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Insights Category: Estate and Inheritance Tax Planning

How to pay yourself as a business owner tax efficiently

Introduction

There are three primary methods through which you can pay yourself as a business owner tax efficiently. This involves withdrawing profits from your limited company: salary, dividends, and pension contributions (though the latter involves setting aside funds from the company for future use). Alternatively, profits can be retained within the company and later accessed through the sale proceeds or dividends.

The primary consideration in choosing among these methods is the net benefit to the owner in terms of payment structure. While nobody enjoys paying taxes or national insurance, optimising these payments to maximise benefits is prudent. Paying taxes isn’t necessarily negative if it results in more money in your pocket when you need it.

For instance, a basic rate taxpayer making a pension contribution provides a straightforward illustration of net benefit. By receiving tax relief on the contribution, they effectively turn an £80 net contribution into an £85 net benefit, taking into account tax relief, and future tax paid. Given this, one must decide whether to retain 100% of the £80 in their bank account or make a pension contribution to receive 85% of £100 at a future date.

However, for the owner of a limited company, the decision is more complex, considering various factors beyond simple tax implications.

Taxation applying to extracting profit

Corporation Tax

Corporation tax is a levy imposed on the profits of a registered business entity.

The primary corporation tax rate is now 25%, applicable to profits exceeding £250,000. Small businesses, defined as those with profits below £50,000, continue to be taxed at the small profits rate (SPR) of 19%.

For companies earning profits above £50,000 but below £250,000, the full main rate will apply, yet they will receive marginal rate relief. This means their actual corporation tax rate will gradually increase from 19% to a figure between the small profits rate and the main rate.

The SPR does not extend to close investment-holding companies, such as those controlled by a small group of individuals not primarily engaged in commercial trading or land investment for letting purposes. For instance, a Family Investment Company may not qualify for the SPR.

Before calculating profits, business expenses such as employee salaries (including those of business owners acting as employees), employers’ National Insurance contributions, and pension contributions (subject to the “wholly and exclusively” rule) are deductible.

Employers National Insurance Contributions

Employers are obligated to pay National Insurance contributions for their employees once their salary surpasses specific thresholds. Typically this is at a rate of 15% on weekly income above £96 (equating to annual income above £5,000).

Be aware that the employment allowance, which provides up to £10,500 per year towards a company’s National Insurance contributions, may not be applicable to company owners unless they employ additional staff.

When paying yourself as a business owner, you cannot utilise the employment allowance if you are the director and the sole employee earning above the Secondary Threshold, or if you operate as a service company subject to ‘IR35 rules’, and your sole income comes from the intermediary (e.g., your personal service company, limited company, or partnership). If you are part of a group, only one company or charity within the group is eligible to claim the allowance.

Income Tax and Employee NI

Income will be taxed in line with standard employee taxation. When paying yourself as a business owner, you’ll receive a personal allowance, which currently stands at £12,570 per annum. However, it’s important to note that there’s a reduction for individuals with adjusted net income exceeding £100,000.

Similar to employer contributions, the rates and amounts of employee National Insurance (NI) contributions can vary. However, for most employees, NI is charged on weekly income between £242 to £967 at 8%, and on income above £967 at 2%.

Dividends

Dividends represent payments made from company profits to its shareholders and can be an important element to paying yourself as a business owner. They are subject to taxation in a consistent manner across dividends received from companies, unit trusts, and open-ended investment companies.

Since the 2016/17 tax year, the previous dividend taxation system underwent significant changes. The dividend tax credit was eliminated and replaced by the structure outlined below.

Each individual is entitled to an annual Dividend Allowance of £500. Subsequent dividends are taxed as follows:

  • Basic Rate: 10.75%
  • Higher Rate: 35.75%
  • Additional Rate: 39.35%

It’s crucial to note that the 0% rate serves as a starting point for dividend taxation and not a deduction from the dividend amount received. For instance, if an individual exhausts their personal allowance, falls £500 below the higher rate threshold, and receives £1,000 in dividends, £500 of those dividends would be subject to higher rate dividend tax.

Furthermore, it’s essential to understand that the entire dividend payment is considered in the tax calculation, not just the portion exceeding £500. While the initial £500 enjoys a 0% rate, any surplus is taxed according to the respective tax band. Dividends can offset any unused Personal Allowance before applying the £500 allowance. Consequently, an individual with no other income can receive dividends up to £13,070 before incurring tax liability.

What’s the most tax-efficient method for extracting profits from your business?

When paying yourself as a business owner, a straightforward solution to improve tax efficiency is to make pension contributions. As previously explained, these contributions are not subject to corporation tax or National Insurance when made by the business. Moreover, upon benefiting from these contributions, 25% is typically tax-free, with subsequent amounts taxed at marginal rates and no National Insurance to pay.

However, while pension contributions may be the most tax-efficient option, they might not always be the most practical. Individuals under 55 require accessible income for day-to-day living expenses. Even for those over 55, immediately vesting pension contributions could technically cover living expenses. However, in reality, this may not be feasible due to potential complications with recycling rules.

Moreover, accessing pensions beyond any tax-free cash can trigger the Money Purchase Annual Allowance (MPAA), limiting the ability to fund a Defined Contribution pension beyond the MPAA threshold.

Given the favourable tax treatment of pensions, it’s worth considering whether pension funds should be utilised to meet retirement needs rather than immediate financial requirements. It’s then important to explore how you can withdraw funds from your business to cover day-to-day living expenses both presently and in the future, when paying yourself as a business owner.

Dividends often outperform salary when it comes to meeting immediate daily needs, especially when considering all available allowances. However, the interplay between allowances and National Insurance (NI) thresholds can significantly influence this comparison. For instance, while you can draw a salary up to the personal allowance of £12,570 without incurring income tax, employers’ NI contributions become payable from £5,000.

Ultimately, the business owner must extract sufficient profit for livelihood. Therefore, determining the “sweet spot” for taking a combination of salary and dividends becomes crucial. Could the optimal approach entail taking a salary of £12,570, with the remaining amount as dividends? Perhaps. However, given the intricate nuances of taxation rates, thresholds, and allowances, the answer may be more nuanced and dependent on individual circumstances.

Once the immediate income needs have been met and any remaining profit is surplus to the business’s requirements, considering pension contributions becomes prudent.

Indeed, while there are many options for paying yourself as a business owner and extracting company profits, each carries its own tax and National Insurance implications for the business owner, considering both their employer and employee roles.

Despite the technical complexity involved, the planning approach can be fundamentally simple. The goal is to withdraw the minimum profit necessary to cover immediate needs, ensuring that the rest is directed towards the pension to optimise future financial security. An expert wealth adviser can help you determine the optimal strategy for your individual circumstances.

Advice around your remuneration structure is ultimately the responsibility of your company’s accountant.

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 11/06/2026

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

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Using a Life Cover Insurance Plan Written in Trust to Meet an Inheritance Tax (IHT) Liability

Introduction

Inheritance Tax (IHT) can be tricky to understand, but its impact can mean less money ends up in the pockets of your loved ones. This is even more so the case as most unused pensions and death benefits will form part of your estate from 2027. A solution could be to write a Life Cover Insurance Plan into Trust.

Tax allowances such as the residence nil-rate band (RNRB) begin to fall away for estates valued in excess of £2 million. In the case of the RNRB, this is tapered by £1 for every £2 an estate exceeds £2 million.

What is a Life Cover Insurance Plan?

Life insurance offers a tax-exempt payout to a chosen beneficiary upon your death.

This insurance comes in two forms; term assurance and whole of life assurance.

Term assurance covers you for a set duration. It is often chosen to safeguard against debts that will diminish or conclude over time, like a mortgage repayment, or to ensure there is a fund available for specific future expenses, such as your children’s education costs.

Whole of life assurance, on the other hand, guarantees a payout at the time of death, as long as the premiums have been consistently paid throughout the policy’s term.

Whole of life policies are generally aimed at addressing financial responsibilities that will arise at your death, regardless of its timing, like covering an inheritance tax bill or enhancing the inheritance you leave behind. These plans are suitable when the need for coverage is indefinite or unclear.

How can a Life Cover Insurance Plan help pay towards an Inheritance Tax (IHT) bill?

Over and above gifting sufficient assets to reduce your gross estate value to within £2 million, if you have excess income during your retirement, it might make sense to consider a Life Cover Insurance Plan written in trust, to meet the eventual IHT liability, which could be as high as £400,000 on an estate valued at £2 million.

It is important that the Life Cover Insurance Plan is written into Trust, and that the premiums are paid using excess income, rather than from assets – otherwise, the premiums paid could be treated as a chargeable lifetime transfer (CLT).

Note that probate is required to release estate assets, and IHT needs to be paid before probate is granted. Therefore, an estate’s assets cannot be directly used to meet IHT liability, and an alternative solution such as life cover in trust provides the funds required.

How much might a Life Cover Insurance Plan cost?

As of June 2026, a guaranteed whole of life joint plan with a sum assured of £400,000 would cost £6,572 per annum, assuming a 65-year-old male non-smoker and 65-year-old female non-smoker insured through Vitality, and not including ‘waiver of premium’ as an additional option. These figures are based on guaranteed premiums, meaning the provider cannot change the premium as you get older.

Guaranteed whole of life cover provides certainty; if the premiums are paid until death, then the sum assured will pay out. To put the figures in perspective, a 65 year old woman has a life expectancy of 24 years. By the time she is 89, she would have paid around £158,000 in premiums, but the payout from the plan would be £400,000 on second death. If the woman lives to 100, she will have paid £230,000 in premiums, and the payout from the plan would still be £400,000 on second death.

The value of financial advice and Inheritance Tax (IHT) planning

IHT is a highly complex area and very few people know every rule, exemption and allowance, or how to use them.

As your assets increase or decrease in value, your IHT liability will change and regular reviews of your financial position will therefore be important. It’s always a good idea to get in touch with a financial adviser whenever you buy or sell property too, or if you’re thinking of doing so. They can help make sure the choices you make will be tax-efficient for you – and those you leave behind.

Making confident decisions about Inheritance Tax planning while you’re still fit and healthy helps to create a better world for everyone you care about.

Appointing an expert wealth manager may enable you to capitalise on tax efficiencies such as these, mitigating paying unnecessary tax in your retirement and in the event of your death.

The levels and bases of taxation and reliefs from taxation can change at any time.

Tax relief is generally dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

SJP Approved 11/06/2026

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

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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.

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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 £240,000 at once, at a net cost from £132,000, 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.

SJP Approved 10/06/2026

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.

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Protecting Income and Wealth: The Complete Guide

The Complete Guide to Protection Planning for High-Earning Professionals and High-Net-Worth Families

How to protect your income, family, business and long-term wealth.

Protection isn’t a product. It’s a philosophy.

Most successful professionals dedicate enormous effort to:

• building investment portfolios
• mitigating unnecessary taxation
• growing businesses
• planning for retirement

Yet far fewer devote the same attention to protecting what they’ve built.

We frequently meet successful professionals with substantial assets – sometimes portfolios worth several million pounds – yet protection arrangements that are fragmented, outdated, or incomplete.

The problem is rarely affordability. It is complexity. And the common misconception that specialist insurance is primarily for people with “less to lose”. In reality, the opposite is true.

The more wealth you accumulate – and the more people depend on you – the more important protection becomes.

For high earners and entrepreneurs, the greatest financial asset is often not their portfolio or property. It is their future earning power. A serious illness, accident or premature death can derail a carefully constructed financial plan almost overnight. Protection planning exists to prevent that.

In this guide we explore:

• The core types of financial protection
• How to identify gaps in existing cover
• The hidden limitations of employer benefits
• Advanced strategies used by high-net-worth families
• How protection fits into long-term wealth and estate planning

Arrange your no-obligation protection coverage sufficiency review with an expert wealth adviser.

Select date and time

Understanding the Real Financial Risks

Before selecting policies, it’s important to understand what you’re actually protecting against.

Most families face four primary risks…

Premature death

If the primary earner dies, their income disappears immediately.

Yet financial commitments remain:

• Mortgage repayments
• School fees
• Household costs
• University funding
• Retirement planning for the surviving partner

Professionals in their 30s and 40s have decades of future earnings at stake – earnings that would be lost entirely in the event of premature death. Protection planning effectively insures this “human capital”.

Hypothetical example: A 42-year-old business owner and father of two died suddenly from a heart attack, leaving his family reliant on a single income that had vanished overnight. A well-structured life policy ensured his mortgage was cleared and his children’s school fees could still be paid, giving his family financial stability during an unimaginably difficult time.

Serious illness

Medical outcomes for serious illnesses have improved dramatically.

But recovery can still mean:

• extended time away from work
• reduced earning capacity
• major lifestyle adjustments

Even wealthy individuals can face significant financial disruption if illness prevents them working.

Hypothetical example: At 49, a lady was diagnosed with aggressive breast cancer and needed to step away from her role as a senior solicitor while undergoing treatment. Her critical illness cover paid out a substantial lump sum, allowing her to focus on recovery without the added pressure of replacing lost income.

Long-term inability to work

Perhaps a more likely financial shock than death for someone in their 30s or 40s, conditions such as:

• chronic fatigue
• mental health conditions
• neurological illness
• musculoskeletal injuries

may prevent someone from working for years, without qualifying for a critical illness payout.

Hypothetical example: After a cycling accident left him with a spinal injury, a 37-year-old consultant was unable to return to work for several years. His income protection policy replaced a large portion of his salary each month, ensuring his household finances and long-term plans stayed on track.

Financial instability for dependants

Without proper protection, families may be forced to:

• liquidate investments prematurely
• sell property
• abandon long-term plans
• rely on extended family support

Protection ensures financial independence even when life does not go according to plan.

Hypothetical example: When a couple separated, the household finances became far more fragile, particularly with two young children depending on them. Protection cover ensured that if either parent became seriously ill or died, there would still be funds available to maintain the children’s home and future education.

Please note that these plans do not have a cash-in value and will stop if payments to them cease.

The Core Protection Building Blocks

Most well-designed protection strategies combine several layers of cover…

Life Insurance (Term Assurance)

Life insurance provides a lump sum if you die during the policy term.

This money can be used to:

• repay mortgages
• replace income for dependants
• fund education costs
• provide financial security for a partner

Two common structures are used:

Level term cover

Pays a fixed lump sum. Typically used to replace income or fund family commitments.

Hypothetical example: A couple had two young children and a large mortgage, so they wanted certainty that their family would be financially secure if either of them died. A joint level term policy ensured a fixed lump sum would be paid out at any point during the term, providing stability for school fees, living costs and long-term planning.

Decreasing term cover

Reduces over time, often aligned with a repayment mortgage.

Hypothetical example: When a couple bought their first home, their priority was protecting the mortgage without overpaying for cover they didn’t need. A joint decreasing term policy mirrored their repayment mortgage balance, ensuring the outstanding loan would be cleared if one of them died.

How much life cover is needed?

For many professionals, advisers calculate coverage based on:

• outstanding debts
• income replacement
• school fees
• retirement provision for the surviving partner

Critical Illness Cover

Critical illness cover pays a tax-free lump sum if you’re diagnosed with a serious illness such as:

• cancer
• stroke
• heart attack
• multiple sclerosis

This money provides immediate financial flexibility during recovery.

It can be used to:

• repay debts
• fund private treatment
• reduce working hours
• support family commitments

For affluent individuals, this liquidity is particularly valuable when wealth is tied up in long-term assets.

Hypothetical example: A 46-year-old was diagnosed with multiple sclerosis and had to reduce his workload significantly. His critical illness policy paid a lump sum that helped cover private treatment, adapt his home, and replace income during a period of uncertainty.

Income Protection

Income protection replaces a portion of your income if illness or injury prevents you working.

Policies typically:

• cover 50–70% of earnings
• pay a monthly benefit
• continue until recovery or retirement

For many professionals, income protection is the single most important policy, because the probability of long-term illness is far greater than premature death.

Hypothetical example: After developing severe back problems, a 38-year-old marketing director was signed off work for nearly a year. Her income protection policy paid a monthly benefit that covered the majority of her salary, allowing her to maintain her lifestyle while focusing on recovery.

Family Income Benefit

Family income benefit provides a tax-free monthly income to dependants if you die.

Rather than paying a lump sum, it replaces income over time.

This is often used to cover:

• school fees
• childcare
• day-to-day household spending

Hypothetical example: When a father died unexpectedly at 41, his partner and their two children faced the sudden loss of his income. His family income benefit policy paid a tax-free monthly income until the end of the policy term, helping to replace his earnings and support the family through the children’s upbringing, providing towards school fees and mortgage repayments.

Please note that these plans do not have a cash-in value and will stop if payments to them cease.

Please note that there is no pay-out of family income benefit if you die after the term of the policy, nor will you get your money back.

The hidden limitations of employer benefits

Many professionals assume workplace benefits provide sufficient protection. In practice, they rarely do.

Benefits vs gaps

Typical benefits include:

  • Death-in-Service cover
  • Group Income Protection
  • Group Critical llness cover
  • Private Medical Insurance

These are valuable – but they often leave significant gaps.

  • Cover disappears when you change jobs
  • Employer benefits are rarely portable.
  • If you change firm, start a business, or take a career break, protection may disappear entirely.
Income protection limits

Employer schemes may:

• exclude bonuses
• cap payouts
• limit claim duration

For senior professionals with performance-linked income, these limitations can be significant.

Death-in-service rarely replaces lifetime earnings

A payout of four times salary may sound substantial.

But in reality, that replaces only a few years of income.

Identifying gaps in your current protection

Most people already have some cover. The challenge is determining whether it’s actually sufficient.

A proper review should consider:

Auditing existing policies

Taking an objective view of

  • employer benefits
  • personal life cover
  • critical illness
  • income protection
Financial commitments

By leveraging sophisticated cashflow modelling, a professional adviser can help you visualise the ongoing costs of

  • retirement plans
  • mortgages
  • school fees
  • dependants
Income reliance

Many households depend heavily on one or two primary earners. Often, this income is derived from a complex variety of sources.

If that income stops, the financial plan may collapse.

Scenario stress-testing

A structured review asks questions like:

• What happens if income stops at age 45?
• What if serious illness prevents work for several years?
• What are the potential lifestyle implications, now and in the future?

Cashflow modelling plays a critical role in this part of the process, too.

Advanced strategies for HNW individuals

Once the core protection foundations are in place, wealthier families often implement more sophisticated structures to protect assets, businesses and future generations.

Life insurance structured for tax efficiency and control

High-net-worth individuals often combine different types of life insurance to meet different objectives.

Term life cover

Used for:

• mortgages
• children’s education
• business continuity

Whole-of-life cover

Whole-of-life policies remain in force for the insured’s lifetime.

These are commonly used to fund future inheritance tax liabilities.

With the current nil-rate band of £325,000, estates above this threshold may face inheritance tax at up to 40%.

Whole-of-life cover can provide liquidity to pay this tax without forcing the sale of family assets.

Writing policies into trust

One of the most important structural considerations is ownership.

If a life policy is held personally, the payout may fall into the estate – potentially increasing an inheritance tax liability.

By writing the policy into trust:

• proceeds can remain outside the estate
• beneficiaries receive funds quickly
• the policy avoids probate delays Trust structures also provide control over who receives funds and when.

Relevant Life Plans for directors

Relevant Life Plans (RLPs) are a highly tax-efficient way for company directors or high-earning employees to arrange life insurance through their business.

These policies:

• are paid for by the company
• may qualify for corporation tax relief
• are written into trust
• sit outside pension lifetime allowance calculations

For owner-managed businesses, this can be a highly efficient way to provide substantial life cover.

Advanced critical illness planning

Critical illness cover becomes particularly valuable for high-net-worth individuals because wealth is often illiquid.

Assets may include:

• property portfolios
• private businesses
• pension funds
• long-term investments

A serious illness can create liquidity pressure at precisely the wrong time.

A lump sum payout allows families to:

• avoid forced asset sales
• fund private treatment or rehabilitation
• maintain lifestyle during recovery It can also protect business interests by providing capital during temporary incapacity.

Executive income protection

Standard income protection often fails to reflect how high earners are paid.

Many professionals receive:

• dividends
• profit shares
• bonuses
• carried interest

Executive income protection allows cover to be structured via a company, often covering a broader definition of remuneration and potentially offering tax advantages.

Business protection planning

For entrepreneurs or partners, protection must extend beyond personal finances.

Key person insurance

Protects a business against the financial loss caused by the death or illness of a critical individual.

Payouts can fund:

• recruitment of replacements
• stabilisation of cashflow
• protection of credit facilities

Shareholder and partnership protection

If a co-owner dies, their shares may pass to family members who have no involvement in the business.

Cross-option agreements funded by life and critical illness cover allow remaining shareholders to purchase those shares at fair value. This protects both the business and the family.

Further considerations

Protection within estate planning

Life insurance is also a powerful estate planning tool.

Many wealthy families use policies to provide liquidity when wealth transfers between generations.

This can help:

• fund inheritance tax
• equalise distributions between heirs
• prevent forced sales of businesses or property

Advanced strategies may involve:

• discretionary trusts
• legacy or dynasty trusts
• premium financing arrangements

These structures allow families to preserve investment portfolios while still providing large insurance cover.

Private medical and global protection

For internationally mobile families, healthcare protection is also essential.

Advanced private medical plans may offer:

• worldwide cover
• unlimited cancer care
• concierge claims handling
• second-opinion services

Some plans also include executive health screening and genomic testing.

Philanthropic and ethical protection planning

Increasingly, high-net-worth families integrate protection planning with philanthropy.

This may involve:

• naming charities as trust beneficiaries
• funding charitable legacies through life insurance
• aligning insurance providers with ESG principles These strategies can sit alongside family foundations or donor-advised funds.

Please note most of these plans do not have a cash-in value and will stop if payments to them cease.

Is your financial plan truly protected?

Many successful professionals discover that their existing protection would cover only a small portion of their family’s financial needs.

A structured planning session can reveal:

• where your current cover falls short
• the level of protection needed to secure your financial plan
• whether your employer benefits are sufficient

Book a Protection Planning Session

In this meeting we will:

• review your current protection arrangements
• model potential life scenarios
• identify any gaps in coverage
• outline a strategy to safeguard your financial future

Arrange your no-obligation protection coverage sufficiency review with an expert wealth adviser.

Select date and time

A well-designed protection strategy typically follows four stages.

Step 1: Understanding the financial picture

Income, assets, debts, dependants and lifestyle commitments.

Step 2: Cashflow modelling

Financial planning software can simulate scenarios such as:

• long-term illness
• premature death
• early retirement

Step 3: Gap analysis

Comparing the protection required with existing cover.

Step 4: Implementation

Designing a protection strategy that ensures the financial plan remains intact.

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.

Trusts are not regulated by the Financial Conduct Authority.

SJP Approved 20/04/2026

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

Contact Us

Autumn Budget 2025: A tax hike that redefines wealth for a decade

Britain has entered a new era of even higher taxation

Sixteen months ago, Labour walked into Downing Street on a platform of “no major tax rises” and an £8.5bn package of revenue measures. Today, the picture is unrecognisable. Across just two Budgets, the Chancellor has now imposed £70bn of tax rises.

What was framed as “temporary and measured” has become a structural tax shift that hits working people, investors, entrepreneurs and property owners across the board.

What remains is a structural shift: Britain is now a high-tax, low-incentive economy, and working people are footing the bill in an attempt to keep Labour’s backbench benefits supporters on side, for now.

All figures used in this article are from Office for Budget Responsibility forecasts. Yes, that’s the OBR that leaked the entire Budget an hour early; with market-sensitive information available for all to see before even Labour’s own MPs knew its full contents.

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.

A tax system ratcheting up every year until 2031

Income Tax and National Insurance thresholds frozen for a decade

Perhaps the most consequential move is the extension of the Income Tax and National Insurance threshold freeze to 2030-31 – a full three years beyond what had been planned previously. While welfare payments have been index linked, working people will now suffer a decade of stealth tax, extracting £66.6bn a year from taxpayers by 2030-31. Despite manifesto pledges not to raise “taxes on working people”, the reality is a sweeping stealth raid on the financially productive.

Key impacts:

  • 920,000 more people dragged into the higher-rate 40% band above £50,270
  • 780,000 more low earners pulled into paying income tax above the personal allowance of £12,570
  • 8.7 million higher-rate taxpayers by decade-end (almost double the 4.4m when the freeze began in 2021-22)
  • Those earning £50,000 will be £1,500 worse off
  • Someone earning £100,000 will be over £4,000 worse off

Different rates and thresholds of Income Tax apply to Scottish residents.

Mitigating solutions

Planning as a couple: Make full use of both partners’ allowances and tax bands where possible by thoughtfully allocating income-producing assets. If assets are transferred, this must be on an outright and unconditional basis.

Boosting pension contributions: A direct way to bring taxable income down while strengthening long-term retirement resilience.

Strategic charitable giving: Well-planned donations can meaningfully reduce your tax burden while backing the causes that matter most to you.

Reassess work commitments: As galling as it is that hard work no longer pays off; a couple might decide to reduce working hours between them, so as to keep their respective incomes just below a threshold and devote more of their time elsewhere.

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.

A direct hit on pensions and long-term investment

Salary sacrifice pension contributions – £2k to lose NI exemption from 2029

The Budget strikes at one of the last major tax advantages available to professionals: salary-sacrifice pension saving.

From April 2029, salary-sacrifice contributions above £2,000 lose their National Insurance exemption:

  • Employee NI: 8% up to £50,270 and 2% above £50,270)
  • Employer NI: 15%

Real-world example:

One earning £120,000 and making pension contributions of £20,000 via salary sacrifice, will now face an additional National Insurance bill of 2% on the amount of £18,000 above the £2k cap; equivalent to £360 a year.

The measure raises £4.7bn in 2029-30 and £2.6bn in 2030-31, but at the cost of undermining long-term saving behaviour and pushing more households back into punitive tax thresholds.

Mitigating solutions

Spouse/partner strategy: Balance income and assets between partners to leverage joint tax efficiency.

Diversify investment wrappers: Consider using ISAs and other vehicles, alongside pensions where their tax efficiency begins to diminish.

Maximise employer benefits: Ensure you contribute enough to qualify for full employer pension matching and confirm whether NI savings are passed on.

Review thresholds: If targeting income limits (e.g. £100,000), explore alternatives to salary sacrifice for reducing taxable income. Net pay arrangements, and making your own contributions to a private pension, are not exempt from National Insurance.

Tax relief on pension contributions above the basic rate of 20% must be claimed separately via your annual tax return.

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.

Wealth and savings hit hard: ISAs, dividends and property income

Cash ISA allowance cut from £20k to £12k for under-65s from April 2027

In a further blow to savers, the Cash ISA allowance for under-65s is to be slashed by 40%. A significant £8,000 portion of one’s total ISA allowance will be reserved for non-cash investments only.

This poses a significant threat to one’s ability to accumulate cash savings, including emergency funds, in a tax-efficient manner.

Over-65s will reserve the freedom to use their full £20,000 allowance for cash each year should they choose to.

Please note that Cash ISAs are not available through St. James’s Place.

Dividend tax and savings income tax soar by 2 percentage points

Dividend tax rates for basic and higher rate taxpayers will rise by 2% as early as April 2026.

  • Basic rate moves from 8.75% to 10.75%
  • Higher rate increases from 33.75% to 35.75%
  • Additional rate remains at 39.35%

The dividend tax allowance remains frozen at a pitiful £500 a year.

Real-world example:

A higher rate taxpayer receiving a dividend of £20,000 will see it eroded by £6,971.25; nearly £400 more than previously.

Meanwhile, in a double blow to cash savers, Labour has now created a two-tier income tax system. From April 2027, savings income is to be taxed at a hiked rate of 47% for additional rate taxpayers; meanwhile higher rate taxpayers face a rate of 42%, and basic rate taxpayers will pay 22%.

Real-world example:

An additional rate taxpayer earning 4% annual interest on £50,000 in cash (a £2,000 gross return) currently pays £900 in tax; this will rise to £940.

Mitigating solutions

Spouse/partner strategy: Utilise a total of £24,000 a year available as Cash ISA allowances between two people. Make use of both dividend tax allowances totalling £1,000 a year.

Furthermore, where at least one partner earns less than £125,140, capitalise on savings income allowances of £1,000 a year for basic rate taxpayers and £500 a year for higher rate taxpayers. There is no savings income allowance for additional rate taxpayers.

Diversify savings wrappers: Consider using NS&I premium bonds up to £50,000 on which returns are tax-free.

Investors seeking lower-risk, tax-efficient options might use a Stocks & Shares ISA to access conservative strategies such as cash funds.

Another route is through fixed income assets (gilts and qualifying corporate bonds) which can deliver tax-efficient outcomes even when held outside a wrapper. While the income remains taxable, any capital gains are free from CGT. This makes lower-yielding bonds that generate most of their return through price movement an appealing, lower-risk alternative to traditional cash ISAs.

Consider crystallising chargeable events on onshore or offshore bonds before April 2027, allowing any gains to be taxed under the current, lower savings rates.

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.

Please note that Cash ISAs are not available through St. James’s Place.

With thresholds frozen until 2031 and tax rises on savings, property, and dividend income, before then, proactive planning with a wealth adviser is essential.

Schedule a call

Property owners and investors hit with two critical tax whacks

Property income tax rises by 2 percentage points from April 2027

Landlords have been targeted yet again, with another two-tier example in property income tax facing newly hiked rates:

  • Basic rate: 22%
  • Higher rate: 42%
  • Additional rate: 47%

Real-world example:

A landlord earning £50,000 a year in rental income from a single, modest property will face a tax bill £1,000 a year higher than before. Multi-property portfolio landlords could see many times that eroded from their already constricted earnings; putting yet more pressure on rental market prices.

Homeowners stung by high-value council tax surcharge from April 2028

In this de facto ‘mansion’ tax; annual, unavoidable, and index-linked via valuation banding; owners of properties worth more than £2m face a new surcharge on their council tax bills.

Landlords themselves will face this cost as the owner of the property, as opposed to council tax paying tenants footing the bill.

Property valueAnnual surcharge
£2m – £2.5m£2,500
£2.5m – £3.5m£3,500
£3.5m – £5m£5,000
£5m+£7,500

The measure will disproportionately hit London and the South East, and will become a long-term cost baked into ownership.

An estimated 145,000 properties will fall within scope. For many owners, securing the liquidity to meet the charge could prove difficult – particularly where the asset is a primary residence rather than a rental property.

Mitigating solutions

Accurate property valuations are crucial, particularly for assets near the threshold, taking into account factors that could raise or lower their value.

As the charge targets owners rather than occupiers, renting rather than purchasing a property may be a more attractive option.

Downsizing to a lower-valued property could reduce or even eliminate the liability.

Properties in Wales and Scotland currently appear exempt, which may present opportunities for those near the border. This may change in future Budgets by these devolved regions.

Consider the optimum location of high-value properties; holding a larger home abroad and a cheaper UK property if you still need a base, may be advantageous.

Splitting ownership between multiple individuals or entities could provide planning benefits. Converting a single property into multiple smaller units may also be worth exploring.

Individuals may want to review the structure through which they hold their properties and assess whether it remains appropriate.

Improving tax efficiency in other areas could free up liquidity to meet this charge.

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.

Stealth Inheritance Tax (IHT) as it is frozen for even longer

Fiscal drag on estates worth over £325,000

The Chancellor has extended the freeze on IHT thresholds until 2030-31. This could bring in as much as £14 billion or more for the Treasury over the period.

Nil-rate band of £325,000 per person.

Residence nil-rate band of £175,000 per person, when passing main residence to direct descendants (tapered where overall value of estate exceeds £2m).

Individuals holding business assets, working farms, or qualifying AIM shares could, for the first time, become liable for IHT on these holdings. For example, a business owner with a £10 million shareholding could see their IHT liability rise from zero under current rules to £1.8 million from April 2026.

It’s important to note that previously announced reforms will mean pensions become subject to IHT from April 2027.

Mitigating solutions

Lifetime gifting; including making immediately exempt gifts from surplus income, provided it does not affect your standard of living; remains an effective way to reduce the value of your estate for IHT purposes.

Writing a Life Cover Plan into Trust may calculate to be a prudent solution to help meet an eventual IHT liability.

Placing qualifying agricultural or business property into a trust before April 2026 can currently be done without an IHT entry charge. From April 2026, only the first £1 million will be exempt if the settlor dies within seven years, with any excess subject to an entry charge. For business owners planning an exit and wishing to allocate shares into a trust as part of their succession strategy, there is still a limited window to transfer larger holdings without an upfront charge.

For full details, explore The Inheritance Tax Escape Route.

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.

Trusts are not regulated by the Financial Conduct Authority.

Business owners and entrepreneurs see investment incentives cut

Tax takes its toll on innovation
  • Writing Down Allowances cut 18% to 14% from April 2026
  • New 40% first-year allowance from January 2026
  • Dividend taxation up 2% from April 2026
  • Property income taxation up 2% from April 2027
  • EV road-pricing introduced at 3p per mile from April 2028
  • National Insurance thresholds held longer

Companies face higher friction across remuneration, capital allocation and investment planning just as borrowing costs tighten.

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.

Yet more Capital Gains Tax hikes

CGT relief on qualifying disposals to Employee Ownership Trusts immediately cut in half

From 26 November 2025, CGT relief on qualifying disposals to Employee Ownership Trusts (EOTs) is reduced from 100% to 50% of the gain.

This change materially affects the net proceeds for business owners considering an EOT exit, with the effective tax rate rising from zero to 12% on the full gain. While employee ownership remains supported, the reduced financial incentive for vendors requires a reassessment of business valuations and personal financial planning strategies.

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.

Other announcements

Venture Capital Trust income tax relief to fall to 20% from April 2026

VCT investments will see a reduction in upfront income tax relief but continue to offer tax-free dividends – a valuable income stream for many investors – alongside exemption from capital gains tax.

Qualifying EIS investments retain 30% upfront income tax relief, as well as inheritance and capital gains advantages.

As a UK Private Capital (formerly BVCA) member firm, Apollo is concerned by this reduction in income tax reliefs, which could lead to a decline in fundraising potentially impacting high growth investments that the government says it seeks to encourage.

Post-departure trade profits brought into tax net

Currently, distributions or dividends from “post-departure trade profits” (profits accruing to a company after an individual leaves the UK, calculated on a just and reasonable basis) are not subject to UK tax. From 6 April 2026, these profits will fall within the scope of the temporary non-resident rules, meaning dividends received while non-UK resident will become taxable in the UK.

Legacy Excluded Property Trusts to benefit from new cap

Excluded Property Trusts set up before 30 October 2024 will benefit from a £5 million cap on periodic and exit charges, with the cap applied retrospectively from 6 April 2025.

The farming tax U-turn: A political climbdown

In a rare moment of reversal, the Chancellor abandoned elements of her controversial “family farm tax” overhaul.

In the 2024 Budget a limit of £1million was introduced for agricultural property relief and business property relief, causing anger among farmers and businesses.

However, in the 2025 Budget Reeves confirmed this £1 million relief could now be transferred between spouses and civil partners if unused on first death. This means one half of a couple could now benefit from relief of £2 million.

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.

Has anything been spared tax increases?

  • Pension income tax relief untouched
  • 25% tax-free cash cap untouched at £268,275
  • Stocks & Shares ISA allowance remains £20,000
  • Capital gains tax rates unchanged
  • Gifting rules and inheritance tax rates unchanged
  • Salary sacrifice NI cap only applies to pensions; and not to EV schemes etc.

As a UK Private Capital (formerly BVCA) member firm, Apollo is pleased that the government have not introduced a new tax charge on partnerships. The LLP model is an important component of the UK’s competitive advantage as a global destination for business.

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.

Future outlook and planning

The bottom line is that this Budget deepens the tax burden on earned income, property, investment and retirement.

Whether you’re earning, investing, building a business or holding property, this Budget materially changes your 10-year outlook.

Key moves now matter more than ever:

  • Restructure your pension approach before 2029
  • Overhaul your estate planning to mitigate soaring IHT liabilities
  • Model net property income at the new 22/42/47% tax rates
  • Plan for increased dividend taxation
  • Factor in the high-value property surcharge to long-term ownership costs
  • Rebalance portfolios in light of reduced VCT relief
  • Prioritise tax-efficient wrappers before further erosion; take advantage of allowances while they still exist
  • Stress-test overall net income under extended fiscal drag
  • Review succession planning given the new farming inheritance rules (and possible future changes elsewhere)
  • Protect wealth from both fiscal drag and market uncertainty.

This is not episodic tinkering – it’s a structural reset. And for affluent households, the difference between reacting and planning will be measured in five- and six-figure outcomes.

For higher earners, senior executives, contractors, company directors and entrepreneurs, this Budget isn’t something to simply read and move on from. It reshapes the wealth landscape for the rest of the decade.

If your financial life touches pay, pensions, property, investments, or business ownership, now is the moment to re-plan.

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.

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.

Obtain support from an expert financial planner.

Create Your Bespoke Plan

UK economic picture

Welfare expansion and rising long-term fiscal risk

  • Welfare costs expected to exceed £400bn within a few years
  • Two-child cap scrapped: £3bn a year
  • Disability/PIP spending rising sharply
  • Higher-than-expected unemployment inflating welfare budgets
  • Revised asylum accommodation costs: £15.2bn (up from £4.5bn)
  • National debt heading to 96% of GDP

Fiscal space is evaporating just as taxation rises to historic highs.

The OBR flags acute risk exposure. A 35% global equity correction (AI bubble burst scenario) could blow £26bn out of the UK’s fiscal position. A more modest 15% market drop would still cut GDP by 0.6% by 2028.

Losses on the Bank of England’s QE programme now forecast to reach £164bn by 2036 – up £30bn from March’s estimate.

Meanwhile, the housing market is stagnating, retail is cooling sharply, and the country is already witnessing outward migration of higher earners and business owners.

SJP Approved 05/12/2025

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

Contact Us

The Inheritance Tax Escape Route

Your complete guide to preserving family wealth for 2025/26

How high‑earning families and business owners can build and preserve wealth across generations – with practical steps you can take this tax year.

With inheritance tax (IHT) thresholds frozen until at least 2030 and new pension tax rules taking effect from 2027, many families are asking the same question:

“Do I need to leave the UK to protect my wealth?”

The good news: you don’t. There are multiple estate planning strategies available that can significantly reduce or even remove an eventual IHT liability – without changing your residency or lifestyle.

Read this 1-min snapshot first

If your total estate could exceed £500k+ as an individual, or £1m+ as a couple, you’re in inheritance tax (IHT) territory. If you’re around £2m+, decisions about lifetime gifts, trusts, business relief and pensions will materially alter your family’s eventual outcome. Here’s the fast path:

Write/Review your Will (and Letters of Wishes) and Lasting Powers of Attorney.

Map out your estate: assets, liabilities, how they’re owned (sole/ joint/ trust/ company), and your domicile/ residence status.

Use allowances today: £3,000 annual exemption, wedding/ civil ceremony gifts, small gifts, and – the most powerful – regular gifts out of surplus income.

Plan around the £2m threshold: keeping your estate below the Residence Nil-Rate Band (RNRB) taper can increase the tax‑free amount that passes with the family home.

Protect business and farm assets: review eligibility for Business Relief (BR)/ Agricultural Property Relief (APR), as well as the reforms to these reliefs from April 2026.

Re‑think pensions: with most pensions facing IHT from April 2027, adjust nominations, drawdown plans, and wrapper strategy to avoid double‑tax traps.

Fund the bill: if you can’t (or don’t want to) gift enough, consider whole‑of‑life insurance written in trust and pay premiums from surplus income.

Consider structures: trusts (bare/ IIP/ discretionary, loan trusts, discounted gift trusts) and Family Investment Companies (FICs) to control, protect and direct wealth.*

Charity: leave ≥10% of the net estate to charity to reduce IHT from 40% to 36%.

Keep records: gift logs, income vs expenditure evidence, trust paperwork, valuations, ownership statements, and a family “financial map”.

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

Wills as well as Trusts are not regulated by the Financial Conduct Authority.

*Please note that advice in this area will necessitate the referral to a service that is separate and distinct to those offered by Apollo Private Wealth or St. James’s Place.

What’s changed and what’s coming

UK resident non‑domiciled individuals & IHT scope: from 6 April 2025, the UK has moved toward a residence‑based approach for IHT scope. Transitional rules may apply, and planning is essential if you have overseas assets.

Business & Agricultural Property Relief reforms: from 6 April 2026, BR/ APR will be modernised – including a £1m per‑person allowance at 100%, with only 50% relief above that, plus holding‑period and listing clarifications, and separate allowances for trusts/estates.

Pensions: from 6 April 2027, most unspent pensions are scheduled to be brought inside your estate and face IHT. This creates potential double tax alongside Income Tax on beneficiaries on the net proceeds.

With these major changes it is absolutely critical that you review your estate planning as soon as possible.

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

Arrange your no-obligation estate planning conversation with an expert wealth adviser

Select date and time

The 11 fundamental principles to mitigating unnecessary inheritance tax eroding your family’s wealth

Principle 1. How IHT works (2025/26)
  • Standard rate: 40% above the available Nil‑Rate Band (NRB) and Residence Nil‑Rate Band (RNRB).
  • NRB: £325,000 per individual, generally transferable between spouses/civil partners.
  • RNRB: up to £175,000 per individual when leaving a qualifying residence to direct descendants. Unused RNRB is transferable. There’s a downsizing addition if you’ve sold, gifted or downsized.
  • RNRB taper: the RNRB is reduced by £1 for every £2 that the estate exceeds £2,000,000. Importantly, the estate value for taper ignores BR/ APR and similar reliefs (so you can’t “taper‑proof” via BR/ APR alone).
  • Spouse/civil partner exemption: generally unlimited on transfers between UK‑domiciled spouses/ civil partners.
  • Charity: leave ≥10% of the net estate to charity, and the IHT rate on the rest drops from 40% to 36%.
  • When is IHT paid? Typically due by the end of the sixth month after death; some assets allow the option to pay by instalments. Probate is usually granted after IHT is settled, so it’s necessary to plan liquidity.

Lifetime transfers

  • Potentially Exempt Transfers (PETs): outright gifts to individuals become fully exempt if you survive 7 years. Taper relief reduces tax on failed PETs in excess of any available nil rate band after year 3.
  • Chargeable Lifetime Transfers (CLTs): gifts to most trusts are CLTs and can attract 20% lifetime IHT above your available NRB, with possible further tax if you die within 7 years.
  • Gifts with Reservation (GWR): if you keep some form of benefit (e.g. stay living in the gifted home rent‑free), the asset remains in your estate. Pre-Owned Asset Tax (POAT) may also apply to certain arrangements.

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

Principle 2. Mapping your estate (so you can plan with it)

Build an inventory:

  • Property: main home, other UK/ overseas property; ownership (joint tenants/ tenants in common), mortgages, SDLT history.
  • Pensions: DC/ DB values; death benefit nominations; age 75 considerations; current drawdown; protected tax‑free cash; uncrystallised amounts.
  • Investments & cash: ISAs, GIAs, bonds, AIM shares; premium bonds; crypto; private equity and other investments.
  • Business interests: shareholdings, partnerships/ LLPs, carried interest; qualifying trading status; excepted assets.
  • Trust interests: you as settlor/ trustee/ beneficiary; type of trust; assets; appointment powers; 10‑year/exit charge cycle.
  • Insurance: policies, owners, lives assured; in trust?; beneficiaries?
  • Loans: intra‑family loans, loan trusts; director’s loans
  • Liabilities: mortgages, personal loans, guarantees, IHT loans, POAT charges.
  • Domicile & residence: your current status and history; exposure of overseas assets; treaty positions.

Outputs: (a) estimated taxable estate at death, (b) expected IHT liquidity (cash to pay), and (c) target actions this tax year.

An expert Private Wealth Adviser will help you gather this information and ‘model’ it, with various scenarios to show potential liabilities and mitigation actions.

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

Wills as well as Trusts are not regulated by the Financial Conduct Authority.

Principle 3. The £2m question: Restoring a tapered RNRB

If your estate exceeds £2m, your RNRB can reduce to zero. Practical ways to manage the estate value at death:

  1. Time‑sequenced gifting
    • Use annual/ small/ wedding exemptions now.
    • Establish regular gifts out of surplus income (document the pattern and that your lifestyle is unaffected).
    • Consider larger PETs early to start the 7‑year clock.
  2. Charitable bequests
    • Calibrate a residuary gift to charity so that your adjusted estate drops below £2m while also unlocking the 36% rate.
  3. Trust strategies
    • Loan trusts/ discounted gift trusts — retain access to an income stream while moving capital growth outside your estate, subject to CLT/ GWR/ POAT rules.
  4. Business & agricultural planning
    • BR/APR relief does not reduce the estate value for RNRB taper, but lifetime planning may still reduce your taxable estate and improve control.
  5. Pensions & wrappers
    • Historically, pensions sat outside IHT; with pensions scheduled to face IHT from April 2027, revisit the balance between ISAs, GIAs and pensions and your drawdown plan.

Worked example (simplified): Total estate £2.3m; home £900k left to children; couple with full transferable NRB/ RNRB. Because the estate exceeds £2m by £300k, the RNRB is reduced by £150k. Bringing the estate down to £1.99m (via gifts/ charity) can restore up to £350k of additional tax‑free band for the couple.

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

Trusts are not regulated by the Financial Conduct Authority.

Principle 4. Lifetime gifting that actually works
  1. Use the easy wins first
    • Annual exemption: £3,000 per donor per tax year (can carry forward one prior year if unused).
    • Small gifts: £250 per recipient per tax year (cannot combine with the £3,000 exemption to the same person).
    • Wedding/ civil ceremony: up to £5,000 to a child, £2,500 to a grandchild/ great‑grandchild, £1,000 to others.
  2. The most powerful – regular gifts out of surplus income
    • Gifts must be from income, regular/ normal, and not reduce your standard of living. Keep meticulous records (income/ expenses schedule, minutes/ letters, bank statements).
  3. PETs vs CLTs – PETs (to individuals)
    • no lifetime tax, fully exempt after 7 years; taper relief applies on failed PETs in excess of any available nil rate band after 3 years (tax on the gift, not the estate).
    • CLTs (to most trusts): may trigger 20% lifetime IHT above NRB; further charges if death within 7 years. Trusts within the Relevant Property Regime may face 10‑year and exit charges.
  4. Trap‑dodging – GWR/POAT
    • Don’t keep using what you’ve “given away” (e.g. living in a gifted home) without paying full market rent; beware asset “share‑and‑stay” schemes.
    • 14‑year look‑back: earlier CLTs can reduce the NRB available against later gifts, increasing potential tax if you die within 7 years of the later gift.
  5. Record‑keeping pack (we’ll help you set up)
    • Gift log (date, recipient, amount, exemption used, cumulative totals)
    • Income vs expenditure statement (evidence for the “surplus income” rule)
    • Valuations and letters of intent/wishes

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

Trusts are not regulated by the Financial Conduct Authority.

Principle 5. Trusts: Control, protection and precision
  1. Common trust types
    • Bare trust: simple, assets belong absolutely to the beneficiary at age 18 (16 in Scotland); gifts are PETs.*
    • Interest in Possession (IIP): named beneficiary has a right to income; can be pre‑ or post‑March 2006 with different IHT treatments.*
    • Discretionary trust: trustees decide who benefits and when; offers control/protection; falls under the Relevant Property Regime (RPR).*
    • Vulnerable beneficiary trusts: special tax treatment where conditions met.*
  2. Charges under RPR
    • Entry (usually CLT at up to 20% over NRB), 10‑year charges (up to 6% of value above NRB), and exit charges when capital leaves.
  3. Popular planning structures
    • Loan trust: you lend a lump sum to a trust; growth accrues outside your estate, while the loan remains repayable to you (no immediate gift for IHT, but loan forms part of your estate).*
    • Discounted Gift Trust (DGT): you gift into a trust but retain a fixed, actuarially‑valued income stream; the actuarial “discount” can reduce the initial CLT/GWR exposure.*
    • Life assurance in trust: Explained in greater detail in Principle 8.
  4. When trusts help most
    • You want control over timing/ quantum of distributions, or to protect beneficiaries (creditors, divorce risks, addiction, vulnerability).
    • You’re comfortable with trustee responsibilities, reporting, and charges.

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

Trusts are not regulated by the Financial Conduct Authority.

*Please note that advice in this area will necessitate the referral to a service that is separate and distinct to those offered by Apollo Private Wealth or St. James’s Place.

Principle 6. Business & Agricultural Property Relief (BR/ APR)
  1. Today’s position (high‑level)
    • BR can provide 100% or 50% relief from IHT on shares in unlisted trading companies, interests in a trading partnership, or business assets used in a qualifying trade. Certain excepted assets may not qualify. Shares on certain junior markets may qualify depending on the rules.
    • APR can relieve the IHT value of qualifying agricultural property.
  2. Reforms from 6 April 2026 (headline points)
    • A new £1,000,000 per‑person allowance for the combined value relieved at 100% across APR and BR. Value above the allowance receives 50% relief.
    • Shares admitted to trading on certain recognised stock exchanges designated as “not listed” will receive 50% relief (not 100%).
    • Qualifying periods and conditions will be modernised/ clarified, and trusts/ estates will have their own allowances.
  3. What to do now
    • Audit eligibility of business/ farm assets and any AIM/ quoted exposures.
    • Consider timing of transactions, restructures, or succession ahead of April 2026.
    • Ensure excepted assets are minimised and trading tests are satisfied.

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

Trusts are not regulated by the Financial Conduct Authority.

Principle 7. Pensions and the 2027 IHT change
  1. Position until April 2027 (simplified)
    • Currently, most unused DC pensions do not form part of the estate for IHT.
    • Income tax applies to beneficiaries’ withdrawals if death occurs after age 75; pre‑75 deaths can be tax‑free (subject to rules and timing).
  2. From 6 April 2027 (subject to legislation)
    • Most unused pension funds are scheduled to be included for IHT.
    • Spouse/ civil partner exemptions continue for death benefits paid to them.
    • This creates a potential double‑tax effect (IHT at death plus Income Tax on the net proceeds when beneficiaries draw the fund), producing very high effective rates for some families.
  3. Planning actions
    • Refresh nominations (make sure trustees have clear directions, and review expression of wishes wording).
    • Consider drawing part of the tax‑free Lump Sum Allowance and using it in‑life (spending, gifting, or funding insurance premiums) where appropriate.
    • Balance wrappers: re‑assess the trade‑off between keeping wealth inside pensions vs. drawing and moving to ISAs/ GIAs/ trusts/ FICs.
    • Integrate pension planning with your £2m RNRB taper strategy and overall IHT liquidity plan.

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

Trusts are not regulated by the Financial Conduct Authority.

Principle 8. Life Cover written into Trust to help meet a liability

If you have surplus income and want to retain capital (or can’t gift enough), consider a guaranteed whole‑of‑life policy written in trust to create liquidity for heirs.

  1. Why trust‑own the policy?
    • Keeps the sum assured outside your estate.
    • Pays before probate, giving executors cash to meet IHT and other costs.
  2. Best practice
    • Pay premiums from surplus income (documented) where possible to avoid gifts counting against your NRB.
    • Review joint life, second‑death vs. single life arrangements; consider waiver of premium options.
  3. Illustrative cost
    • As a reference point, a joint life, second‑death guaranteed whole‑of‑life for age‑65 non‑smokers with £400,000 sum assured can be c. £6k–£7k p.a. (provider‑ and underwriting‑dependent). Your actual premium will vary.

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

Trusts are not regulated by the Financial Conduct Authority.

Principle 9. Charitable giving

Leave ≥10% of your net estate (the “baseline amount”) to charity and your IHT rate can drop to 36% on the remainder.

Consider donor‑advised funds or charitable legacies via Will; you can also structure lifetime gifts (with Gift Aid where appropriate) to reduce the eventual estate.

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

Principle 10. Domicile, residence and overseas assets

From 6 April 2025, the UK has shifted to a residence‑based approach for the scope of IHT on worldwide assets, with transitional rules. Long‑term UK residence can bring overseas assets into the IHT net after a qualifying period.

If you have non‑UK assets, review exposure and treaty interactions; consider excluded property trusts and timing where appropriate (specialist advice essential).

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

Principle 11. Deeds of Variation (DoV)

Within 2 years of death, beneficiaries may vary an inheritance so they pass to others (including charity or trusts) and be treated for IHT/ CGT as if made by the deceased.

This can:

  • Restore RNRB by redirecting assets.
  • Reduce the overall IHT rate to 36% via charitable legacies.
  • Implement trusts where the Will didn’t.

All affected parties must agree; and we would refer you for legal advice.*

*Involves the referral to a service that is separate and distinct to those offered by St. James’s Place.

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

Trusts are not regulated by the Financial Conduct Authority.

Pulling it together: Three mini case studies

A) Couple, estate £2.3m (home £900k), children as heirs

Goals: keep the family home; minimise IHT; keep flexibility.

  • Annual/small gifts and regular gifts out of income documented.
  • £60k charitable residuary legacy calibrated to bring estate below £2m at second death, to restore combined RNRB.
  • Loan trust established; growth now outside estate.
  • Whole‑of‑life policy £400k in trust funded from surplus income to create liquidity at second death.

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

Trusts are not regulated by the Financial Conduct Authority.

B) Entrepreneur with trading company and AIM portfolio

Goals: succession to children; use reliefs; prepare for 2026 reforms.

  • Audit trading status/ excepted assets; rebalance AIM exposures mindful of 50% relief treatment changes post‑2026.
  • Pass controlling shareholding to family trust with staged appointments; equalise estates between spouses.
  • Update Wills to capture BR/ APR efficiently.

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

Trusts are not regulated by the Financial Conduct Authority.

C) Widow with £1.7m pension + £600k ISA/ GIA

Goals: family provision with simplicity; aware of 2027 pension change.

  • Review beneficiary drawdown vs. lump sum; consider partial crystallisation and tax‑free cash gifting.
  • Increase ISA funding; consider charity legacy to reduce rate to 36%.
  • Evaluate whole‑of‑life in trust to fund residual IHT.

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

Trusts are not regulated by the Financial Conduct Authority.

Your next 90 days (action list)

  1. Estate inventory and ownership map (Principle 2).
  2. Will and LPAs review; add letters of wishes (trusts/guardianship guidance).
  3. Set up gift log and begin surplus income gifting (documented).
  4. Decide on RNRB restoration approach if near/ over £2m (gift/ charity/ trust path).
  5. Pensions: update nominations; model drawdown vs. wrapper relocation ahead of 2027.
  6. BR/APR assets audit; plan around April 2026 reforms.
  7. Explore trusts if control/protection needed.
  8. Obtain quotes for a whole‑of‑life policy in trust funded from surplus income.
  9. Build the IHT liquidity plan and executor instructions.
  10. Schedule regular reviews; update on life events (property sales, business exits, windfalls).


An expert Private Wealth Adviser will help you put this plan into action.

Protecting your wealth from the taxman can be harder than creating it – but with early, structured planning and expert guidance, you can give your family the freedom, control and security you want for them. If any of this resonates, we’ll turn this into a personal plan and do the heavy lifting for you.

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

Wills as well as Trusts are not regulated by the Financial Conduct Authority.

Arrange your no-obligation estate planning conversation with an expert wealth adviser

Select date and time

SJP Approved 11/09/2025

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

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High earner navigating pension limitations? Plan for increasing retirement costs.

Retirement costs now exceed £60,000

The cost of achieving a comfortable retirement lifestyle has climbed above £60,000 per year for the first time, according to the latest data from the Pensions and Lifetime Savings Association (PLSA) – a figure that should prompt serious reflection among high-earning professionals who face constraints in how they can save for the future.

The 2025 Retirement Living Standards reveal that maintaining a lifestyle in retirement that includes regular dining out, a well-maintained car, generous gifting, and a two-week Mediterranean holiday will now cost couples £60,600 annually, and £43,900 for single individuals – with no housing costs included.1

While these figures may not seem daunting to those earning six or seven figures, the real challenge lies in how such individuals can structure their wealth to generate that income without relying on traditional pensions, especially when the annual allowance is tapered – in some cases down to just £10,000 per year. Business owners and self-employed Partners, too, often overlook the need to save sufficiently for retirement in place of defined contribution pensions.

1 Pension and Lifetime Savings Association Retirement Living Standards Report, June 2025

High income can limit your options

For senior professionals whose total earnings exceed £260,000 (and adjusted income over £360,000), the tapered pension annual allowance significantly reduces the capacity for tax-advantaged pension contributions. As a result, many are either not contributing at all or relying solely on employer contributions, often deferring proactive retirement planning for another day.

However, the figures from the PLSA make clear: deferring action comes at a cost. To replicate a £60,000 per year income in retirement (before tax and assuming full state pension entitlement), individuals still need personal assets in the region of £900,000 per couple – more if retirement is early, spending is considerable, or if higher inflation persists.1

“These aren’t aspirational figures plucked from the air,” says Zoe Alexander of the PLSA. “They reflect the reality of the lifestyle many professionals want – whether they’ve planned for it or not.”

Beyond pensions: Alternative choices

With limited pension allowances, high earners must turn to alternative vehicles to build tax-efficient retirement savings for future income streams.

A couple’s combined £40,000 a year ISA allowances (£20,000 per adult) offer an initial opportunity. Offshore Bonds could also be used to potentially defer tax liabilities (currency movements may affect the value of investments).

For business owners, consider extracting value from the enterprise itself or building diversified portfolios via corporate structures.

An expert financial adviser can help recommend more sophisticated solutions depending upon your individual circumstances.

The silent risk: Lifestyle creep

The greatest risk facing many high-income households isn’t low income – it’s lifestyle inflation. Private school fees, multiple mortgages, and elevated living costs often leave little room for accumulating diversified wealth in investments outside of pensions. Yet the assumption that income will convert automatically to retirement security is, in many cases, misplaced.

According to Scottish Widows, 20% of defined contribution pension savers are still on track for poverty in retirement, and 3.5 million people will carry some housing costs well into their later years – averaging £10,600 annually.2

For those navigating restricted pension allowances, the challenge isn’t saving more, but saving differently. This means a deliberate, tax-aware approach to building non-pension income sources – whether through investment choices, business liquidity events, or structured drawdown strategies.

For many, engaging with an expert financial adviser earlier – before the taper bites or entrepreneurial liquidity arrives – can make the difference between a retirement that reflects years of work and one that feels compromised.

Bottom Line for High Earners: Your income buys you lifestyle today. It’s your wealth structure that will deliver it in retirement. The two are not the same – and time, as always, is your most valuable asset.

2 Scottish Widows’ Annual Retirement Report, May 2025

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 is dependent on individual circumstances.

SJP Approved 06/06/2025

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

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Lifetime Allowance Changes: Carry Forward Pension Allowance up to £240,000

Introduction

In spring 2023, the government took pension savers by surprise, by announcing Lifetime Allowance changes, including the removal of the Lifetime Allowance (LTA) Charge. In the 2023/24 tax year, the tax charge for exceeding the Lifetime Allowance threshold of £1,073,100 (or a higher threshold where LTA protection applies) was effectively removed, and the Lifetime Allowance itself was abolished from 6 April 2024.

The Lifetime Allowance changes are particularly welcome news for those whose pensions were already above the value of the LTA, and who were nearing a benefit crystallisation event – including turning 75 years old, drawing down funds, purchasing an annuity, or indeed upon their death.

Many who stopped making contributions to their pension, will now be considering restarting contributions, including Carry Forward Pension Allowance. If you’ve been a member of a qualifying pension scheme, but haven’t used your annual allowances for 2025/26 (£60,000), 2024/25 (£60,000) or 2023/24 (£60,000), then together with this year’s annual allowance of £60,000, you could kickstart your pension by carrying forward these allowances to make a one-off contribution of up to £240,000.

However, it is critical to remember that from the 2027/28 tax year, pensions will be considered part of one’s Estate for Inheritance Tax (IHT) purposes.

How the Lifetime Allowance changes impact retirement planning and saving

Removing the LTA is designed to keep people in work, and attract people back to the workforce

In the UK, employers are required to contribute to their employees’ pensions at a minimum rate of 3% of qualifying earnings, subject to that employee contributing at least 5% of their qualifying earnings. Over time, it’s a considerable benefit of being employed in the workforce. Previously, as workers’ pension savings had approached the LTA, they were becoming disincentivised to continue working. Now, employees may work longer, and those who had already retired may consider re-joining the workforce, which could lead to greater macroeconomic performance in the UK economy, and potentially lessen the burden on the state to subsidise people’s retirements.

It’s also designed to further incentivise savers, to maximise their pensions before turning to other investment vehicles

While it’s important to note that the Lifetime Allowance Charge might be reintroduced in the future, its removal coincided with the government raising the annual allowance from £40,000 to £60,000 with effect from the 2023/24 tax year. The purpose of the LTA had been to cap the tax privileges of pensions. Additional rate taxpayers qualify for income tax relief on pension contributions at up to 45%. If an additional rate taxpayer had opted to use their entire annual allowance at the previous level of £40,000, they would have attracted up to £18,000 in tax relief. With the increased annual allowance of £60,000, they could gain up to £27,000 in tax relief; an additional £9,000 a year. This may incentivise a greater amount of pension saving, subject to the limits on tax relief on pension contributions, before savers turn to other investment vehicles such as ISAs. One option is to Carry Forward Pension Allowance.

The tapered annual allowance may still punish ‘late savers’

Despite the removal of the LTA charge benefitting many savers, the complex tapered annual allowance (TAA) remains for those with threshold income in excess of £200,000 and adjusted income in excess of £260,000 who will see their annual allowance (the maximum they may save into their pension that tax year without incurring a tax charge) taper down (to a minimum of £10,000) by £1, for every £2 their adjusted income exceeds £260,000.

It doesn’t leave out those who took out fixed lifetime allowance protection

In 2012, 2014 and 2016, some pension savers had the opportunity to take out fixed protection against the falling Lifetime Allowance. Each form of fixed protection allows the claimant to retain the level of Lifetime Allowance that was available immediately before the reduction (£1.8 million, £1.5 million and £1.25 million respectively). As a result, those claimants have not made pension contributions for several years in order to preserve their protection.

With these Lifetime Allowance changes, claimants are likely to want to restart pension contributions. This would previously have automatically resulted in the fixed protection being lost and would have resulted in their maximum tax-free cash dropping to the current level of £268,275.

However, HMRC has since confirmed that, as long as fixed protection had been registered before 15 March 2023, the protections cannot be lost. They can therefore restart their contributions without renouncing their bigger tax-free lump sums.

What next?

If over the last few years, you had elected to cease making pension contributions, as the value of your pension crept above £1 million; then the Lifetime Allowance changes may represent a unique and valuable opportunity to significantly boost your retirement savings.

Assuming, as a member of a registered pension scheme, you have not used any of your annual allowances from the tax years 2023/24, 2024/25, 2025/26, and the current tax year 2026/27, you could make contributions amounting to up to £240,000 before 6 April 2027 – provided you are not subject to tapering in any of those years, and you have earnings to support personal contributions in the current tax year. This is via Carry Forward Pension Allowance.

The net cost of each £1,000 contribution could be as little as £550.

That’s because you’ll receive automatic basic rate tax relief of 20%, and an additional rate taxpayer may claim a further 25% tax relief via their tax return.

And, because of the gradual loss of your personal allowance for income between £100,000 and £125,140 resulting in an effective 60% tax trap, you could gain even more if restoring your full personal allowance.

However, it is critical to remember that from the 2027/28 tax year, pensions will be considered part of one’s Estate for Inheritance Tax (IHT) purposes.

There are a number of factors that may cause different results in individual circumstances, which is why it’s important to seek professional advice from an expert adviser, to help you maximise the amount you can contribute to your pension and benefit from tax relief on this year.

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.

The value of any tax relief is dependent on individual circumstances.

Any tax relief over the basic rate is claimed via your annual tax return.

SJP Approved 03/06/2025

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

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Gifting

Introduction

Need a bespoke financial plan crafted specifically for your unique requirements?

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Should you have concerns regarding the impact of Inheritance Tax (IHT) on your estate and the subsequent ability to transfer wealth to your cherished beneficiaries and causes, incorporating a Gift Plan into your wealth management approach could be a prudent measure.

Utilising gifting as a method for establishing an investment fund for your chosen beneficiaries can offer tax efficiency while potentially reducing the value of your estate, and therefore any resulting IHT liability. Our Gift Plan is available on absolute basis or discretionary basis. It is used in conjunction with an investment bond, available both onshore and offshore. This arrangement is designed to advantage the individuals or entities of your choosing. Where a discretionary trust is used, this provides you with control and flexibility.

Will it help me?

Do I need a gift plan?

Consider whether you have identified the individuals or entities you wish to inherit your wealth, either during your lifetime or posthumously. Should this be the case, our Gift Plan may facilitate the direction of your assets to your desired recipients.

Funds held within a discretionary trust do not contribute to the estate valuation of the beneficiary as long as they remain in the Trust.

This strategy can be employed for various objectives, including optimising IHT exemptions or covering educational expenses.

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. Tax relief is dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

Subject to eligibility and HMRC ratification.

Please note that this is not a recommendation. If this is of interest, please take advice to see whether it would be suitable for you.

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

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