High And Ultra High Net Worth Individuals Archives

Advanced protection strategies for high net worth individuals

Why protection isn’t a product – it’s a philosophy

Most successful individuals understand the value of investing, tax planning, and building wealth. But far fewer give the same care and attention to protecting it.

We often encounter HNWIs with portfolios worth millions – yet protection strategies that are fragmented, outdated, or insufficient. The issue isn’t affordability. It’s complexity. And the misconception that insurance is only for people with “less to lose.”

The reality is this: the more you have, the more you need to protect.

In this article, we explore the advanced protection strategies used by high-net-worth individuals to safeguard their wealth, ensure family continuity, and keep their businesses resilient.

Life Insurance structured for tax and control

Term life vs. Whole of life: Matching product to purpose

While most people are familiar with term life cover, many HNWIs require a combination of term and whole-of-life (WOL) policies to achieve different objectives:

Term cover: Useful for covering debts, children’s education, or business continuity during a defined period (e.g. until retirement or exit).
Whole-of-life cover: Critical for estate planning – ensuring liquidity to meet inheritance tax (IHT) liabilities.

Writing policies into trust

High earners often make the mistake of holding policies in their own name, which brings the payout into their estate – and potentially into the IHT net at 40%.

The solution? Write policies into trust to keep them outside the estate, avoid probate delays, and give control over who receives what, when, and how.

Save time – receive a no-obligation protection sufficiency assessment.

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Relevant Life Plans: Tax-efficient cover for directors and high earners

Relevant Life Plans (RLPs) are a highly tax-efficient way for employers (typically limited companies) to provide individual life cover for an employee, including directors. They’re especially attractive to high earners and owner-managed businesses looking for a cost-effective way to protect loved ones and extract value from the company.

A Relevant Life Plan is a term life insurance policy that provides a lump sum benefit to the insured’s family or nominated beneficiaries if they die (or are diagnosed with a terminal illness) during the policy term.

For company directors, a Relevant Life Plan (RLP) can help to extract value from their business tax efficiently. For directors, high-earning employees, or partners in a firm, RLPs are often a cornerstone of HNW protection planning. Proceeds are typically paid into a discretionary trust, keeping them outside the estate.

Critical Illness Cover – but done correctly

Critical illness cover is often overlooked by high net worth individuals, who may believe their wealth alone provides sufficient protection. However, for affluent clients – especially those with dependents, complex financial structures, or lifestyle dependencies on active income – critical illness cover is not just a safety net; it’s a strategic wealth preservation tool.

Liquidity protection at a critical time

While HNWIs may have significant assets, those assets are often tied up in illiquid holdings – property, businesses, pensions, or investments that cannot be easily accessed or sold without penalty or delay. A tax-free lump sum from a critical illness policy provides instant liquidity without needing to disrupt investment strategies, crystallise capital gains, or make distress sales.

Protecting human capital

Many HNWIs are entrepreneurs, executives, or consultants whose ability to earn is tied to their health and cognitive function. A diagnosis of cancer, stroke, or a heart attack could halt their income-generating potential – even if temporarily. Critical illness cover acts as a monetisation of human capital, ensuring the individual and their family can maintain lifestyle, commitments, and responsibilities without compromise.

Offsetting opportunity costs and recovery time

The cost of a serious illness is not just medical – it includes:

Loss of earnings (particularly for self-employed/HNWIs with performance-linked income)
Treatment abroad, private rehab, or experimental therapies
Time away from business ventures, affecting future growth and compound returns

Critical illness cover can fund these without eroding long-term investment portfolios or derailing growth strategies.

Protecting leverage and legacy commitments

HNWIs often use geared strategies – leveraging property or investments – and are committed to legacy or intergenerational planning. A serious illness at the wrong time could force early liquidation of assets, undermine gifting strategies, or create unforeseen liabilities.

Critical illness payouts can:

Pay off loans or service interest during incapacity

Fund trust or IHT planning strategies without delay

Maintain life cover or pension contributions during recovery

Supporting family stability and dependents

For clients with children in private education, dependents abroad, or family members reliant on their oversight (e.g. elderly parents, disabled children), a critical illness diagnosis can ripple through their financial ecosystem. Having an immediate lump sum allows the family to bring in support, continue funding important commitments, or restructure life with minimal stress.

Business continuity and key person risk

If the HNWI is a business owner, their illness could trigger:

Business interruption

Loss of investor confidence

Buy-sell complications with co-directors

Staff or client attrition

Critical illness cover can be written in trust or as part of a business protection plan, providing capital for succession, share purchase, or continuity.

Tax-efficient structuring

Depending on how it’s set up, critical illness can be arranged in tax-efficient structures that reduce corporation tax and preserve personal allowances.

Executive income protection and business continuity

HNWIs often have non-salary income (e.g., dividends, drawings, performance bonuses), making standard income protection inadequate or mispriced.

Solution: Executive Income Protection, which can be structured via a company to:

Cover a % of total remuneration, not just base salary
Be tax-deductible for the company
Provide ongoing cover during sabbaticals or international relocation (if structured correctly)

For entrepreneurs or partners, cover can be extended to:

Replace lost profits or revenues in the event of illness
Provide sick pay for multiple directors or key individuals

Key Person and Shareholder Protection

If you run or co-own a business, you are the business. Your loss could destabilise your team, clients, and profitability.

Key Person Insurance:

Covers financial loss from the death or serious illness of a key revenue generator or leader. Payouts can be used to:

Recruit replacements
Cover lost profits
Stabilise credit lines or investor confidence

Shareholder/Partnership Protection:

If a co-owner dies or becomes critically ill, what happens to their shares?

Solution: Cross-option agreements funded by life and/or critical illness cover allow surviving shareholders to buy out the deceased’s estate at fair value, keeping ownership within the firm and avoiding disputes.

Premium equalisation also ensures tax efficiency and fairness between shareholders.

Trusts and legacy structuring

Using life insurance in estate planning

When structured correctly, life insurance is a powerful estate planning instrument – not only as a means to provide for heirs, but also as a way to protect the estate itself. For wealthy individuals and families, particularly those with complex asset structures (e.g. businesses, real estate portfolios, or international holdings), life insurance can solve several challenges that arise when passing wealth between generations. Many wealthy families use life insurance as a liquidity tool to fund estate tax liabilities, often via Discretionary Trusts. This ensures:

Rapid access to capital (outside probate)
No forced asset sales (such as property or business interests)
Equalisation between beneficiaries (e.g., if one child inherits a business and the others don’t)

For ultra-high-net-worth individuals with high net worth but illiquid or unpredictable income, premium financing is becoming increasingly popular. This involves:

Borrowing funds (often through referral to private banking solutions) to pay large policy premiums

Using the policy’s cash value and/or death benefit as security

Repaying the loan via the estate, policy proceeds, or other liquidity events

This preserves capital and investment returns, avoids disrupting cash flow or needing to liquidate high-performing assets, and allows for much larger policies than might be affordable with cash alone. However, it is a complex strategy involving interest rate risk, loan covenants, and insurer underwriting – so professional advice is essential.

Additional considerations

Gift of premiums: Regular premiums paid into a trust may be exempt from IHT if they qualify as normal expenditure out of income.

Business Relief: If certain business assets qualify for Business Relief, life insurance might not be needed for those – but it’s important to plan for assets that don’t qualify.

Generational planning: Life insurance can also be used to fund Legacy Trusts or Dynasty Trusts, ensuring wealth protection across multiple generations.

Expatriates: International clients may benefit from offshore life assurance policies, adding layers of tax efficiency across jurisdictions.

Private medical and global protection

For internationally mobile clients or those with high expectations for healthcare, private medical insurance and international health plans are essential.

Plans may include:

Worldwide cover with no cap on cancer care
Direct billing for major hospitals
Concierge claims management
Optional cover for dependents, domestic staff or business employees

HNWIs also benefit from second opinion services, executive health screening, and genomic testing – all now available via advanced private healthcare packages.

Philanthropic and ethical protection planning

Increasingly, HNWIs want to align their protection strategies with their values, such as:

Naming charitable organisations in their trust beneficiaries
Using overfunded life policies to create legacy donations
Applying ESG filters to insurers or private medical providers

These choices can be embedded into broader philanthropy planning, often in tandem with donor-advised funds or family foundations.

Ready to create your protection strategy?

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The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

SJP Approved xx/xx/xxxx

Should you require more information or have particular questions, we invite you to contact us at your convenience.

Taking the leap: Financial clarity when leaving a high-earning role

Introduction

Whether you’re preparing to leave corporate life behind, scaling back, or stepping into something new – like launching your own business or becoming a partner – it’s crucial to have a clear view of your financial position before you make the move. Here are some of the key areas our team of advisers can help you navigate.

Workplace Pensions

If you’ve built a significant pension through your employer – particularly in a defined contribution or hybrid scheme – it’s worth reviewing your options before you leave:

Should you consolidate it? Many professionals now have multiple pensions scattered across employers, and it’s easy to lose track. Consolidation could offer lower fees, greater control, and clearer access – but may also forfeit certain guarantees or employer perks.
Will your new business or partnership offer a pension? If not, a personal or SIPP arrangement might be essential to keep building tax-efficient retirement savings.
Need a transfer strategy? We can help you understand the pros, cons, and timing of transferring old workplace pensions into a tailored plan that works for your new lifestyle.

Save time – receive a no-obligation financial plan, tailored to your circumstances.

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Equity Compensation: Options, RSUs, and Exit Events

If you’ve received share options, restricted stock units (RSUs), or performance-based shares during your tenure, now is the time to check the fine print:

Are you close to a vesting event? Leaving too early might result in forfeiting a significant portion of your equity.
What tax liabilities are triggered? Depending on timing, exercising or selling shares may result in income tax or capital gains tax charges.
Do you need liquidity planning? If a lump sum or windfall is expected, structuring that into your wider financial strategy could help reduce tax and unlock future opportunities.

We help senior professionals manage these transitions with an eye on both opportunity and downside risk.

Personal Protection, Insurance and Private Medical Cover

Group benefits often disappear the moment you leave employment. That might include:

Life cover
Critical illness protection
Income protection
Private medical insurance

We help clients identify what’s worth replacing privately, what can be deferred, and how to get covered in the most cost-effective and tax-efficient way. This is especially important for new business owners, where income can be volatile.

Founding a business or becoming a partner?

Starting your own business or joining a partnership structure presents both risks and opportunities:

Are you losing employer pension contributions or matched benefits?
Do you have startup capital or need to keep cash liquid?
How will your income change – and how can your personal finances adjust?

From creating a director’s remuneration strategy to helping you reinvest a bonus or exit package tax-efficiently, we provide forward-thinking advice for professionals building their next chapter.

Planning for retirement, sooner or later

Whether this career change brings retirement forward – or just sharpens your focus – it’s essential to understand:

What will you spend? Retirement Living Standards can give you a national benchmark, but our team builds bespoke financial models so you know exactly what’s needed for your lifestyle.
How will you draw down income? We’ll help you weigh the pros and cons of drawdown, annuities, or phased lump sums – and time withdrawals to avoid unnecessary tax.
Do you still need protection or investment growth? Retirement doesn’t mean standing still. Let’s plan for the future you want.

A strategic wealth plan for professionals

When high-earners leave a role, the stakes are high: pensions, protection, share schemes, benefits, taxes, and future income are all in play.

Whether you’re stepping away to reset, relaunch or retire, our team is here to help you leave on your terms – with confidence and clarity. Let’s take stock of your position and map out what’s next – for your wealth, your goals, and your peace of mind.

Book a Career Change Financial MOT with an expert Private Wealth Adviser.

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The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

SJP Approved xx/xx/xxxx

Should you require more information or have particular questions, we invite you to contact us at your convenience.

Should you save more than £1 million in your pension?

Carving out the optimum strategy to save for your retirement, and mitigate tax on your earnings

The removal of the Pension Lifetime Allowance (LTA) charge in 2023 was a significant win for high earners, allowing unrestricted pension growth without an additional tax charge. However, the landscape changed again in October 2024 when it was announced that most unspent pensions will form part of an individual’s estate for Inheritance Tax (IHT) purposes from 6 April 2027.

This raises a crucial question: should you continue maximising pension contributions beyond £1 million, or are there better alternatives? This guide explores the tax benefits and trade-offs of pensions, compared to ISAs and Offshore Bonds.

What is the right combination of Pensions, ISAs and Offshore Bonds?
How should your strategy be tailored, depending on your level of income?
Could you be impacted by these decisions when funding your retirement?

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Save time – receive a no-obligation financial plan, tailored to your circumstances.

Let’s get started

Tax considerations for pensions

Tax relief

One of the biggest advantages of pension contributions is tax relief:

Basic rate taxpayers (20%): Receive 20% tax relief at source, on eligible contributions to a personal pension plan.
Higher rate taxpayers (40%): Can claim an additional 20% relief via HMRC.
Additional rate taxpayers (45%): Can claim an additional 25% relief via HMRC.
On earnings between £100,000 and £125,140, the effective rate of tax relief could be as high as 60% if the pension contributions restore your tapered personal allowance.

Example:

A £10,000 pension contribution effectively costs:

£8,000 for a basic rate taxpayer.
£6,000 for a higher rate taxpayer.
£5,500 for an additional rate taxpayer.
£4,000 when income between £100,000 and £125,140 is sacrificed to mitigate the tapered personal allowance.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Tax relief on personal contributions is limited to a maximum of 100% of relevant earnings in the tax year the contributions are paid. Contributions are also limited by the annual allowance. The standard annual allowance is £60,000.

Taxation on Pension Withdrawals

While pensions benefit from tax relief on contributions, withdrawals are subject to income tax:

25% of withdrawals are tax-free, up to the Lump Sum Allowance (LSA) of £268,275.
The remaining 75% is taxed at the individual’s marginal rate (20%, 40%, or 45%).

One rule of thumb is that you ought to save into a pension if, when you retire, your marginal rate of income tax is similar to or lower than when you were working. That would typically result in a strong degree of tax efficiency, given the tax-free element up to the LSA.

However, the tax efficiency of pensions is diminished once the total value of one’s pensions exceeds £1,073,100. That’s because less than 25% of the total value is available as a tax-free withdrawal – for instance, the LSA applied to a pension valued at £3 million is equivalent to only 9% rather than 25%.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

When the amount you can save into a pension is ‘tapered’

For high earners, the decision to make increased pension contributions may be taken away from you.

Pension tapering regulates the amount high-earning individuals can contribute to their pensions annually while still receiving the full benefits of tax relief.

For the 2025/26 tax year, the standard annual allowance is set at £60,000. Nonetheless, those earning a higher income may see their allowance reduced to as low as £10,000, based on their total yearly income.

Individuals with a ‘threshold income’ over £200,000 and an ‘adjusted income’ over £260,000 are subject to the tapered annual allowance. The reduction in allowance halts when ‘adjusted income’ exceeds £360,000, setting the annual allowance to a minimal £10,000 for pension savings that receive the full benefit of tax relief.

Broadly, ‘Threshold Income’ includes all taxable income received in the tax year, including rental income, bonuses, dividend, and other taxable benefits. From this you deduct any personal pension contributions to personal pension scheme.

‘Adjusted income’ includes all taxable income plus any employer pension contributions and most personal contributions to an occupational pension scheme.

Individuals exceeding both a ‘threshold income’ of £200,000 and ‘adjusted income’ of £260,000 will experience a reduction in their annual allowance by £1 for every £2 exceeding £260,000 in adjusted income.

For instance, an ‘adjusted income’ of £280,000 reduces the annual allowance by £10,000, resulting in a £50,000 allowance instead of £60,000.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

What are the alternatives?

Making ISA contributions

A Stocks and Shares ISA (or Investment ISA) is a tax-efficient way to invest, offering potential for higher growth than a Cash ISA. Any gains or income within an ISA are free from Capital Gains Tax and Income Tax. You can invest up to £20,000 per tax year (6 April – 5 April), and if you’re married, you might consider using your spouse’s allowance to maximise tax efficiency.

While you can withdraw funds anytime, Stocks and Shares ISAs are best suited for mid- to long-term investing, helping you ride out market fluctuations. While you won’t receive tax relief on your ISA contributions like you might with a pension, the withdrawals you make are entirely tax-free.

The value of an ISA with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested. An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

Please note that Cash ISAs are not available through Apollo Private Wealth nor St. James’s Place.

Investing in a General Investment Account (GIA)

A General Investment Account (GIA) can be a useful addition to a retirement strategy, particularly for individuals who have already maximised their pension and ISA allowances. Unlike pensions, GIAs have no contribution limits, and unlike ISAs, they don’t offer tax-efficient growth or withdrawals. However, they provide full flexibility: you can invest as much as you like, access your funds at any time, and choose a wide range of investments.

While investment growth and income within a GIA are subject to capital gains tax (CGT) and dividend tax, you can make use of annual allowances – like the £3,000 CGT exemption and dividend allowance (currently £500) – to manage tax efficiently. In retirement planning, a GIA can complement other wrappers by offering liquidity, investment flexibility, and tax-planning opportunities, especially when used alongside ISAs and pensions to smooth income and reduce overall tax liabilities.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Offshore Bonds

An Offshore Bond is a tax-efficient investment vehicle that can be used as an alternative to or alongside a pension for retirement planning. It offers tax-deferred growth, meaning that any gains within the bond are not subject to UK tax while they remain invested. Instead, tax is only due when withdrawals are made, allowing your investments to grow more efficiently over time.

One of the key benefits of an Offshore Bond is its withdrawal flexibility. You can take up to 5% of your original investment each year, tax-deferred for 20 years, which can be particularly useful for supplementing retirement income without an immediate tax liability.

Offshore Bonds also provide estate planning advantages, as they can be structured under a trust to help mitigate Inheritance Tax. Additionally, they offer investment flexibility, giving access to a wide range of funds, including those not typically available within UK-based wrappers.

While pensions offer tax relief on eligible contributions, they come with restrictions on access, along with the Lump Sum Allowance (LSA) and income tax on withdrawals. An Offshore Bond, by contrast, provides greater control over when and how you draw your money, making it a valuable complement to retirement planning. However, tax treatment will depend on individual circumstances and may change, so professional advice is essential.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

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Next steps

For many, pensions will still be a core part of retirement planning due to the up-front tax relief. However, it may be time to consider diversifying into ISAs, Offshore Bonds, and other tax-efficient vehicles. The right approach depends on income level, retirement goals, and intergenerational wealth planning objectives.

Speak to an expert Private Wealth Adviser to assess your specific situation and develop a tailored strategy that maximises tax efficiency and protects your wealth for future generations.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

SJP Approved 13/06/2025

Start planning now – invest later. Obtain a bespoke financial plan, tailored to your unique objectives.

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Should you require more information or have particular questions, we invite you to contact us at your convenience.

Starting the new tax year on the right footing

For busy professionals, the smartest wealth decisions happen in April – not next March. Here’s why.

If you’re a high-earning professional, your time is at a premium. Between work, life, and everything in between, financial planning often slips down the list – until deadlines loom. But when it comes to building and protecting your wealth, timing matters.

This guide outlines the key allowances available for the 2025/26 tax year and explains why acting early (with the right support) can generate significantly better outcomes than leaving things to the last minute. Best of all? We do the legwork for you – so you can focus on what you do best.

Save time – receive a no-obligation financial plan, tailored to your circumstances.

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What are the key tax allowances and reliefs for 2025/26?

ISA and JISA Allowances

£20,000 per adult
£9,000 per child

ISA and JISA Allowances reset each tax year, on a use-it-or-lose-it basis. Invest in cash, stocks & shares, or a blend. Enjoy flexible access for mid-term goals. Both growth and withdrawals are free of income and capital gains tax.

St. James’s Place do not offer cash ISAs or JISAs.

Pension Annual Allowances

Up to £60,000, or 100% of relevant earnings, per adult
Up to £3,600 for non-earners, including children

Pension Annual Allowances reset each tax year, but in some cases, you can carry forward unused allowances from the previous three years. Benefit from tax relief at your marginal rate of income tax. Growth is also tax free, and withdrawals can be made tax efficient.

When sacrificing your salary, you could mitigate an effective 60% rate of tax on income between £100,000 and £125,140.

Your Pension Annual Allowance may be tapered, if your ‘threshold income’ exceeds £200,000 and your ‘adjusted income’ exceeds £260,000; the reduction in allowance halts when ‘adjusted income’ exceeds £360,000, setting the annual allowance to a minimal £10,000 for pension savings that receive the full benefit of tax relief.

Capital Gains Tax Exemptions

£3,000 per person, including children

Capital Gains Tax Exemptions reset each tax year on a use-it-or-lose-it basis, and apply to everyone, whether adult or child, earning or not.

It is crucial to capitalise on the CGT Exemption when rebalancing your portfolio, or exiting positions, to realise gains in the most tax efficient way.

A financial adviser can also help you with tax loss harvesting – an investment strategy for generating capital losses to gain a tax advantage.

Dividend Allowances

£500 per person, including children

Dividend Allowances reset each tax year on a use-it-or-lose-it basis, and apply to everyone, whether adult or child, earning or not.

Particularly relevant for company directors, and for investors, utilising Dividend Allowances can provide a small additional tax-free income.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Why acting now, rather than in March next year, could yield thousands.

For busy professionals, the smartest wealth decisions happen in April – not next March. Leaving everyone else to scramble at the 11th hour of the tax year end deadline, you’ll have already taken control, and put your capital to work from day one.

More time in the market = greater potential for growth
Time in, not timing the market. The earlier you invest, the longer your money benefits from tax-efficient compounding. Example: Investing £20,000 into each ISA in April, instead of next March, could add £1,200+ to your long-term returns, based on 6% net annual growth. Do that year after year, and the difference compounds into five figures.

This figure is for illustrative purposes only. You may get back more or less than the figure shown. How your investment grows will depend on the fund choices made, the taxation of the funds selected and the charges attributed to your plan.
Less stress, better strategy
Trying to rush through financial decisions next March, meeting deadlines at the same time as juggling end-of-Q1 pressure at work, means crucial planning could get missed – rarely resulting in the best outcomes. Starting early gives you time to plan your cashflow, and space to think thoroughly about your investment decisions; supported by an expert financial planner, who curates your approach according to your unique goals and objectives in life.
Proactive utilisation of all the tax allowances and reliefs available to you and your family
By starting early, you can allocate pension contributions according to regular income, plan lump-sum investments around bonus and maturity dates, and engage your spouse and children in taking a holistic approach to your family’s finances.

We make it effortless.

Our core expertise is in helping time-poor professionals – investment bankers, lawyers, consultants, founders – take full advantage of every tax planning opportunity, with zero hassle. Benefit from;

A dedicated, expert Private Wealth Adviser, who remains your single point of contact and understands your unique requirements
Support from your Adviser’s team of qualified Associates, Paraplanners and administrative staff – working tirelessly to bring your financial objectives to life
A bespoke strategy report each year, complemented by advanced cashflow modelling and scenario planning

Your holistic financial roadmap will also encompass important frameworks for preserving your wealth, asking questions like;

Is your insurance coverage (e.g. critical illness, key person) sufficient, based on your lifestyle and that of your dependents?
What is your mounting inheritance tax liability, and how can your estate be structured to enable as much of your wealth as possible to be passed on to your beneficiaries?
Do your investments remain suitable for your objectives over time? Is there a rebalancing need? And most of all, is the asset location optimal for tax efficient accumulation?

The Value of Advice

Start by creating your action plan today.

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Should you require more information or have particular questions, we invite you to contact us at your convenience.

How to manage a windfall, tax efficiently

A strategic guide for high net worth individuals

Receiving a windfall – whether from an inheritance, business sale, bonus, or other significant financial gain – presents both opportunities and complexities. Without a clear strategy, it’s easy to mismanage these newfound assets, potentially eroding wealth over time. This guide outlines a structured approach to making the most of your windfall while ensuring long-term financial security.

Save time – receive a no-obligation financial plan, tailored to your circumstances.

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Assessing your financial situation

Before making any financial decisions, take a step back and evaluate your current financial position.

Understanding your net worth

Compile a detailed breakdown of your assets, liabilities, income sources, and ongoing expenses.

Clarifying your financial goals

Define short-, medium-, and long-term objectives – whether that’s early retirement, property investment, philanthropy, or wealth preservation.

Evaluating your existing investment strategy

Assess whether your current portfolio is aligned with your new financial reality and risk tolerance.

Reviewing liabilities and liquidity needs

Determine if paying down liabilities (such as mortgages or business loans) is a priority or if maintaining liquidity for future opportunities is more beneficial.

A professional wealth adviser can help you take a holistic view and ensure your decisions align with your broader financial aspirations.

Managing tax implications

A windfall can have significant tax consequences, and careful planning is essential to ensure you retain as much wealth as possible.

Inheritance Tax (IHT) mitigation

If the windfall is from an inheritance, consider strategies such as gifting, trusts, and other qualifying investments to reduce future IHT liabilities.

Capital Gains Tax (CGT) planning

If assets (such as shares or property) are involved, a phased disposal strategy may help spread CGT liability over multiple tax years.

Income tax efficiency

Large bonuses and unexpected income surges can push you into higher tax brackets. Structuring receipts over time, pension contributions, or investing in tax-efficient vehicles can mitigate this impact.

Use of tax wrappers

Leveraging ISAs, pensions, and other HMRC-approved schemes and investment wrappers, can provide significant tax relief while ensuring long-term wealth growth. Don’t forget, you could also provide some funds to your partner, and/or children, to utilise their respective pension and ISA allowances.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

Developing an investment strategy

Once tax considerations are addressed, focus shifts to deploying the windfall effectively. A well-structured investment strategy should reflect your risk tolerance, investment horizon, and objectives.

Diversification

Avoid overexposure to any single asset class. A mix of equities, bonds, property, private equity, and alternative investments can mitigate risk.

Risk management

Understand how your risk appetite has changed now that your wealth has increased. Stress-test different scenarios using cashflow modelling.

Tactical vs strategic asset allocation

Balance active opportunities (e.g., private equity or thematic investing) with a long-term passive core.

Liquidity considerations

Ensure you maintain an emergency fund while keeping a portion of your portfolio readily accessible for new opportunities.

Professional oversight

Regular reviews with a financial adviser can help ensure your investments remain aligned with your changing needs and market conditions; for example, regularly evaluating rebalancing need.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Retirement planning

A windfall provides an opportunity to reassess retirement plans, whether accelerating retirement or enhancing existing strategies.

Maximising pension contributions

Consider using your Annual Allowance (£60,000) and any available Carry Forward from the past three years to boost tax-efficient pension savings. One could theoretically contribute up to £200,000 at once, at a net cost from £110,000, subject to relevant earnings. Discover more about Pension Carry Forward.

Overall pension value considerations

While the Lifetime Allowance charge has been abolished, excess pension savings may still impact income tax rates in retirement. The Lump Sum Allowance (LSA) caps tax-free cash at £268,275, while the Lump Sum Death Benefit Allowance (LSDBA) has significant estate planning implications for individuals who die before age 75. Furthermore, from 2027, unspent pensions will be brought inside of estates for Inheritance Tax (IHT) purposes. Strategic withdrawals and planning remain crucial.

Sustainable withdrawal strategies

If you’re considering early retirement, ensure you have a sustainable drawdown plan that balances income needs with longevity risks.

Decumulation tax planning

Structuring withdrawals across ISAs, pensions, and taxable accounts efficiently can optimise your income tax position in retirement. Discover more about managing a high-value retirement portfolio, tax efficiently.

A well-integrated retirement plan ensures your windfall contributes to a financially secure future, rather than being eroded by inflation or inefficient withdrawals.

Estate planning and wealth preservation

A windfall can have long-term implications for your estate and legacy. Proper planning ensures your wealth is protected and transferred tax-efficiently to the next generation.

Trust structures

Discretionary and bare trusts can provide tax-efficient intergenerational wealth transfers while maintaining control. Discover more about Trusts.

Gifting strategies

The use of the £3,000 annual gift exemption, potentially exempt transfers (PETs), and regular gifts out of surplus income can mitigate inheritance tax. Discover more about Gifting.

Family Investment Companies (FICs)

For larger estates, FICs can provide an alternative to trusts while offering greater control and flexibility.

Please note FICs are not offered by St. James’s Place.

Updating Wills and Lasting Powers of Attorney (LPAs)

Ensure legal documents reflect your new financial circumstances and wishes for asset distribution.

Charitable giving and philanthropy

If philanthropy is a priority, consider setting up a donor-advised fund (DAF) or a family charitable trust to structure donations effectively.

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills are not regulated by the Financial Conduct Authority.

Advice given in relation to a Power of Attorney will involve the referral to a service that is separate and distinct to those offered by St. James’s Place and is not regulated by the Financial Conduct Authority.

Trusts are not regulated by the Financial Conduct Authority.

Professional advice: A critical component

Handling a windfall effectively requires expert input from multiple disciplines, including financial planning, tax advisory, and legal expertise. Partnering with an expert Private Wealth Adviser ensures you:

Make tax-efficient decisions from day one.
Implement a diversified and well-structured investment plan.
Safeguard your wealth for future generations.
Maintain flexibility as your circumstances evolve.

A well-managed windfall can significantly enhance your financial future. With the right strategy, you can turn a one-time financial event into a lasting legacy of security and prosperity.

Start planning now – invest later. Obtain a bespoke financial plan, tailored to your unique objectives.

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Should you require more information or have particular questions, we invite you to contact us at your convenience.

Thinking about retiring in 2025?

Fine-tune your strategy for an imminent retirement

Retirement isn’t just about stopping work – it’s about securing financial freedom on your terms. If you’re planning to retire in 2025, now is the time to fine-tune your strategy. This guide walks you through the essential financial decisions to help you retire with confidence while optimising your tax efficiency.

TAX IN RETIREMENT

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

Save time – receive a no-obligation financial plan, tailored to your circumstances.

Let’s get started

Define your retirement goals

Retirement is more than just a financial milestone – it’s a transition to a new phase of life. The foundation of any successful retirement plan is a clear understanding of your goals. Defining these early ensures that your financial strategy aligns with your lifestyle aspirations, risk tolerance, and long-term wealth planning.

What do you want your retirement to look like?

Your retirement objectives should dictate your financial plan, not the other way around. Ask yourself:

Do you prioritise capital growth or stable income? Some individuals focus on growing their portfolio to support a longer retirement or leave a financial legacy. Others prioritise generating reliable income streams to fund day-to-day expenses.
How much flexibility do you need? Unexpected costs—such as healthcare, home renovations, or family support—can arise. Ensuring liquidity in your portfolio is key.
Are there legacy or philanthropic goals? If passing wealth to future generations or supporting charities is a priority, your investment and estate planning strategies must reflect this.

Common retirement objectives

Most retirees fall into one of the following categories—or a combination of them:

Growth-Focused – You may aim to increase your purchasing power over time, ensuring your investments outpace inflation. This approach suits those with a long investment horizon or wealth they intend to pass down.
Income-Focused – Generating sufficient cash flow to cover essential and discretionary expenses is the main goal. A structured withdrawal strategy is key to making assets last.
Balanced Approach – Many retirees require both growth and income to maintain financial security over multiple decades. A well-balanced portfolio allows for withdrawals while preserving capital for the future.

Investment time horizon and risk considerations

Understanding your time horizon is critical:

If you retire at 60 with a long family history of longevity, your portfolio may need to last 30+ years, requiring continued investment growth.
Conversely, if you plan for a shorter retirement window, preserving wealth and minimising volatility may take precedence over long-term appreciation.

By defining clear goals, you create a roadmap that informs every financial decision—from asset allocation to tax planning.

Assess your asset allocation

Your asset allocation—the balance of equities, fixed interest, cash, and other investments—plays a crucial role in determining the success of your retirement strategy. As you transition from wealth accumulation to income generation, reassessing your portfolio is essential to ensure it aligns with your evolving financial needs and risk tolerance.

Are you holding the right mix of assets?

A well-structured portfolio should provide both growth and stability. Key considerations include:

Diversification – Are you overly concentrated in a single asset class, such as equities, property, or cash? A well-diversified portfolio mitigates risk while capturing growth opportunities.
Liquidity – Do you have sufficient accessible funds to cover unexpected expenses without disrupting your investment strategy? Cash holdings should be balanced against inflation risk.
Volatility vs. Stability – Is your current allocation too aggressive or too conservative for your retirement objectives? While equities provide long-term growth potential, fixed interest investments (such as bonds and gilts) offer stability and income.

The impact of asset allocation on retirement income

Asset allocation is a considerable factor in portfolio returns. However, retirees often make the mistake of becoming either too cautious or too aggressive with their investments:

Being too conservative – Holding excessive cash or bonds may seem prudent, but it can reduce purchasing power due to inflation. A well-balanced portfolio should include assets that provide growth to sustain long-term income needs.
Being too aggressive – A high allocation to equities can create unnecessary risk if market downturns force you to sell assets at a loss. As you near retirement, consider shifting towards a mix that prioritises stability while maintaining growth potential.

Adjusting for market conditions and personal circumstances

Your ideal asset allocation isn’t static—it should evolve based on market conditions, economic shifts, and personal circumstances. Regular reviews ensure that your portfolio remains aligned with your retirement goals.

Structuring your retirement income

A successful retirement plan ensures you have enough income to maintain your lifestyle while preserving capital for the future. This requires careful planning to balance essential living costs, discretionary spending, and long-term financial security.

Non-discretionary expenditure (essential costs)

These are unavoidable expenses that form the foundation of your retirement budget:

Living Expenses – Day-to-day costs such as housing, groceries, utilities, and transportation. If you plan to remain in your current home, you likely have a good estimate of these. If downsizing or relocating, consider potential cost changes.
Debt Obligations – Mortgages, car loans, and credit card payments need to be factored in to ensure you can comfortably meet these commitments without depleting assets too quickly.
Taxes – Your tax liability depends on income sources, including pensions, investments, and withdrawals from tax-advantaged accounts. Strategic tax planning helps minimise unnecessary outflows.

Discretionary spending (lifestyle and leisure)

Once essential costs are covered, your remaining budget supports the lifestyle you envision:

Travel – Many retirees plan to explore new destinations or visit family abroad. Whether it’s an annual holiday or extended stays overseas, travel expenses should be accounted for.
Hobbies & Interests – Retirement is the perfect time to pursue passions, whether it’s golf, art, music, or learning a new skill. Even low-cost hobbies can add up over time.
Luxury & Leisure – Dining out, entertainment, or personal indulgences should be factored into your spending plan to ensure a comfortable retirement without financial strain.
Family Support – Many retirees choose to financially support children or grandchildren, whether through gifts, education funding, or home deposits. Consider how much of your wealth you’re comfortable passing on during your lifetime.

Structuring your income for stability

Your retirement income should be structured to cover non-discretionary expenses first, with additional sources funding discretionary spending and future needs. This typically involves:

Fixed Income Sources – State Pension, defined benefit pensions, annuities, and rental income provide stable, predictable cash flow.
Investment Withdrawals – Drawing from ISAs, GIAs, and pension pots in a tax-efficient manner to optimise your total retirement income.
Flexible Access Funds – Cash reserves and liquid investments provide security for unexpected expenses or market downturns.

By carefully structuring income sources, you can ensure financial security while enjoying the flexibility to fund your ideal retirement lifestyle.

Drawing down your retirement savings

As you transition into retirement, how you access your savings can significantly impact your long-term financial security and tax efficiency. Withdrawing funds in the right order – while considering tax liabilities – can help preserve wealth, minimise unnecessary tax charges, and maintain eligibility for certain allowances and benefits.

Tax implications and withdrawal sequencing

A well-structured drawdown approach should prioritise:

Minimising income tax liabilities by spreading withdrawals across different tax years
Using tax-free allowances effectively
Managing capital gains tax (CGT) exposure when selling investments
Considering estate planning implications to protect wealth for future generations

Understanding your retirement accounts and tax implications…

Tax-free withdrawal accounts

Individual Savings Accounts (ISAs)

Tax treatment: Withdrawals are entirely tax-free (no income tax, dividend tax, or CGT)
Best use: Ideal for supplementing income while keeping taxable withdrawals lower
Estate planning: Included in your estate for Inheritance Tax (IHT)

Tip: Since ISAs don’t trigger tax on withdrawals, they can be used to fill income gaps without pushing you into a higher tax bracket. However, they should be balanced against other accounts that might be more tax-efficient for legacy planning.

Taxable investment accounts

General Investment Accounts (GIAs)

Tax treatment: Gains and income are subject to CGT and dividend/income tax
Best use: Useful for funding additional income needs, but tax planning is essential
Tax exemption: £3,000 CGT exemption in 2025/26

Tip: Withdrawals should be carefully managed to avoid exceeding tax allowances. Spreading gains over multiple years can reduce CGT exposure.

Investment Bonds

Tax treatment: Withdrawals of up to 5% per year (of original investment) are tax-deferred
Best use: Controlled income withdrawals without immediate tax consequences
Tax on gains: When exceeding the 5% allowance, gains are subject to income tax

Tip: Investment bonds can be beneficial for later retirement years when taxable income is lower, helping smooth tax liabilities over time.

Pension drawdown and tax considerations

Defined Benefit Pension (Final Salary Scheme)

Tax treatment: Pays a guaranteed income, fully subject to income tax
Best use: Provides stability but limited flexibility on withdrawal sequencing

Tip: Since payments are fixed and taxable, other withdrawals should be structured to keep total income within optimal tax bands.

Defined Contribution Pensions (Workplace & Personal Pensions)

Tax treatment:
- 25% of withdrawals are tax-free (usually as a lump sum or phased), up to the Lump Sum Allowance (LSA) of £268,275
- The remaining 75% is taxed as income at your marginal rate
Best use: Can be drawn flexibly via pension drawdown or used to purchase an annuity

Self-Invested Personal Pension (SIPP)

Tax treatment: Same as workplace pensions, but with more control over investments
Best use: Flexible drawdown strategy to balance income and tax efficiency

Tip: Using the 25% tax-free lump sum strategically – either upfront or in phases – can help reduce income tax in higher-tax years. Remember that, from 2027, unspent pensions will be brought inside your estate and subject to inheritance tax.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is dependent on individual circumstances.

State Pension considerations

Tax treatment: Taxable income but paid gross (without tax deducted at source)
Best use: Forms the foundation of retirement income, but may push other withdrawals into higher tax bands
Full new State Pension (2025/26): £11,976 per year

Tip: If your total income (State Pension + withdrawals) exceeds the personal allowance (£12,570 in 2025/26), additional withdrawals should be planned carefully to avoid higher tax rates.

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How to structure drawdowns for long-term tax efficiency

A well-planned withdrawal strategy can significantly enhance your retirement income while minimising tax and preserving long-term wealth. There’s no one-size-fits-all approach, but understanding the pros and cons of different sequences can help you make informed decisions.

Key principle: It’s not just about minimising tax this year – it’s about minimising tax over your lifetime.

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A phased, tax-efficient drawdown approach might look like this:

Phase 1: Early Retirement (before State Pension and required pension access)

Primary income sources:
- ISAs – tax-free withdrawals
- Pension tax-free lump sum (25%)
- Cash savings
Why?
- Keeps taxable income low
- Maximises use of lower tax bands in future years
- Provides flexibility before pensions are accessed

Phase 2: Mid-Retirement

Primary income sources:
- Taxable investments – general investment accounts (GIAs), investment bonds
- Controlled pension withdrawals – draw income while managing tax brackets
Strategy:
- Harvest capital gains within the annual exemption
- Use personal allowance, dividend, and savings rate bands
- Avoid higher-rate tax thresholds where possible

Phase 3: Later Years

Primary income sources:
- Pensions – more heavily drawn upon after deferring earlier
- Investment bonds – for tax-deferred growth and possibly top-slicing relief
- ISAs – as a tax-free income buffer in high-cost years or for care needs
Why?
- Helps manage income post-State Pension
- Maintains flexibility and liquidity in older age

Should you use tax-free assets first or last? There are two schools of thought – both valid depending on the situation:

Using tax-free assets early (e.g., ISAs, pension lump sum)

Ideal for minimising early income tax and creating flexibility

Pros:

Keeps taxable income low in early retirement
Avoids triggering higher tax brackets or benefit tapers
Supports early lifestyle or travel goals without tax friction

Cons:

Reduces future flexibility and tax-free growth potential
May increase reliance on taxable income later in life

Preserving tax-free assets for later

Ideal for long-term tax optimisation and estate planning

Pros:

Allows tax-free wrappers (ISAs, pensions) to grow longer
Reduces future tax liability
Supports legacy and care planning

Cons:

May result in paying more tax early on
Could underuse valuable allowances like CGT exemption or dividend allowance

The hybrid approach: Best of both worlds

In practice, the most tax-efficient withdrawal strategy typically blends both approaches:

Withdraw just enough from taxable assets to use allowances (personal allowance, CGT exemption, dividend allowance)
Use ISAs and tax-free cash strategically to top up income when needed
Defer pension withdrawals where possible to reduce future tax and maximise flexibility
Review annually — small adjustments can yield large long-term benefits

Final thought: Keep reviewing your withdrawal plan

Tax laws and personal circumstances change. A structured withdrawal strategy should be reviewed annually to ensure it remains tax-efficient and aligned with your goals. The right withdrawal sequence is highly personal – and depends on:

Your current vs future tax position
Your goals (e.g., spending, gifting, legacy)
The mix and value of your assets
When and how you want to retire

We’re here to model your options and help you choose the strategy that works best for you.

Structuring a sustainable retirement income strategy from investments

Generating reliable income in retirement requires a balanced approach, ensuring your portfolio provides both cash flow and long-term growth. Below are five key sources of retirement income, each with its benefits and risks.

Equity dividends: A potential source of passive income

Many retirees rely on dividends from equity investments as a core income stream. However, it’s important to understand their limitations:

Regular Income Potential – Some companies pay dividends consistently, providing passive income.
Dividend Cuts Can Happen – No payout is guaranteed; companies can reduce or eliminate dividends.
Concentration Risk – Many high-yield stocks cluster in specific sectors, limiting diversification.
Best Approach: Rather than focusing solely on dividends, consider a total return strategy that balances growth and income.

Homegrown dividends: Generating cashflow from your portfolio

Instead of relying solely on company dividends, selectively selling investments can provide more flexibility:

Control Over Timing and Tax Implications – Selling specific assets allows you to manage capital gains tax efficiently.
Portfolio Rebalancing – Adjust allocations strategically by selling appreciated assets.
Maximise Allowances – Utilise your annual capital gains tax exemption to withdraw tax-efficiently.
Best Approach: Sell assets selectively to manage income needs while maintaining diversification and tax efficiency.

Fixed interest coupons: Predictable income, with trade-offs

Fixed interest securities, such as government and corporate bonds, provide regular interest payments. While attractive for stability, they come with risks:

Stable and Predictable Income – Bonds offer set coupon payments.
Inflation Risk – Fixed payments lose purchasing power over time.
Interest Rate Sensitivity – Rising rates can decrease bond values.
Default Risk – Some issuers may struggle to meet obligations.
Best Approach: Use bonds strategically, balancing income stability with growth-oriented investments.

Cash holdings: Liquidity for short-term needs

Cash reserves provide immediate access to funds, but holding too much can be detrimental:

No Market Volatility – Cash is stable and readily available.
Inflation Erosion – Purchasing power declines over time.
Opportunity Cost – Cash may not generate sufficient returns.
Best Approach: Keep a cash buffer for emergencies, but avoid excessive cash holdings that can erode wealth over time.

Annuities: A structured income stream, with constraints

Annuities provide guaranteed income but come with trade-offs:

Predictable, Lifelong Income – Provides security against outliving savings.
Inflation Risk – Fixed payments may not keep up with rising living costs.
Limited Liquidity – Once purchased, annuities are difficult to adjust or sell.
Best Approach: If considering an annuity, ensure it complements other income sources and inflation protection strategies.

Optimising Your Retirement Income Mix

The most effective retirement income strategy balances multiple sources to reduce risk and enhance sustainability. Regularly reviewing your withdrawal approach can help protect your long-term financial well-being.

Beyond investments: A holistic approach to retirement planning

A successful retirement plan extends beyond investment strategy – it involves optimising your estate planning, and structuring your wealth, to meet your financial and legacy goals.

State Pension: When and how to take it

1. When Should You Start?
The timing of your State Pension can impact your overall retirement income:

The State Pension age currently ranges between 66 and 68, depending on your birth year.
Delaying your claim increases payments by 1% every 9 weeks (approximately 5.8% per year).

2. Spousal Benefits & Eligibility

Your State Pension is based on your National Insurance record, not your spouse’s.

Estate Planning: Protecting your wealth and legacy

Effective estate planning ensures that your assets are distributed according to your wishes while minimising costs and taxes.

1. Key Estate Planning Questions:

Who should inherit your assets? (Family, charities, friends)
Which assets should they inherit? (Cash, property, investments, heirlooms)
What are the tax implications? (Inheritance tax, capital gains tax)

2. How Assets Transfer Upon Death:

There are three primary ways assets can pass to beneficiaries:

Wills

A legally binding document outlining how your estate is managed.
Executors must usually apply for a Grant of Probate to distribute assets.
Wills alone do not prevent probate but provide legal clarity.

Trusts

Bare Trusts: Assets are held for a beneficiary who gains full access at age 18.
Discretionary Trusts: Trustees have control over how and when beneficiaries receive assets.
Trusts can provide tax efficiency and asset protection but require careful structuring.

Beneficiary Designations

Life insurance policies, pension plans, and annuities often bypass probate and go directly to named beneficiaries.
Regularly review designations to ensure they align with your wishes.

Executors & Trustees

Choose a trusted individual or professional to oversee your estate’s administration.
They will be responsible for applying for probate and ensuring assets are distributed correctly.

Best Approach: Regularly review and update your will, trust structures, and beneficiary designations to reflect life changes and tax laws.

Maximising your legacy through tax planning and charitable giving

Reducing Inheritance Tax (IHT):

The current Inheritance Tax threshold is £325,000 per individual, with an additional £175,000 allowance for a main residence left to direct descendants.
Spouses can transfer unused allowances, increasing the tax-free threshold to £1 million per couple.

Gifting & Charitable Giving Strategies:

Gifts up to £3,000 per year are tax-free, reducing your taxable estate.
Charitable donations can lower IHT liability while supporting causes you care about.

Best Approach: Work with an estate planner to optimise your wealth transfer and mitigate tax exposure.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills, along with Trusts are not regulated by the Financial Conduct Authority.

Start planning now – invest later. Obtain a bespoke financial plan, tailored to your unique objectives.

Book A Conversation

Should you require more information or have particular questions, we invite you to contact us at your convenience.

Net Adjusted Income: Crucial Information for Parents

Why net adjusted income is so important

Many parents overlook the complexities of net adjusted income, leading to costly financial mistakes. One of the most common errors involves pension contributions and eligibility for government childcare schemes. To ensure you make informed decisions, we’ll clarify how net adjusted income is assessed and how strategic planning can help you optimise your finances.

Optimise your net adjusted income, with a no-obligation financial planning consultation.

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A case study

Kate and Mark are new parents, both committed to securing the best future for their family. Kate earns an annual salary of £130,000, placing her above the income threshold for key government childcare benefits, including 30 free hours’ childcare, and tax-free childcare (£2 government contribution for every £8 saved into the scheme).

To bring her income below the relevant threshold and qualify for these schemes, she began making additional pension contributions. However, she made a critical mistake.

The miscalculation

Kate increased her pension contributions by £1,000 per month, beginning in January. She assumed this would immediately reduce her net adjusted income and enable her to access government childcare support. Unfortunately, this assumption was incorrect.

Net adjusted income is assessed over the entire tax year (6 April to 5 April), not on a monthly basis. Despite her increased pension contributions in the later months, Kate’s total net adjusted income for the full tax year still exceeded the qualifying threshold.

The financial impact

As a result of this miscalculation, Kate remained ineligible for government childcare support and may have lost £2,000 per year in potential savings, compared to if she had she structured her pension contributions strategically from the start of the tax year.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected, and the value may therefore fall as well as rise. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Key actions

To avoid similar pitfalls, consider the following:

Plan well in advance – Adjustments to net adjusted income should be made at the start of the tax year (April), not mid-year, to maximise potential savings.
Understand the full-year assessment – Government childcare schemes evaluate income over a 12-month period, not on a rolling basis.
Assess the financial trade-offs – While pension contributions can reduce net adjusted income, it is essential to balance contributions with immediate financial needs.

Steps to optimise your net adjusted income

With April fast approaching, now is the time to prepare. Here’s how you can take proactive steps:

Step 1: Determine the benefits available through government childcare schemes based on your income level.

Step 2: Calculate the impact of increased pension contributions on your take-home pay and long-term savings.

Step 3: Compare the financial advantages of reduced net adjusted income with the benefits of additional pension growth.

Many parents find that with careful planning, they can strike a balance between immediate cost savings, and long-term financial security.

Act now to establish your financial position

With the new tax year just around the corner, now is the ideal time to take control of your finances. By planning ahead, you can optimise your net adjusted income, access valuable childcare benefits, and strengthen your long-term financial security.

If you want to ensure you are making the right decisions without unnecessary complexity, book a no-obligation financial planning consultation for the start of the new tax year.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Optimise your net adjusted income, with a no-obligation financial planning consultation.

Book A Demo

Should you require more information or have particular questions, we invite you to contact us at your convenience.

Employee Share Options as an Employment Benefit

What you need to know

Overview:

Many high-earning professionals receive shares as part of their remuneration package, which can impact their tax situation. Understanding different Employee Share Options arrangements can help optimise tax efficiency.
Employee Share Options schemes vary and often have different tax implications. For instance, under the Enterprise Management Incentives (EMI) scheme—frequently used by start-ups—employees can benefit from Business Asset Disposal Relief on Capital Gains Tax upon selling their shares.
Seeking expert advice is crucial to maximise any available tax reliefs and make the most of your wealth.

In today’s business climate, companies are carefully structuring remuneration packages, with Employee Share Options schemes becoming a popular option to promote employee loyalty. Such schemes can motivate employees, especially those in senior roles like executives and directors, by giving them a personal stake in the company’s success.

Simon Martin, Chartered Financial Planner at Technical Connection (a company owned by St. James’s Place), notes that many high-net-worth clients’ remuneration packages include either direct shares or Employee Share Options, regardless of whether they work for private or public companies.

Different types of share schemes offer unique tax benefits, and the specific scheme available often depends on the company’s nature.

Explore your Employee Share Options benefits, with a no-obligation financial planning consultation.

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Common schemes

Enterprise Management Incentives (EMI)

Common among start-ups, the EMI scheme allows employees to purchase shares if they meet certain performance or tenure requirements. This scheme helps attract talent by providing the potential for investment returns in the future, even if the company can’t currently match larger firms on salary.

Technology companies frequently use EMI as it enables key employees to own shares and benefit from the company’s growth in a tax-efficient way. A company can grant up to £250,000 worth of share options over a three-year period.

With EMI, you might have the option to buy shares in the future at an agreed price, potentially much lower than their market value at purchase time. If shares were priced at £1 initially and are worth £10 when purchased, you could gain £9 per share.

If shares are bought at or above market value when the option was granted, no Income Tax or National Insurance is due. A discounted purchase will, however, incur Income Tax and National Insurance on the difference. When you sell, Capital Gains Tax (CGT) applies at a reduced rate of 10% (rather than the standard 20%) if the option has been held for at least two years.

Save As You Earn (SAYE)

SAYE is a popular UK share scheme available to all employees, not just higher-level staff.

With SAYE, you save between £5 and £500 monthly for three to five years, deducted from your gross salary. At the end of this period, you have the option to buy shares at a pre-set price, usually up to 20% below the market rate at the time.

If share prices drop, you can opt not to buy and withdraw your savings as cash, minimising risk. If you do buy the shares, they can be held or sold immediately for a profit. Income Tax and National Insurance do not apply, though CGT may be due unless shares are transferred to a pension or ISA within 90 days.

Should you require more information or have particular questions, we invite you to contact us at your convenience.

Private Equity: Carried Interest Tax Treatment

Understanding the upcoming reforms to remuneration in private equity

The UK government has announced major reforms to the tax treatment of Carried Interest, set to take effect over the coming years. These changes will affect private equity executives, fund managers, and other stakeholders in the UK’s asset management sector.

This guide outlines the key elements of the reforms and how you can prepare.

The levels and bases of taxation can change at any time. The value of any tax relief depends on individual circumstances.

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Overview of proposed reforms

Increased tax rate
Starting from 6 April 2025, the Capital Gains Tax rate on Carried Interest will increase, from 18% for basic rate taxpayes, and 28% for higher/ additional rate taxpayers, to a single unified rate of 32%.

Further Reforms
The government intends to revise the taxation of Carried Interest, following an extended consultation period with industry stakeholders. This change aims to align tax treatment with the economic nature of carried interest, while simplifying the legislative framework.

Executives have the opportunity to provide input on these changes until 31 January 2025, either through written feedback or by requesting a meeting with HM Treasury.

Explore your options with an expert in financial planning for private equity executives.

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Key insights from industry feedback

HM Treasury’s Call for Evidence revealed a focus on maintaining the UK’s competitive position in asset management. Respondents to the Call for Evidence proposed several recommendations:

Minimum Co-Investment Requirements: A proposal to require fund managers to have a minimum investment in the funds they manage.
Long-Term Investment Incentives: Suggested adjustments to the Income Based Carried Interest (IBCI) rules to encourage long-term commitments.
Mandatory Holding Periods: Introducing a minimum holding period before carried interest payouts are permitted.
Simplified Taxation Structure: The adoption of a flat tax rate, rather than a blended rate that includes income and dividends.
Favourable Treatment for VC and Emerging Private Equity Funds: Adjustments to support venture capital and growth-stage businesses.

Respondents also highlighted concerns:

Employment Income Classification: Concerns about the complexities of treating all carried interest as employment income.
Individual Co-Investment Assessments: Avoiding requirements for co-investment at an individual level, which could create administrative burdens.
Transitional Considerations: Ensuring changes do not disrupt existing fund structures and are implemented with sufficient transitional provisions.

Government’s proposed framework for reform

The government intends to implement a new tax structure for carried interest within the Income Tax framework from April 2026, incorporating elements of the existing regime while introducing clearer, more stable guidelines.

Classification as Trading Profits: All carried interest will be treated as trading profits, subject to income tax and Class 4 NICs.
Effective Tax Rate of 34.08% for Additional Rate Taxpayers: For those in the highest income bracket, carried interest will be taxed at an effective rate of 34.08%.
Removal of Certain Exclusions: The current exclusion for employment-related securities from the IBCI rules will be eliminated.
IBCI Rule Enhancements: Specific amendments to the IBCI rules are planned, particularly to address the needs of private credit funds.

International and territorial considerations

For non-UK residents, the tax on carried interest will only apply to services performed in the UK, consistent with the existing Disguised Investment Management Fee (DIMF) rules and subject to double tax agreements.

Interaction with the new 4-Year Foreign Income and Gains (FIG) Regime

From April 2025, the new FIG regime will replace the remittance basis of taxation. Qualifying carried interest from non-UK services may be eligible for FIG relief, whereas non-qualifying interest under IBCI rules will largely remain unchanged.

Transitional provisions

The government does not currently plan to introduce transitional provisions, viewing the reforms as predictable under existing legislative guidelines. However, stakeholders are encouraged to submit any specific scenarios that may merit consideration before the final legislation is enacted.

Still have questions?

Private equity executives should assess their fund structures, co-investment strategies, and tax planning in light of these reforms. Participating in the consultation process may also help influence final policy details. Preparing for these changes now will help minimise potential impacts when the reforms take effect.

We encourage you to speak with an Apollo Private Wealth Adviser who is expert in financial planning for private equity professionals.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Should you require more information or have particular questions, we invite you to contact us at your convenience.

UK Resident Non-Domiciled Individuals: Helping you traverse reforms

Reforms to the Non-Dom regime from April 2025

This guide will outline the key changes and actions you can consider.

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Key planning actions

Inheritance Tax (IHT)

As of April 2025, Inheritance Tax (IHT) rules will undergo significant changes, affecting non-domiciled individuals who live in the UK. Here’s an overview to help you understand how the new rules may impact your estate and any trusts you have.

Current Rules vs. New Rules from April 2025

Current System

IHT liability is based on domicile status
Non-UK domiciled individuals only pay UK IHT on UK-based assets
Long-term UK residents (15 out of the last 20 years) are considered “deemed domiciled” and are subject to UK IHT on worldwide assets

Changes from April 2025

Domicile will no longer determine IHT. Instead, residency status will dictate IHT obligations.
Long-Term Residents (LTRs): Anyone who has been UK-resident for 10 of the last 20 years will be considered a “long-term resident” (LTR) and liable for IHT on worldwide assets, similar to UK domiciled individuals.

Key Points for Trusts and Excluded Property

Trusts Set Up by Non-Domiciles Before April 2025
Non-UK assets placed in trusts before April 2025 are considered “excluded property,” meaning they remain outside the UK IHT scope. However, this benefit might change if the trust creator becomes an LTR.
Trusts Set Up by LTRs Post-2025
If an LTR establishes a trust, the trust assets (even if held overseas) may fall under UK IHT rules. Trust assets may incur charges:
- At the trust’s tenth anniversary: If the settlor is an LTR, periodic charges may apply.
- Upon the settlor’s death: Assets in the trust could be taxed as part of the estate if the settlor is a potential beneficiary.
Shifting Residence Status
Assets may enter and leave the IHT net depending on whether the settlor remains an LTR. For example, if you retire abroad and lose LTR status, your trust assets may move outside the IHT net again, possibly triggering exit charges.
Exceptions
- Trusts set up by non-domiciles before April 2025 may retain “excluded property” status if the settlor passes away before April 2025.
- If the settlor was an LTR at death, the trust may still be subject to periodic charges.

Other IHT Considerations

Lifetime Transfers: Gifts or transfers of foreign assets made by a non-LTR are generally exempt from UK IHT. However, if the transferor later becomes an LTR, some assets may fall back within the scope.
Spouse Exemption: A non-domiciled spouse may choose to be treated as UK domiciled to benefit from an unrestricted spouse exemption. This election remains but with a longer exit period (10 years) post-2025.

Summary

The upcoming IHT changes aim to simplify rules but may complicate trust management for LTRs. Non-domiciled individuals should review estate plans and discuss any trusts with advisors to mitigate unexpected tax implications as their residence status shifts.

Still have questions?

Following the biggest set of tax increases in modern history, it’s an opportune moment to evaluate your family’s financial situation and objectives.

We encourage you to contact us, to ensure you are fully utilising all available allowances this year, and that you are adequately protected from risk, as far as possible, including any risk resulting from these changes.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

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