing your Income Tax liability too. For example, you might choose to access savings or investments that are held in an ISA. A financial plan could help you explore the different options and assess what is right for you.

2. The amount you can tax-efficiently contribute to your pension may be lower

One of the benefits of returning to work is that it could provide an opportunity to boost your pension. Increasing your contributions now could mean you’re able to enjoy a more comfortable lifestyle in the future.

Usually, you can contribute up to £60,000 to your pension in the 2024/25 tax year and receive tax relief. This makes saving into a pension tax-efficient.

However, if you’ve already accessed your pension to create a flexible income or to purchase an annuity, you may have triggered the Money Purchase Annual Allowance (MPAA). The MPAA reduces how much you may add to your pension tax-efficiently to just £10,000 during the tax year.

Pension contributions that exceed the MPAA will trigger a tax charge so it’s important to be aware of whether you’re affected and to monitor your contributions during the tax year.

The MPAA won’t typically be triggered if you’ve taken a tax-free cash lump sum or you’ve accessed a small pension pot valued at less than £10,000. However, it’s crucial to check this is the case before you start making pension contributions to avoid an unexpected tax bill.

A tailored financial plan could help you manage your overall tax liability

Personal circumstances will affect your tax liability and the allowances you might be able to use. So, a tailored financial plan could help you to identify ways to efficiently manage tax on your income once you’ve retired, including if you’ve returned to work.

You might have other taxes you need to consider in retirement too, such as Capital Gains Tax if you’re disposing of assets or investing outside of a tax-efficient wrapper. Again, a bespoke financial plan could help you minimise a tax bill, so your assets go further and support your retirement goals.

Please get in touch to talk about your retirement plans and tax liability.

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.