Retirement Planning Archives - Apollo Private Wealth

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 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 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 value	Annual 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 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 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 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.

Avoiding the Retirement Tax Trap

A high net worth guide to investing for retirement; then drawing down tax efficiently

How high‑earning families and business owners can build wealth in anticipation of an early, affluent and tax-efficient retirement.

The retirement tax trap is straightforward: paying more tax than necessary by drawing the wrong money, from the wrong places, at the wrong time. For high net worth households this could be real money lost every year, compounding across decades and eroding legacies.

This guide is built to be your operational handbook. It explains how to:

Map your net-of-tax cashflow and direct funds to the right savings and investment wrappers;
Use ISAs, Pensions, GIAs, Onshore/Offshore Bonds and Trusts together – not in isolation;
Capitalise on today’s tax allowances and reliefs to invest more tax-efficiently (like the pension annual allowance of up to £60,000, and the removal of the Lifetime Allowance charge);
Sequence withdrawals to keep taxable income in low bands during retirement (while using allowances efficiently);
Plan for the 2027 pension‑IHT reforms to mitigate double taxation;
Deploy advanced moves (phased crystallisation, ‘bed & ISA’, bond segmentation) in a compliant and documented manner.

Practical benefit: for many HNW families, re‑sequencing and multi‑wrapper orchestration reduces annual tax leakage by £10k–£30k+ versus a single‑wrapper drawdown, often without reducing disposable income.

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

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

Trusts are not regulated by the Financial Conduct Authority.

The retirement tax landscape at a glance

This section lists the key allowances and rules you will base every decision on, both for saving towards your retirement as well as when eventually drawing down from those investments in retirement.

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Key income thresholds and allowances

Personal Allowance: £12,570 p.a. per person
- Protect it! When total income exceeds £100k, the Personal Allowance is tapered by £1 for every £2; until it reaches £0 at £125,140 – an effective 62% marginal band when national insurance is factored in on top. Use pension contributions and other forms of salary sacrifice to avoid this cliff.
- In retirement, use phased withdrawals to keep income-taxable drawdown below £100k each year.
Income tax bands (England & NI for 2025/26):
- 20% basic rate; 40% higher rate; 45% additional rate.
- In retirement, these determine the marginal cost of pension/ GIA/ bond events: small changes in taxable income can move you across bands with significant tax consequences.
Dividend allowance: £500 per person
Savings allowance per person:
- £1,000 (basic rate taxpayer), £500 (higher rate taxpayer), £0 (additional rate taxpayer).

Practical tip: Always start withdrawal planning by listing all taxable sources (rental income; realised gains; dividend income; taxable pension income). Tax bands and allowances should form the ‘frame’ for sequencing.

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

Capital Gains Tax (CGT)

Annual Exempt Amount: £3,000 per person
- Where possible use it every year – it cannot be carried forward.
Rates (recently increased):
- 18% within the basic rate band;
- 24% for gains above the basic rate band.
- That tightening increases the potential value that can be gained from annual CGT harvesting and ‘bed & ISA’ tactics.

What is ‘bed & ISA’?

Sell the investment outside your ISA
- You sell your shares, funds, or ETFs held in a general investment account (GIA) or similar.
- This sale may realise a capital gain — but you can use your annual CGT allowance (£3,000 in 2025/26) to minimise or eliminate any tax liability.
Repurchase the same investment inside the ISA
- Using the proceeds from the sale, you immediately repurchase the same investment within your ISA (or choose something else entirely).
- Once inside the ISA, all future growth and dividends are tax-free.

Practical tip: Small, repeated sales in General Investment Accounts – timed to use Annual Exempt Amounts and avoid income band creep – materially beat large once‑off disposals taxed at the higher CGT rate.

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. Tax relief is dependent on individual circumstances.

Pension allowances and crystallisation rules

Relevant primarily for Defined Contribution (DC) pensions

Annual Allowance: £60,000 (Tax relief is also limited to a maximum of 100% of relevant earnings in the year).
Tapered Annual Allowance:
- Occurs where threshold income exceeds £200,000 and adjusted income exceeds £260,000
- Allowance reduces by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000.
Money Purchase Annual Allowance (MPAA): £10,000
- Triggered if you flexibly access your pension; avoid accidental triggers!
Tax‑free pension cash/ Lump Sum Allowance (LSA):
- 25% of the total value of your pensions, capped at £268,275
Lump Sum & Death Benefit Allowance (LSDBA): £1,073,100

Practical tip: After the removal of the Lifetime Allowance charge, one blunt cap was replaced with allowances and lump sum death‑benefit ceilings. Accessing the tax-free portion of your pension requires careful planning, as phased crystallisation can be more efficient than taking lump sums.

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. Tax relief is dependent on individual circumstances.

Individual Savings Accounts (ISAs)

ISA allowance: £20,000 per person
Growth and income on assets held within the ISA are free of Capital Gains Tax and Income Tax.
Withdrawals are tax free and do not count as taxable income – one of the most powerful levers in retirement sequencing.

Practical tip: Use ISAs to hold growth and yield assets that would otherwise generate taxable income in General Investment Accounts (GIAs) or pensions.

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

Onshore & offshore investment bonds

5% cumulative allowance per policy year: withdrawals up to 5% of capital investment (accumulative) are tax‑deferred (not tax‑free).
On a later chargeable event, gains are treated as savings income. ‘Top‑slicing’ relief may reduce the effective tax.
Segmentation (issuing multiple small bond segments) enables partial encashments without crystallising the entire bond.

Practical tip: Bonds are sequencing tools – excellent for smoothing when you want to avoid lifting marginal taxable income.

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

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

If the withdrawals taken exceed the growth of the Bond, the capital will be eroded.

Trusts and their charges

Discretionary trusts carry entry charges, 10‑year periodic charges (up to 6%), and exit charges – all complex, but invaluable where control and estate planning are jointly required with income management.

Practical tip: Use bonds in trust to provide family controlled distributions while preserving beneficiary tax allowances.

Trusts are not regulated by the Financial Conduct Authority.

The strategic pivot: Pensions & IHT from April 2027

From 6 April 2027, most unspent pensions and many pension death benefits will be included within estates for IHT purposes.

This is a structural change: the once‑automatic IHT shelter provided by pensions will no longer be universally reliable.

Practical tip: Planning that relied on “leaving wealth in pensions forever” should be re‑examined. Sequencing may shift towards partial de‑risking and movement into ISAs/ trusts/ bonds where appropriate.

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. Tax relief is dependent on individual circumstances.

State Pension

Often overlooked in drawdown, the New State Pension applies to men born on or after 6 April 1951, and women born on or after 6 April 1953.

New State Pension (full rate): £230.25 per week, or about £12,005 per year.

Qualifying years:

Minimum 10 years of National Insurance (NI) contributions or credits needed to receive any pension.
Full rate requires 35 years of qualifying contributions or credits.

Protected payments: If your earnings record from before April 2016 would give you a higher payout under legacy rules, you may receive that as a “protected payment” on top of the current full rate.

Deferral increases entitlement by ~1% every 9 weeks (~5.8% p.a.).

The “triple lock” policy guarantees the New State Pension will rise by the larger of: inflation (CPI), average earnings growth, or 2.5%. In 2025–26, the increase was 4.1%, based on average earnings growth from May-July 2024.

The government has launched the third review of the State Pension age, to determine whether pension age should be automatically linked to life expectancy, possibly raising it even further. The current plan already includes raising the age to 67 by 2027-2028 and to 68 by 2044-2046.

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

Select date and time

The orchestration mindset: Principles and objectives

How high net worth households could avoid the retirement tax trap.

The objective: Provide for your target net-of-tax lifestyle, sustainably, while minimising total lifetime tax (Income Tax + CGT + IHT) and preserving estate optionality.

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

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Principle 1. Start with spend, not pots

Build a 10- to 30-year plan, that models the net income required each year, stress tested for market downturns and longevity. This should account for irregular outgoings too, such as travel, contributing to school fees, property works, gifting, and care contingencies.

An expert financial adviser will use sophisticated cashflow modelling software that considers a variety of scenarios.

Principle 2. Segment capital by tax behaviour

Define which savings and investment pots are tax‑free, tax‑deferred, taxable and trust/ legacy oriented.

Tax-efficient: ISA
Tax-deferred: Pensions & Bonds
Taxable but manageable: GIA
Plus, those which are Trust-based to offer control & IHT shaping

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 depends on individual circumstances.

Principle 3. Sequence withdrawals to preserve low-rate bands

Use allowance‑rich pots first and leave taxable pots to years where other income is low;
Keep taxable income inside lower bands/allowances;
Harvest CGT each year without eroding core capital;
Maintain optionality for later-life and estate outcomes.

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

Principle 4. Split ownership of assets

Share key allowances between spouses;

Personal Allowance
CGT Annual Exemptions
Dividend allowances

…to avoid higher tax bands as individuals. Although, any transfer must be on an outright and unconditional basis.

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.

Principle 5. Preserve optionality

Avoid locking all capital into illiquid or high-penalty structures.

For example, pensions generally cannot be accessed until age 55 (rising to age 57 in 2028), and now face potential double taxation inside estates for IHT purposes.

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 depends on individual circumstances.

Principle 6. Annual discipline

Harvest allowances;
Move assets to ISAs when appropriate;
Re-sequence if income profile changes;
Crystallise gains;
Reset bond segments; and
Top up a 2-3 year cash bucket so markets don’t dictate tax timing.

Tax optimisation is allocation and timing: Think allocation (ISA vs GIA vs pension) and timing (year to year sequencing). For HNW households, a modest shift in timing often outperforms a risky, concentrated tax shelter.

Total-return beats income-only: Preferring high yields traps you in dividend tax bands and concentration risk. A total-return approach with controlled sales from the optimal wrapper gives cleaner tax and risk management.

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 depends on individual circumstances.

Wrapper-by-wrapper: Deep dive and pro moves

What each wrapper really does, and how to use them. These are the rules, tactical moves, common pitfalls and pro plays for each wrapper.

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Pensions – the orchestration core

Core rules:

Up to 25% tax-free, but limited by LSA £268,275 (protections aside). Remainder taxed at your marginal rates.
Contributions: Annual Allowance £60k, taper from £260k adjusted income (min £10k). MPAA £10k if flexibly accessed.
Flexi-access drawdown vs UFPLS: both create taxable income beyond the tax-free element; beware Emergency (Month-1) tax on first payments; reclaim via P55/ P53Z/ P50Z.

What they do well:

Tax relief on eligible contributions;
Tax‑deferred compounding;
Structured death benefits (beneficiary rules).

Key constraints:

Taxable on withdrawal beyond PCLS/ LSA;
MPAA may restrict future contributions once flexible access is used;
PCLS subject to LSA cap;
2027 IHT inclusion looms.

Pro moves:

Earning between £100–£125k? Combine pension contributions and other salary sacrifice to reclaim or preserve Personal Allowance (effective 62% marginal relief zone).
Phased crystallisation:
- Crystallise small portions each year to realise up to 25% tax‑free cash (within LSA) and keep taxable income inside target bands.
- Preferred to large UFPLS where MPAA or rate spikes may occur.
PCLS-only first draws (where legally feasible) to avoid MPAA trigger in the short term. Document carefully.
Pension contributions as tax-band management: for those near the PA taper band, an extra pension contribution or Gift Aid top‑up can reduce adjusted net income, restoring PA or reducing marginal rates. (Use with caution and model liquidity.)

Common mistakes:

Emergency tax shock on first draw; plan cash and reclaim promptly.
Taking a large UFPLS early, triggering MPAA or pushing into 45% band. Can trigger HICBC/ benefit cliffs for under-retirement-age households.
Failing to segment crystallisations, losing LSA advantage or incurring unnecessary income spikes.

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. Tax relief is dependent on individual circumstances.

ISAs – the retirement workhorse

Core rules:

Withdrawals are tax-free and don’t count as income for tax-band tests – ideal for smoothing income and avoiding higher-rate thresholds.
£20,000 p.a. use-it-or-lose-it allowance per person.

What they do well:

Tax‑free withdrawals;
Tax-efficient growth and income on investments within ISAs;
Do not count as taxable income;
Ideal for smoothing tax bands.

Pro moves:

Prioritise funding ISAs in accumulation years after covering tax‑efficient pension contribution needs.
Family pooling: two spouses = £40k p.a.
‘Bed & ISA‘ GIA assets each year to migrate yield/ growth into a tax-free silo.
Park high-yield or fast-growing assets inside ISA to silence tax drag.

Common mistakes:

Putting low‑growth or defensive assets into ISAs, while leaving high‑growth investments in pensions/GIA – match asset to wrapper strategically.

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. Tax relief is dependent on individual circumstances.

GIAs – taxable but flexible

Purpose:

Flexible, taxable accounts used for CGT harvesting, dividend management and bridging between tax‑sheltered pots.

Pro moves:

Annual CGT harvesting: Crystallise up to £3,000 p.p. every year. Split across spouses for double allowance.
‘Bed & spouse’ transfers: Shift gains to the spouse with lower rates or unused allowances (watch out for 30‑day/ share-matching rules to avoid wash sales).
Prefer funds with accumulation units where dividend stuffing would otherwise create tax drag.
Target dividends within the £500 allowance; progressively migrate surplus yield into ISAs.

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. Tax relief is dependent on individual circumstances.

Onshore & offshore investment bonds – mastering deferral

Purpose:

Create tax-deferred cashflow via the 5% cumulative allowance – useful when you want spending power without lifting taxable income;
Top-slicing relief may mitigate a large one-off encashment if held many years;
Assignments (to spouse/trust) normally no gain/ no loss – can shift future gains to different taxpayers/structures;
Useful in early retirement or when deterministic withdrawals are required.

Design tips:

Segment policies at outset (e.g., 10–100 segments) to allow partial encashment without crystallising the whole bond;
Match bond type to tax profile: onshore has a basic-rate credit; offshore maximises gross roll-up but gains are fully income-taxed when they arise.

Pro moves:

Segment large bonds into multiple policies/ segments to allow partial surrenders;
Use top‑slicing relief modelling when planning a large encashment;
Assign to spouse or trust as part of intergenerational planning (assignment usually non‑taxable).

Common errors:

Treating 5% as tax-free (it’s deferred); always model the eventual chargeable event with future expected income bands;
Large future chargeable events can collide with high-rate bands or Personal Allowance taper.

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. Tax relief is dependent on individual circumstances.

If the withdrawals taken exceed the growth of the Bond, the capital will be eroded.

Trusts – for control

Purpose:

Control, protection, and IHT management for surplus capital;
Ring‑fencing and bespoke distributions;
Useful when a retiree wishes to provide controlled family income without inflating personal taxable income.

Key charges:

Entry: 20% on value above available Nil-Rate Band (NRB) for discretionary trusts;
Periodic (10-year) charge: up to 6% above NRB;
Exit charges apply on capital appointments.

Where Trusts meet retirement income:

House surplus capital in trust (often using bonds) to deliver trustee-controlled distributions while ring-fencing from your personal bands/ means-tests.
Time trustee distributions around beneficiaries’ allowances (e.g., adult children in low bands).

Pro move:

Use trusts for pension death benefit holding where legislation permits (but seek legal advice).

Trusts are not regulated by the Financial Conduct Authority.

Obtain a no-obligation review of your retirement planning opportunities

Meet with an expert

Withdrawal sequencing playbook

Concrete algorithms and templates you can run each year, according to your household’s objectives.

An expert financial adviser will revisit your sequencing strategies each year using cashflow modelling; taking into account market fluctuations, tax allowances and reliefs, and your changing tax bands.

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Template A: Keep taxable income ≤ basic-rate band

ISAs first (withdraw tax‑free cash to meet most of the need).
Bond 5% allowances next (tax deferred).
GIA disposals up to CGT Annual Exemption.
Pension taxable draw only to fill remaining PA/ basic band headroom.

This maximises tax‑free draw, defers taxable draws until necessary, and avoids creeping into 40/ 45% income tax territory.

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. Tax relief is dependent on individual circumstances.

If the withdrawals taken exceed the growth of the Bond, the capital will be eroded.

Template B: Materially zero-tax year

ISAs first;
Bond 5% allowances next (tax deferred);
Pension up to Personal Allowance only;
Harvest CGT Annual Exemption in GIA, but avoid creating dividend income beyond the £500 allowance.

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. Tax relief is dependent on individual circumstances.

If the withdrawals taken exceed the growth of the Bond, the capital will be eroded.

Template C: Estate-centric pre-2027 reposition

Goal: Re‑weight pension‑heavy estates to reduce 2027 IHT exposure, without spiking marginal tax rates.

Cash & ISA top ups;
Phased crystallisation of smaller pension tranches to preserve PA and basic rate (not UFPLS lumps) to re-weight gradually from pension to ISA/ bond/ trust;
GIA to fund bed & ISA over multiples years;
Onshore bond assignment to trust where continuity of control is needed;
Life cover in trust to insure IHT if immediate migration impossible.Note: model run‑rate impact carefully; acting too quickly may crystallise gains or incur large income tax;
Maintain a cash buffer (2–3 years) to avoid forced selling in down markets, preserving tax control into 2027+.

Important: Your financial adviser should model the run‑rate impact carefully; acting too quickly may crystallise gains or incur large income tax.

Implementation algorithm (annual):

Forecast the next 24 months of required net spending (base and irregular);
Project all expected non‑portfolio income (state pension, rental, interest);
Run the sequencing template to meet net spend, while keeping taxable income within parameters;
Update ISA/ CGT harvest/ segment bond decisions for each tax year;
Rebalance, migrate high‑return assets into ISAs if room, and reset bond segments.

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. Tax relief is dependent on individual circumstances.

Example case studies

These examples show the numerical effect of sequencing. All examples are simplified and illustrative, will not be suitable for everyone and do not constitute advice. An expert financial adviser can show more precise outcomes through cashflow modelling. Investment risk, sequencing, spend patterns and wrapper history will alter outcomes.

‎

Example A: £80,000 lifestyle with minimal/ zero tax

Two spouses age 60 and 58 target £80,000 annual expenditure.

Asset breakdown:

Pensions: £900k (uncrystallised)
ISAs: £450k
GIAs: £500k
Offshore bond: £300k (10 segments)
Cash: £50k

Annual drawdown plan (year 1):

Withdraw £40,000 from ISAs (untaxed)
Withdraw £15,000 from offshore bond (5% allowance of £300k, tax deferred)
Each crystallise pension income equal to Personal Allowance of £12,570, using PCLS to fund the tax‑free portion (zero taxable income)
Realise £6,000 in gains from GIA (utilising annual exemption)
Earn dividends up to £1,000 (utilising allowances); migrating high-yield positions into ISAs over time.

Net result:

~£80k cash flow with negligible/ zero current-year income tax; no CGT; bond withdrawals deferred; pensions largely untouched and compounding.

Why it works:

Layering tax‑free and tax‑deferred withdrawals plus spouse allowances to avoid higher bands.

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. Tax relief is dependent on individual circumstances.

If the withdrawals taken exceed the growth of the Bond, the capital will be eroded.

Example B: £1m pension single drawdown (hidden leakage)

Single age 62 targets £80,000 gross from their pension alone.

Income tax:

First £12,570 at 0%;
Next slice at 20%;
Next slice at 40%
Typical tax bill £20k-£25k+ p.a. (exact amount depends on other income).

At this rate the pension could run out entirely in less than 20 years, assuming 5% net growth. A quarter of the pension pot is lost unnecessarily to income tax.

This is avoidable if part-funded from ISA/ bond/ GIA to cap marginal rates and preserve 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. You may get back less than the amount invested.

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

If the withdrawals taken exceed the growth of the Bond, the capital will be eroded.

Example C: £1m portfolio capping lifetime tax exposure

Asset breakdown:

Pensions: £450k
ISAs: £250k
GIAs: £200k
Onshore bond: £100k

Strategy:

Years 1-5:
- Withdraw from ISA (tax free);
- Withdraw £5,000 from onshore bond each year (5% allowance of £100k, tax deferred)
- Crystallise pension income equal to Personal Allowance of £12,570 each year
- Harvest £3k CGT (within annual exemption) via GIA each year
Years 6-10:
- Phase pension crystallisations to keep within basic rate band (20%), avoiding higher income tax rates where possible;
- Make gifts from surplus income
Estate planning considerations:
- Review pension nominations and possible bypass/ discretionary trust strategies for death benefits;
- Consider writing a life cover plan in trust to meet an eventual IHT liability;
- Gradually re-weight across wrappers.

Outcome:

Materially lower lifetime income tax and lower projected IHT exposure vs a pension-only draw.

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. Tax relief is dependent on individual circumstances.

If the withdrawals taken exceed the growth of the Bond, the capital will be eroded.

Example D: Significant one-off cash is needed (e.g. renovation)

Strategy:

Split across two or more tax years if possible;
Use ISA first;
Use bond encashment with top-slicing analysis (consider partial segment surrenders);
Pension: crystallise tranches to maximise PCLS and keep taxable slice within target bands;
GIA: realise gains up to CGT annual exemptions across both spouses.

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. Tax relief is dependent on individual circumstances.

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Advanced strategies for HNW households

Phased crystallisation with PCLS routing

Crystallising small pension tranches each year (taking tax‑free element where available, and only taxable as needed) reduces marginal tax spikes and preserves MPAA headroom. Document precisely for HMRC (dates, amounts).

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

Bond segmentation and top-slicing

Issue multiple small bond segments (or purchase multiple small policies) to aid partial surrenders and preserve the 5% allowance across different policy anniversaries. When a larger encashment is required, estimate top‑slicing relief to reduce the effective tax rate.

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

If the withdrawals taken exceed the growth of the Bond, the capital will be eroded.

Trustee distribution engineering

Trustees can smooth distributions to beneficiaries so the household uses beneficiaries’ PA and lower bands, preserving the settlor’s tax bands and potentially keeping the settlor’s taxable income low (subject to trust tax rules).

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

A measured approach to lifetime gifting

Where wealth exceeds long‑term needs and IHT is a concern, measured regular gifting (within the normal expenditure out of income rules) can reduce estate exposure without incurring IHT charges. Keep precise records – to prove regularity to HMRC.

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

Your tax trap checklist

Before your first withdrawal

Decide on draw type (phased PCLS and income vs UFPLS).
Avoid MPAA trigger unless unavoidable.
Confirm tax code to avoid Emergency (Month-1) tax shock.
Factor in other income (rent/dividends) to avoid band creep.
Coordinate spouse allowances (PA/ Dividend/ CGT).

Annual actions

Max usage of ISA allowance (£20k p.p.).
Harvest Capital Gains up to annual exemption (£3k p.p.).
Review dividend flows vs £500 p.p. allowance.
Rebalance risk and refill cash reserves.

Estate planning factors

Model 2027 pension-IHT exposure; review death-benefit nominations and potential trust structures.
Review Wills/ LPAs; keep pension expressions of wishes current.
Consider a life plan in trust to meet anticipated IHT liability.
Keep robust gift records (rules may change over time).

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. Tax relief is dependent on individual circumstances.

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

Integration with portfolio design

Total-return orientation with factor & geographic diversification;
Asset location (what sits where):
- ISA: growth and high-yielding assets;
- Pension: equities for long runway (tax-sheltered compounding);
- GIA: tax-efficient funds/ETFs; prefer accumulation units only when they don’t create dividend tax drag beyond allowance;
- Bond: lower-volatility sleeves to stabilise 5% withdrawals.
Rebalancing: set hard ranges; use flows to minimise CGT.
Costs: consolidate legacy plans where sensible; monitor ongoing charges and platform fees.

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. Tax relief is dependent on individual circumstances.

DIY vs Professionally Advised: The Drawdown Pay-Off

When entering retirement, the decisions you make around how, when, and from where you draw your income can add – or subtract – hundreds of thousands of pounds from your future wealth.

Retirees who ‘go it alone’ often underperform – not because of poor investment returns, but because of suboptimal drawdown sequencing and missed opportunities.

Apollo Private Wealth orchestrates every moving part: income sourcing, wrapper sequencing, tax harvesting, inflation protection, and estate planning – producing materially better financial outcomes over the long term.

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 four biggest DIY mistakes

Front-loading pensions

The problem:

Many DIY investors take the majority of income from pensions first, triggering unnecessary income tax at 40%+ and eroding future compounding potential.

Apollo’s advantage:

Apollo blends ISAs, GIAs, pensions, and bonds intelligently to minimise tax drag and maximise portfolio longevity.

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. Tax relief is dependent on individual circumstances.

Overlooking allowance stacking

The problem:

DIY retirees often underuse the CGT annual exemption, dividend allowance, and personal savings allowance – meaning they overpay HMRC every year.

Apollo’s advantage:

Apollo engineers an “allowance-maxing” waterfall that uses every relief available.

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

Sequence-of-returns risk

The problem:

Withdrawing from growth assets after a market crash can lock in permanent losses – a risk many DIY retirees are blind to.

Apollo’s advantage:

Apollo applies buffer strategies and dynamically switches wrappers to protect growth assets until recovery.

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.

Underestimating longevity

The problem:

Many retirees overspend in the early years or fail to inflation-proof later spending, risking depletion. Assets are eroded quickly by unnecessary taxation, rather than continuing to compound.

Apollo’s advantage:

Apollo stress-tests against 100+ scenarios (inflation spikes, recessions, policy changes) to maintain sustainable drawdowns.

How we add value to every £1 withdrawn:

Tax Alpha → Saving £100,000s+ over decades

Behavioural Alpha → Avoid panic-selling, stick to plan

Sequencing Alpha → Reducing portfolio depletion risk

Legacy Alpha → Integrated estate strategy more wealth passed on to your beneficiaries

Would you like us to build your bespoke retirement strategy?

Obtain personalised recommendations with no obligation

The art of retirement drawdown isn’t picking a single ‘best’ pot. It’s orchestrating all of your pots – year by year – to spend well, stay in low bands, and keep options open as rules evolve (not least the 2027 pension-IHT shift). Get the sequencing right, and you keep more of your money – every year for the rest of your life.

SJP Approved 10/09/2025

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

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 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.

Lifetime Allowance Changes: Carry Forward Pension Allowance up to £220,000

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 2024/25 (£60,000), 2023/24 (£60,000) or 2022/23 (£40,000), 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 £220,000.

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 2022/23, 2023/24, 2024/25, and the current tax year 2025/26, you could make contributions amounting to up to £220,000 before 6 April 2026 – 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.

Taking Retirement Income: Tax in Retirement and Drawing Down

Introduction

There’s much greater flexibility when it comes to retirement income these days, but there are also a few traps waiting for the unwary.

It used to be that when you reached retirement, your journey as a pension investor effectively ended. That’s no longer the case, thanks to the 2015 reforms to Defined Contribution (DC) pensions, which have resulted in many people remaining invested during retirement. The process is now much more seamless, and in some cases very little really changes.

But some things do change, and it’s important to be aware of them. Perhaps the most obvious is the way in which you’re taxed once you begin to take an income in retirement. While there are more opportunities for tax-efficiency these days, there are also a few more pitfalls that need to be avoided.

What you need to know

A new tax regime

During your working life you generally didn’t have to think too much about which income would be taxed, because it would usually be your earnings. And you may well be aware that while you can still be charged Income Tax in retirement, you don’t pay National Insurance on investment income or on any earnings after hitting State Pension age.

But the tax situation is suddenly quite different in other ways too. From a tax perspective, you can now control much more about how you take your income and how much tax you pay. You could well have pensions, Cash ISAs, Stocks & Shares ISAs, property, earnings and so on. But how you extract money from that, and use it as income, is treated and taxed differently.

The best course of action won’t always be obvious. For many of those who are deciding where to take an income from once they’ve retired, the starting point will be their pension – but while the first quarter of your DC pension pot can be taken tax-free, people often forget that anything above that 25% will be taxed at your marginal rate. In other words, the way the pension is taxed makes it worth exploring other options.

For example, income from your ISA won’t be taxed, giving you flexibility to take your income from one place and not another, or to have a mix. A lot of people don’t necessarily realise this and they would rely heavily on a pension income that’s taxed, perhaps because they’re not aware of other ways of doing it. This is where an adviser can step in and help you, simply by knowing which levers to pull.

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.

Navigating an unfamiliar landscape

There are several other tax-related pitfalls to be aware of in retirement. Since the reforms of 2015, a number of people have fallen into the trap of taking a lump sum from their pension pot (beyond the tax free cash lump sum) without realising it would be treated as income, resulting in them having to pay ‘emergency tax’ and potentially receiving less money than anticipated, or with a tax headache.

This is because HM Revenue and Customs (HMRC) treats everything beyond the tax-free cash amount as income. Even if you take a £10,000 lump sum, they’ll see it as income of £10,000 and they’ll tax you accordingly.

Similarly, taking a lump sum from a pension pot could risk pushing you into a higher tax bracket, particularly if you’re a basic- rate taxpayer just below the higher-rate threshold. Again, this is because the lump sum is treated by HMRC as income.

You could use the different tax years to your advantage. For example, if you take £5,000 in one tax year and £5,000 in the following tax year, you might be able to stay under the higher-rate threshold.

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.

Steering clear of the traps

There’s one failsafe way to ensure you don’t end up paying more tax in retirement than you need to – get pension advice from someone who knows the costly mistakes to avoid.

When you’re approaching retirement, you should speak to an adviser to ensure you’re taking income in the most tax-efficient way, because it is quite different from how you’re taxed when you’re working. This applies to anyone leading up to and entering retirement. And it can be especially pertinent for those reaching retirement with both DC and Defined Benefit (DB, or final salary) pension pots.

That’s because the income from a DB pension will be paid to you whether you want it or not, and it will be taxed. So, it’s important to know which incomes you’re going to get anyway and which incomes you have more flexibility with.

An adviser can help you see the bigger picture and understand which of your assets are subject to which tax regime when you take money out. It’s a time of life when a lot of people want to take lump sums, and there are important decisions to make, so you don’t want to take your eye off the ball at the last minute.

Planning for your retirement can be overwhelming, but Apollo can help you begin the journey of budgeting for your later years. If you’re thinking of starting a pension or would like to review your existing pension plans, it’s a good idea to get advice.

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. Tax relief is generally dependent on individual circumstances.

You can also access free impartial pensions guidance from the Pension Wise website, or you can book an appointment over the telephone: 0800 011 397.

SJP Approved 21/05/2025

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

Pensions: Explaining The Tapered Annual Allowance

Introduction

For those earning a high income, it’s essential to understand the implications of the Tapered Annual Allowance on making pension contributions. This guide offers an overview of the tapered annual allowance and its operational mechanism.

Understanding when the Annual Allowance is Tapered

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

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

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

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

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

Mechanics of the Tapered Annual Allowance

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

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

Tapered Annual Allowance and Carry Forward

The tapered annual allowance does not prohibit the use of carry forward rules, which permit the transfer of unused annual allowance from the previous three tax years. The tapered allowance for each year determines the amount that can be carried forward.

Employer Contributions and Exceeding the Tapered Annual Allowance

The tapered annual allowance applies to all pension contributions, including those made by employers. Exceeding your annual pension allowance incurs an annual allowance charge at your highest marginal income tax rate.

Calculating Your Tapered Annual Allowance

Determining your adjusted and threshold income can be complex. Additional information on calculating your tapered annual allowance is available on the Government’s website, and consulting an expert Adviser or tax specialist is advisable for tailored planning.

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 21/05/2025

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

How to manage a windfall, tax efficiently

A strategic guide for high net worth individuals

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

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

Let’s get started

Assessing your financial situation

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

Understanding your net worth

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

Clarifying your financial goals

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

Evaluating your existing investment strategy

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

Reviewing liabilities and liquidity needs

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

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

Managing tax implications

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

Inheritance Tax (IHT) mitigation

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

Capital Gains Tax (CGT) planning

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

Income tax efficiency

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

Use of tax wrappers

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

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

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

Trusts are not regulated by the Financial Conduct Authority.

Developing an investment strategy

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

Diversification

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

Risk management

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

Tactical vs strategic asset allocation

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

Liquidity considerations

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

Professional oversight

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

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

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

Retirement planning

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

Maximising pension contributions

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

Overall pension value considerations

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

Sustainable withdrawal strategies

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

Decumulation tax planning

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

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

Estate planning and wealth preservation

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

Trust structures

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

Gifting strategies

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

Family Investment Companies (FICs)

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

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

Updating Wills and Lasting Powers of Attorney (LPAs)

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

Charitable giving and philanthropy

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

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

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

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

Trusts are not regulated by the Financial Conduct Authority.

Professional advice: A critical component

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

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

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

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

Book A Conversation

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

Thinking about retiring in 2025?

Fine-tune your strategy for an imminent retirement

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

TAX IN RETIREMENT

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

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

Let’s get started

Define your retirement goals

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

What do you want your retirement to look like?

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

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

Common retirement objectives

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

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

Investment time horizon and risk considerations

Understanding your time horizon is critical:

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

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

Assess your asset allocation

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

Are you holding the right mix of assets?

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

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

The impact of asset allocation on retirement income

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

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

Adjusting for market conditions and personal circumstances

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

Structuring your retirement income

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

Non-discretionary expenditure (essential costs)

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

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

Discretionary spending (lifestyle and leisure)

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

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

Structuring your income for stability

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

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

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

Drawing down your retirement savings

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

Tax implications and withdrawal sequencing

A well-structured drawdown approach should prioritise:

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

Understanding your retirement accounts and tax implications…

Tax-free withdrawal accounts

Individual Savings Accounts (ISAs)

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

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

Taxable investment accounts

General Investment Accounts (GIAs)

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

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

Investment Bonds

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

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

Pension drawdown and tax considerations

Defined Benefit Pension (Final Salary Scheme)

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

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

Defined Contribution Pensions (Workplace & Personal Pensions)

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

Self-Invested Personal Pension (SIPP)

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

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

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

State Pension considerations

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

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

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How to structure drawdowns for long-term tax efficiency

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

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

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

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

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

Phase 2: Mid-Retirement

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

Phase 3: Later Years

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

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

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

Ideal for minimising early income tax and creating flexibility

Pros:

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

Cons:

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

Preserving tax-free assets for later

Ideal for long-term tax optimisation and estate planning

Pros:

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

Cons:

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

The hybrid approach: Best of both worlds

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

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

Final thought: Keep reviewing your withdrawal plan

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

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

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

Structuring a sustainable retirement income strategy from investments

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

Equity dividends: A potential source of passive income

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

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

Homegrown dividends: Generating cashflow from your portfolio

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

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

Fixed interest coupons: Predictable income, with trade-offs

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

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

Cash holdings: Liquidity for short-term needs

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

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

Annuities: A structured income stream, with constraints

Annuities provide guaranteed income but come with trade-offs:

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

Optimising Your Retirement Income Mix

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

Beyond investments: A holistic approach to retirement planning

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

State Pension: When and how to take it

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

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

2. Spousal Benefits & Eligibility

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

Estate Planning: Protecting your wealth and legacy

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

1. Key Estate Planning Questions:

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

2. How Assets Transfer Upon Death:

There are three primary ways assets can pass to beneficiaries:

Wills

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

Trusts

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

Beneficiary Designations

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

Executors & Trustees

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

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

Maximising your legacy through tax planning and charitable giving

Reducing Inheritance Tax (IHT):

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

Gifting & Charitable Giving Strategies:

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

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

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

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

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

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

Autumn Statement Impact Assessment

The biggest set of tax increases in modern history.

On 30 October 2024, the UK’s first female chancellor made history with the biggest set of tax increases in living memory. Rachel Reeves’ Budget means that the tax burden in relation to GDP is now the highest on record, surpassing even post-war levels in 1948.¹

After months of speculation surrounding a proposed ‘tax on wealth’, Labour’s first budget in well over decade has brought about sweeping changes to the UK tax landscape.

Arguably the most significant impact will be felt by;

Income Taxpayers
Private Schoolparents
Employers and Business Owners
Private Equity Professionals
Capital Gains Taxpayers
Estates on which Inheritance Tax (IHT) is due (soon to include Pensions)
Non-Domiciled Individuals
Farmers
Purchasers of Additional Property

In the following sections, we outline the order of changes, now and in the coming few tax years.

1 Office for Budget Responsibility data from 1970 to 2024, estimates that the changes announced in 2024’s Autumn Statement will seize an additional £40bn in tax revenues, which is higher than any previous amount on record.

Immediate consequences

Income Tax thresholds frozen

Although there were no changes to the headline Income Tax rates and thresholds, the thresholds remain frozen until April 2028. This stealth tax enables wage inflation to drag a higher proportion of UK taxpayers into paying increased amounts of income tax.

The OBR has forecast that 7.8 million UK taxpayers are likely to be dragged into higher tax bands during the freeze; 4.2 million will start paying Income Tax, with 3 million more pushed into paying the Higher Rate, and an extra 600,000 forced to pay the Additional Rate by 2027-28.

Employees generally pay Income Tax at 20% on income between the Personal Allowance Threshold and the Higher Rate Threshold; at 40% on income between the Higher Rate Threshold and the Additional Rate Threshold; and at 45% on income above the Additional Rate Threshold.

Employees continue to see their Personal Allowance tapered at a rate of £1 for every £2 of income between £100,000 and £125,140, resulting in an effective 60% rate of income tax on this portion of their income.

Employees generally pay National Insurance Contributions (NICs) at 8% on income between the Primary Threshold and Upper Earnings Limit, and at 2% on income above the Upper Earnings Limit.

Personal Allowance frozen at £12,570 per year
Higher Rate Threshold frozen at £50,270 per year
Additional Rate Threshold frozen at £125,140 per year
NIC Primary Threshold frozen at £242 per week
NIC Lower Earnings Limit frozen at £123 per week
NIC Upper Earnings Limit frozen at £967 per week
NIC Lower Profits Limit frozen at £12,570 per year
NIC Upper Profits Limit frozen at £50,270 per year

The last government introduced a plan to assess the threshold at which Child Benefit gets clawed back to be based on household income, rather than at the individual level. Labour are scrapping this plan.

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

Capital Gains Tax (CGT) rates increased

Effective immediately, from 30 October 2024, the rates of Capital Gains Tax (CGT) on shares and various other assets, are increased as follows;

CGT Lower Rate increases from 10% to 18% (a rise of almost double)
CGT Higher/Additional Rate increases from 20% to 24% (a rise of one fifth)

The CGT rates for residential property gains, which do not qualify for the private residence exemption, remain at 18% and 24% respectively.

A small, annual Capital Gains Tax (CGT) Allowance remains at £3,000.

Inheritance Tax (IHT) thresholds frozen

Despite the headline Inheritance Tax (IHT) rates and thresholds remaining unchanged, they have been frozen until 2030; an extension to the freeze of two further years. This stealth tax enables inflation to drag a higher proportion of Estates into paying IHT duties.

The majority of your assets will be subject to IHT if, when you die, the value of those assets exceeds the standard nil-rate band which currently stands at £325,000. If your spouse dies before you without fully using their nil-rate band, any unused percentage can be carried forward to use when you die, subject to a claim being made by your executors within two years of your death.

With the family home often making up a large percentage of an estate, the government has introduced an additional nil-rate band on top of the £325,000, known as the ‘residence nil-rate band’. The current residence nil-rate band is up to £175,000.

This means that if you give away a home that you have lived in as your main home to your children (including adopted, foster or stepchildren) or grandchildren, they won’t have to pay IHT on the first £500,000 (£325,000 nil rate band + £175,000 residence nil-rate band).

If you are a married couple or in a civil partnership then you can combine both your nil-rate bands, meaning that the first £1 million of your assets, including your property, are free from IHT.

Gifting allowances remain unchanged.

IHT Relief on AIM shares is reduced to 50%, giving an effective IHT rate of 20%.

Crucially, Pensions will be brought inside of Estates for IHT purposes from April 2027.

Meanwhile, Agricultural Property Relief and Business Property Relief will be reformed.

Finally, a person’s assets worldwide will be considered for IHT purposes in some circumstances, including for instance where they have lived in the UK for 10 of the last 20 years.

Private School Fees attract VAT at 20%

From January 2025, VAT will apply on Private School Fees at 20%. Schools will also be subject to business rates, where they had previously been exempt.

Many independent schools have already confirmed that they will pass some or all of the increased cost on to parents and fee payers.

While the cost of tuition fees can vary widely depending on the school and location, sending your child to a private school as a day pupil currently costs, on average, £23,925 per year, rising to £42,459 for pupils who board.² The application of VAT could bring the average day fee to £28,710, and the average boarding fee to £50,951, overnight.

2 ISC Census and Annual Report, January 2024

Stamp Duty Land Tax (SDLT) additional dwelling surcharge increased

Effective the day after the Autumn Statement, from 31 October 2024, the Stamp Duty Land Tax (SDLT) Higher Rate for Additional Dwellings is increased by two thirds, from 3% to 5%.

This Higher Rate is applicable when you buy a residential property (or a part of one) for £40,000 or more, if it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world.

You may have to pay the Higher Rate even if you intend to live in the property you’re buying, and regardless of whether or not you already own a residential property. This is because the rules do not apply only to you (the buyer), but also to anyone you’re married to or buying with.

Investors’ Relief lifetime limit reduced

Effective immediately, the lifetime limit for Investors’ Relief is reduced, from £10 million to £1 million.

This will apply to qualifying disposals made on or after 30 October 2024, as well as to certain disposals made before 30 October 2024.

Non-domiciled individuals

With immediate effect, tax benefits are reduced for non-domiciled individuals who move money into Offshore Trusts.

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Further ramifications from April 2025

Employer National Insurance Contributions (NICs) increased

From April 2025, the rate of Employer National Insurance Contributions (NICs) will rise from 13.8% to 15%.

The threshold at which Employer NICs is due, will also be lowered, from £9,100 to £5,000 per year.

Together, these measures will result in additional costs to employers of at least £615 per year, per employee – and in many cases, significantly more.

Prior to the measures introduced in the Autumn Statement, earnings adjusted for inflation were due for a modest increase of 0.2pc in 2026 and 0.3pc in 2027. Now they are set to fall by -0.2 and -0.1pc respectively. The OBR has stated that it estimates approximately 76% of the additional Employer National Insurance cost will be passed on to employees.³

More than 700,000 UK workers ‘inside IR35’ will wear the whole uplift, owing both Employer and Employee NICs.

However, more than 865,000 small businesses will benefit from changes to the Employment Allowance, which increases from £5,000 to £10,500. Employment Allowance lets businesses, charities and sports clubs reduce their annual National Insurance (NI) liability, if their employers’ Class 1 NI liability fell below £100,000 in the previous tax year.

Furthermore, businesses can still offer salary sacrifice schemes to their employees, which may have the effect of reducing Employer NIC liabilities. And, as a business owner, you could utilise a Small Self-Administered (Pension) Scheme (SSAS) to build your own tax-efficient investment pot towards retirement.

3 Office for Budget Responsibility, October 2024

Business Rates Relief reduced

From April 2025, those qualifying for Business Rates Relief will see their discount fall, from 75% to 40%. It is estimated that this discount ‘replacement’ will see qualifying businesses’ rates bills rise by 140% as a result.

Business Asset Disposal Relief (BADR) increased

From April 2025, the rate of Business Asset Disposal Relief (BADR) increases from 10% to 14%.

It is due to increase again from April 2026, to 18%.

BADR is available on disposals of business assets. It had reduced the rate of Capital Gains Tax (CGT) on qualifying gains to 10%, but now the relief/reduction is less.

Capital Gains Tax (CGT) on Carried Interest increased

From April 2025, the rate of Capital Gains Tax (CGT) on Carried Interest will increase, from 18% for basic rate taxpayers and 28% for higher/additional rate taxpayers, into a single unified rate of 32%.

Further reforms to the way that Carried Interest is taxed, are mooted from April 2026.

Carried Interest (or ‘carry’ for short) is one of the main forms of compensation in the private equity industry, and continue to attract a lower rate of tax than traditional income.

Non-Domicile Tax Regime abolished

The Non-Domicile Tax Regime will be abolished from April 2025.

It is set to be replaced by a residence-based scheme, described during the Autumn Statement as “internationally competitive.” Tax relief will apply to Foreign Income and Gains (FIG), and a Temporary Repatriation Facility will be introduced.

State Pension increased

From April 2025, the State Pension will rise by 4.1%, meaning a gain of up to £470 per year for those in receipt of the Full New State Pension.

Future impact from April 2026

Inheritance Tax (IHT) relief on business and agricultural assets significantly reduced

From April 2026, a £1 million allowance will be introduced for Inheritance Tax (IHT) relief on business assets and agricultural assets.

A new effective 20% rate of IHT will apply on the value of relevant assets above £1 million.

Business Asset Disposal Relief increases further

From April 2026, once again the rate of Business Asset Disposal Relief is increased, from 14% to 18% (vs 10% currently).

Capital Gains Tax (CGT) on Carried Interest reformed

Whilst details are yet to be given, it is mooted that Capital Gains Tax (CGT) on Carried Interest will be reformed altogether from April 2026.

Air Passenger Duty (APD) increased

From April 2026, the Standard Rate of Air Passenger Duty (APD) will rise by 13% for long haul flights, reaching up to £253.

APD is chargeable per passenger, on flights departing the UK. The Standard Rate applies to most premium economy, business class and first class fares.

Meanwhile, the Higher Rate of APD, applicable to each passenger travelling by private jet, will increase by 50%, reaching up to £1,141. Generally used as capital assets by corporations, jets allow businesses to increase productivity, and this extortionate increase in APD may have the effect of harming growth, and ultimately tax receipts. It is estimated that 70% of private aviation passengers are “middle managers going about their working day,” according to Steve Varsano, who runs The Jet Business aircraft brokerage on Park Lane.

Eventual changes from April 2027

Inherited Pensions brought inside of Estate for Inheritance Tax (IHT) purposes

From April 2027, any inherited Pension will be considered as part of an Estate for Inheritance Tax (IHT) purposes, meaning that for the first time, IHT will be due at up to 40%, subject to existing IHT rates and allowances.

Agricultural and Business Property Reliefs reformed

From April 2027, Agricultural Property Relief, and Business Property Relief, are each set to be reformed, though little more has been announced.

Air Passenger Duty increases further

From April 2027, Air Passenger Duty (APD) will rise once again, according to forecast Retail Price Index (RPI) at that time.

The effect will be felt most severely by those travelling privately, and in premium economy, business class and first class.

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What remains largely unchanged for now?

Income Tax thresholds and rates

Employees continue to pay Income Tax at 20% on income between the Personal Allowance Threshold and the Higher Rate Threshold; at 40% on income between the Higher Rate Threshold and the Additional Rate Threshold; and at 45% on income above the Additional Rate Threshold.

Personal Allowance frozen at £12,570 per year
Higher Rate Threshold frozen at £50,270 per year
Additional Rate Threshold frozen at £125,140 per year

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

Income Tax Relief on Pension Contributions

Income Tax Relief continues to be made available on Pension Contributions made personally, up to 100% of earnings or £3,600, whichever is higher.

They are further limited by an Annual Allowance, usually £60,000 which includes not only personal contributions, but also employer contributions, and any tax relief received by the scheme. Exceeding the Annual Allowance may result in a tax charge.

Pension tax relief will be granted at one’s marginal rate of tax.

Employee National Insurance (NI) Contributions

Employees continue to pay National Insurance Contributions (NICs) at 8% on income between the Primary Threshold and Upper Earnings Limit, and at 2% on income above the Upper Earnings Limit.

NIC Primary Threshold frozen at £242 per week
NIC Lower Earnings Limit frozen at £123 per week
NIC Upper Earnings Limit frozen at £967 per week
NIC Lower Profits Limit frozen at £12,570 per year
NIC Upper Profits Limit frozen at £50,270 per year

Capital Gains Tax (CGT) rate on residential and buy-to-let property assets

The rate of Capital Gains Tax (CGT) chargeable on gains from residential and buy-to-let property assets remains unchanged, at 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers.

Inheritance Tax (IHT) rates and allowances

The majority of your assets will be subject to IHT if, when you die, the value of those assets exceeds the standard nil-rate band which remains at £325,000. If your spouse dies before you without fully using their nil-rate band, any unused percentage can be carried forward to use when you die, subject to a claim being made by your executors within two years of your death.

If you are a married couple or in a civil partnership then you can combine both your nil-rate bands, meaning that the first £1 million of your assets, including your property, are free from IHT.

Gifting allowances also remain unchanged.

IHT Relief on AIM shares is reduced to 50%, giving an effective IHT rate of 20%.

Crucially, Pensions will be brought inside of Estates for IHT purposes from April 2027. Meanwhile, Agricultural Property Relief and Business Property Relief will be reformed.

In a further blow, the government will increase the interest rate HMRC can charge on unpaid tax, from 7.5% to 9%. Families have six months to pay inheritance tax after the death of a loved one before interest is added to the bill; but grants of probate currently take nine weeks on average to obtain, and in complex cases, the process can drag on for over a year.⁴

⁴ Probate Registry, October 2024

Stamp Duty Land Tax (SDLT) on primary residences

The current rates and thresholds for Stamp Duty Land Tax (SDLT) remain unchanged for the purchase of a primary residence.

From 31 March 2025, the temporary increase to thresholds will end, and SDLT will be due on primary residences from £125,000 (currently £250,000), with the nil-rate threshold for First Time Buyer’s Relief also due to fall, from £425,000 to £300,000.

Corporation Tax

The headline rate of Corporation Tax remains at 25%.

Current expensing reliefs are maintained.

Individual Savings Account (ISA) Allowances

Individual Savings Account (ISA) Allowances are now frozen until 2030; an extension of two years that will face significant fiscal drag as a result of inflation.

By the end of the decade, the annual deposit cap of £20,000 will have remained unchanged for a total of 13 years. The issue is exacerbated by the hike in Capital Gains Tax rates.

The total ISA Allowance remains at £20,000.

The total Junior ISA Allowance (for under 18s) remains at £9,000.

The Lifetime ISA Allowance (for saving towards a first home or retirement) remains at £4,000, with a 25% government bonus provided on contributions. The home value limit of £450,000 appears to be unchanged.

Pension Annual Allowance

The standard Pension Annual Allowance remains at £60,000, although it may be reduced to as low as £10,000 if one has flexibly accessed income via their pension, or if they have high earnings and are subject to the tapered annual allowance.

Pension Carry Forward

The ability to Carry Forward unused Pension Annual Allowances from the previous three tax years, remains.

This means a theoretical maximum contribution of £200,000 may be made in the current tax year, subject to relevant earnings. For now, this is expected to rise to £220,000 in the 2025/26 tax year, and to £240,000 in the 2026/27 tax year, based on historical Annual Allowances.

Personal Savings Allowance (PSA)

The Personal Savings Allowance (PSA) is the maximum amount of cash savings on which interest is not taxed, and remains unchanged as follows;

For Additional Rate Income Taxpayers, the PSA is zero
For Higher Rate Income Taxpayers, the PSA is £500
For Basic Rate Income Taxpayers, the PSA is £1,000

Capital Gains Tax (CGT) Allowances

Each UK adult continues to benefit from a Capital Gains Tax (CGT) Allowance of £3,000 per year.

Interspousal mechanisms remain.

Dividend Tax Rates and Allowances

Dividend Ordinary Rate remains at 8.75%
Dividend Upper Rate remains at 33.75%
Dividend Additional Rate remains at 39.35%

Each UK adult continues to benefit from a Dividend Tax Allowance of £500 per year.

Pension Access Allowances

Replacing the now abolished Lifetime Allowance (LTA) are;

Lump Sum Allowance (LSA) of 25% of the value of your pensions up to a maximum of £268,275
Lump Sum Death Benefit Allowance (LSDBA) of £1,073,100
Overseas Transfer Allowance (OTA) equivalent to the LSDBA

The Lump Sum Allowance (LSA) limits the tax-free lump sums you can take from pensions. Any amount you take over your allowance will be taxed at your marginal rate of income tax.

The Lump Sum and Death Benefit Allowance (LSDBA) limits the tax-free lump sums you can take from pensions, as well as tax-free lump sums that can be paid to beneficiaries after your death.

The Overseas Transfer Allowance (OTA) limits the amount you can transfer to a qualifying recognised overseas pension scheme (QROPS) without tax charges applying.

These allowances, first introduced in April 2024, remain unchanged, despite speculation that the LSA in particular might have been reduced to £100,000. If you recently made a request to draw a lump sum from your pension, as a result of this speculation, then you may wish to consider whether this decision is still in your best interests.

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.

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

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

An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a Cash ISA or a deposit with a bank or building society.

Please note that Cash ISAs are not available through St. James’s Place and although anyone can contribute to an ISA for a child only the parent/legal guardian can open the ISA for them.

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

Seven Steps To Retire Early

What does retirement look like to you?

Retirement often revolves around relishing life’s simple pleasures or embracing newfound financial freedom for spontaneous pursuits, fulfilling long-held dreams, and ambitions once sidelined by work commitments. This guide outlines seven steps to retire early.

Are you eagerly anticipating retirement, feeling assured that your plans are well-managed? Or do you harbour unease, wondering if you’ve adequately prepared? Perhaps you aspire to retire early but question if it’s financially viable.

Achieving a comfortable retirement entails no shortcuts, despite prevalent misconceptions suggesting otherwise. It demands diligent planning and strategic decision-making.

A £1 million pension pot might sound substantial, but it’s the pension sum many of us will require to sustain our current lifestyle throughout retirement. While it may initially appear daunting, attaining this goal is potentially achievable with the early adoption of prudent financial habits and comprehensive planning strategies.

Retire Early: At a glance

A couple may need in excess of £59,000 a year to live a ‘comfortable’ retirement, according to the Pensions and Lifetime Savings Association, February 2024.
You could get tax relief of up to 45% on pension contributions, if you’re an additional rate taxpayer, meaning a £2,000 contribution has a net cost of just £1,100.*
The Annual Allowance is £60,000, but this can be tapered to a lower level if you have a high income. However, personal contributions are also limited to 100% of your earnings, up to a maximum of £60,000, in the tax year the contribution is paid. This includes contributions from yourself, your employer, any third party as well as tax relief paid to the pension.
Compounding has the potential to significantly improve the return on your investment, highlighting the importance of starting early.

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.

*On the basis that any tax relief over the basic rate is claimed via your annual tax return and that you have invested the additional tax relief claimed.

Retire Early: How much will it cost?

Research for the Pensions and Lifetime Savings Association shows what kind of lifestyle you could have in retirement.

Source: Pensions and Lifetime Savings Association, February 2024, developed in partnership with Loughborough University Research Faculty

	Minimum	Moderate	Comfortable
Single	£14,400 a year	£31,300 a year	£43,100 a year
Couple	£22,400 a year	£43,100 a year	£59,000 a year
Standard of living	Covers your needs	More financial security and flexibility	More financial freedom and some luxuries

Why save into a pension?

Savings vehicles like ISAs offer significant flexibility and are effective means to accumulate wealth for the future. However, pensions possess a distinct advantage: tax relief. Individuals under 75 can enjoy a 25% boost on their eligible pension contributions from day one, as everyone receives 20% basic rate tax relief on their pension contributions from the government.

Moreover, higher or additional rate taxpayers may be eligible for additional tax relief through their annual tax returns. Additionally, any growth within a pension is exempt from Income Tax and Capital Gains Tax, providing further enhancement to your retirement fund.

Because of the favourable tax treatment of pensions, they can be an effective method to retire early. However, it is crucial to remember that from April 2027, it has been proposed that pensions will form part of one’s estate for inheritance tax purposes.

The value of an investment with St. James’s Place will be linked directly 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 generally depends on individual circumstances.

How much does each £2,000 contribution cost you?

Contributing £2,000 monthly into your pension could be more attainable than you realise, largely due to tax relief on your contributions. This estimate is predicated on the presumption that contributions are eligible and that any amount exceeding the basic rate of tax is reclaimed through your annual tax return and subsequently allocated to your pension.

How much can I pay into a pension?

For most individuals the tax benefits on pension contributions is typically limited to £60,000 per tax year. This include contributions from you, your employer, any third party as well as the tax relief added by the provider. The contributions you make are also limited to 100% of your earnings in the tax year they are paid.

Your Pension Annual Allowance may be tapered if you are a high earner – read more here.

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.

Seven top tips for boosting your retirement fund to help retire early

1. Start early

It’s undeniably tempting to prioritise immediate financial objectives and rewards, especially when retirement may seem distant.

You might find yourself thinking that you’ll start saving for the future “when I can afford to” or “when I’m earning more money.” However, adopting this mindset carries the risk of procrastination and potentially leaving it too late to prepare to retire early adequately.

The crux of attaining a comfortable retirement lies in saving as much as possible, as early as possible. By embracing this approach, you lay a solid foundation for securing your financial future and ensuring peace of mind during retirement. Starting early could also help you to retire early.

2. Maximise the use of your Pension Annual Allowance

For most people, contributions are limited to the £60,000 annual allowance. This includes any employer contributions and tax relief applied to your personal contributions. Tax relief on your personal contributions is also limited to the level of your relevant earnings in the tax year, or £3,600 if earnings are lower than this.

To capitalise on their annual pension allowance, an individual with a gross annual income of £200,000 could make a gross monthly pension contribution of up to £5,000. As an additional rate taxpayer, the tax relief at 45% on these contributions amounts to £2,250 per month. Their net contribution after allowing for the tax relief is therefore £2,750, equivalent of 16.5% of their gross earnings. This does not factor in any employer contributions that the individual might benefit from.

Starting at 35, investing £5,000 each month, the employee could expect their pension pot to be worth approx. £2,520,000 by the time they reach 55.

Please note that you can currently access your personal pension at 55 but this is increasing to 57 in 2028.

If they started at 45, the pot would be worth approx. £861,000 a decade later.

Based on £5,000 invested each month, increasing 2.5% a year: return 5% a year, compounded monthly, after charges. These figures are only examples and are not guaranteed – they are not minimum or maximum amounts. What you will get back depends on how your investment grows and on the tax treatment of the investment. You could get back more or less.

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.

3. Give your money time to work

Initiating saving sooner enables your money to remain invested for a longer duration, significantly enhancing the prospects of its growth. This phenomenon is propelled by the power of compound investing, where regularly investing money allows the returns generated to compound over time.

Compound investing serves as a potent tool, wherein the returns you earn have the potential to generate additional returns. Over time, this compounding effect can yield substantial gains, irrespective of the fluctuations in financial markets.

It is also important to consider leaving your pension untouched for as long as possible, even if you wish to retire early, if you have other sources of income or assets.e

4. Increase your contributions whenever you can

After initiating contributions to a pension plan, it’s essential to periodically assess and adjust your contribution levels. Simply allowing it to persist at a lower contribution rate may not align with your retirement objectives, or help you to retire early.

Whenever you receive a pay increase, contemplate raising your pension contribution by a corresponding percentage. Even a minor uptick can yield substantial benefits over the long term. Additionally, consider investing bonuses or inheritances as a strategic approach to inch closer to your savings target. Making larger, one-time payments can exert a meaningful influence on your retirement fund when invested over several years.

It’s also worth finding out if you have any unused annual allowance from previous years. Subject to certain limits this could enable you to pay in more than £60,000 in one year and still get the tax benefits on the whole amount. You can ‘carry forward’ unused allowances for up to three years. For instance, in the 2025/26 tax year you can use this year’s £60,000 annual allowance, then anything unused from 2024/25 (£60,000), then 2023/24 (£60,000) and finally from 2022/23 (£40,000), up to a theoretical maximum of £220,000 – provided you were a member of a pension scheme during each of those years, and have the relevant earnings in the current year if making personal contributions.

The value of an investment with St. James’s Place will be linked directly 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 depends on individual circumstances.

5. Don’t dip into your pension if you can help it

You can usually access your pension from age 55 (rising to 57 in 2028). This is when you can generally take up to 25% tax-free as a lump sum. Many people do, perhaps to pay off their mortgage or make a big-ticket purchase.

However, if feasible, it’s advisable to refrain from accessing your pension for as long as possible, allowing it ample time and potential to grow. Ironically, this may help you to retire early.

Keep in mind that a modern retirement might span 30 years or even longer. This prolonged duration underscores the significance of maintaining your standard of living throughout retirement, which is facilitated by maximising the growth potential of your pension fund.

6. Track down old pensions

Throughout your career, you might work for different employers and accumulate a collection of workplace pensions through various schemes. You may also have some personal pensions, especially if you have been self-employed at any point. You might accumulate several workplace pensions with different employers during your career. Tracking these down may help you to retire early.

It’s not always easy to keep track of your pensions, or for your pension provider to keep track of you. Multiple pension pots from different providers mean you run a much higher risk of losing track of them. House moves are often to blame for this as paperwork is lost and providers not notified.

It adds up to a lot of money. 3.3 million pension pots worth £31.1bn are lost or dormant in the UK.¹ That’s money that could be helping people towards a more comfortable retirement. That could include you.

You’ve got a few options for tracking down forgotten pension pots:

Reach out to each former employer with the dates of your employment. They should be able to confirm the pension provider they contributed to for workplace pensions during that period. Ensure you have your National Insurance number handy.

Use the government’s free Pension Tracing Service, which can assist you in finding old employers. Once you obtain their contact information, contact them to request the name of your pension provider and policy number.

If you recall the name of your old pension provider, reach out to them directly. You’ll likely need to provide your name, address, and National Insurance number.

¹ Pensions and Lifetime Savings Association, October 2024

7. Review your Pension Plans

Once you’ve gathered a comprehensive view of your pensions, it’s advisable to seek advice.

Understanding how your accumulated pensions will contribute to your desired retirement is crucial. Evaluate the performance of your investments – are they still suitable for your needs? Identify any restrictions or significant benefits you should be mindful of. It’s possible that adjustments may be necessary, particularly if a pension hasn’t been reviewed for an extended period.

You’ve dedicated considerable effort to earning your money. Taking the time to optimise your pension plans can ensure that all your assets are maximising their potential in preparation for your retirement, and can help you to retire early.

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

Book a no-obligation review

We’d be delighted to review your existing retirement plans, and wider financial circumstances, to help you retire early, in a tax-efficient way. Book a review with one of our experts today.

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 you invested.

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

SJP Approved xx/xx/xxxx

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Britain has entered a new era of even higher taxation

A tax system ratcheting up every year until 2031

A direct hit on pensions and long-term investment

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

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

Property owners and investors hit with two critical tax whacks

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

Business owners and entrepreneurs see investment incentives cut

Yet more Capital Gains Tax hikes

Other announcements

Has anything been spared tax increases?

Future outlook and planning

Still have questions?

Obtain support from an expert financial planner.

UK economic picture

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

A high net worth guide to investing for retirement; then drawing down tax efficiently

The retirement tax landscape at a glance

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

The orchestration mindset: Principles and objectives

Wrapper-by-wrapper: Deep dive and pro moves

Obtain a no-obligation review of your retirement planning opportunities

Withdrawal sequencing playbook

Example case studies

Sound like a lot? Save time with our help

Advanced strategies for HNW households

Your tax trap checklist

Integration with portfolio design

DIY vs Professionally Advised: The Drawdown Pay-Off

The four biggest DIY mistakes

Would you like us to build your bespoke retirement strategy?

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

Retirement costs now exceed £60,000

High income can limit your options

Beyond pensions: Alternative choices

The silent risk: Lifestyle creep

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

Introduction

How the Lifetime Allowance changes impact retirement planning and saving

What next?

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

Introduction

What you need to know

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

Introduction

Understanding when the Annual Allowance is Tapered

Mechanics of the Tapered Annual Allowance

Tapered Annual Allowance and Carry Forward

Employer Contributions and Exceeding the Tapered Annual Allowance

Calculating Your Tapered Annual Allowance

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

A strategic guide for high net worth individuals

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

Assessing your financial situation

Managing tax implications

Developing an investment strategy

Retirement planning

Estate planning and wealth preservation

Professional advice: A critical component

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

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

Fine-tune your strategy for an imminent retirement

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

Define your retirement goals

Assess your asset allocation

Structuring your retirement income

Drawing down your retirement savings

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

Phase 2: Mid-Retirement

Phase 3: Later Years

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

Preserving tax-free assets for later

The hybrid approach: Best of both worlds

Final thought: Keep reviewing your withdrawal plan

Structuring a sustainable retirement income strategy from investments