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5 practical questions to consider when you’re naming a Lasting Power of Attorney

Who you choose to act on your behalf if you lose mental capacity is an important decision. You want to select someone you trust and you feel confident could act in your best interest should you need them to. So, read on to discover five practical questions you might want to answer when you’re setting up a Lasting Power of Attorney (LPA).

An LPA gives someone you trust the ability to make decisions on your behalf if you’re no longer able to. For example, they could take on this role if you’ve been involved in an accident or suffer from an illness that means you don’t have the mental capacity to handle your affairs.

There are two types of LPA:

• Health and welfare LPA, which would cover decisions like your medical care, whether to continue life-sustaining treatment, moving into a care home, and your daily routine
• Property and financial affairs LPA, which would cover decisions like paying your bills, managing your bank account or other assets, and selling your home.

You should consider naming both types of LPA. They could provide you with security and ensure someone is acting on your behalf if you’re in a vulnerable position.

According to FTAdviser, the number of LPAs registered in 2023 jumped by 37% when compared to a year earlier and marked the first time registrations exceeded a million.

Yet, a separate study from Just Group also suggests that millions of families could be unable to act on behalf of their loved ones if something happened to them. Indeed, it’s estimated that 59% of over-75s haven’t arranged an LPA – the equivalent of 3.4 million people.

If you don’t have an LPA set up, someone wishing to act on your behalf may need to apply to the Court of Protection to be appointed as your “deputy”. This could mean someone you wouldn’t choose is given the responsibility of handling your affairs.

In addition, going through the Court of Protection can be a costly and lengthy process. It might place unnecessary stress on your loved ones at an already difficult time and could mean your affairs are left unattended for months. For instance, it may mean that you don’t have the support you need at home, such as care services, or that bills go unpaid.

What to consider when choosing your Lasting Power of Attorney

Your LPA must be someone who is aged 18 or older. Often, people choose family members as their LPA, but you might also select a trusted friend or even a professional, such as a solicitor, to act on your behalf.

These five practical questions could help you decide who to name as your LPA.

1. How many Lasting Powers of Attorney will you name?

You can select just one LPA, but you can also choose several people to act on your behalf. Multiple LPAs can be useful and help relieve some of the pressure they might feel if they need to make decisions for you. For example, if you have two children, you might choose to name them both so they can share the responsibility.

Even if you choose a single LPA, you may also want to name a replacement in case your first choice cannot fulfil their role.

2. Who do you trust to act on your behalf?

One of the first questions you’ll often want to consider is who you trust to make decisions on your behalf. An attorney will potentially have a lot of power over your life and financial affairs. So, it’s important you feel comfortable giving them this responsibility and are confident they’ll act in your best interests.

If you have multiple LPAs, it might be important to consider how well they’ll work together. Conflicts arising could harm your wellbeing and mean decisions are delayed.

3. Who has the right skills to act as a Lasting Power of Attorney? 

Next, you may want to think about whether the people you’d choose as an LPA have the right skills for the role. You might want to consider how they handle their affairs – are they generally organised and make decisions that you agree with?

4. Would your Lasting Power of Attorney be comfortable making large decisions on your behalf? 

Becoming an LPA can be a lot of responsibility, which some people might not be comfortable with.

Having a conversation with the person or people you’d prefer to act on your behalf can be valuable. It could provide an opportunity to talk about what your wishes would be, such as your views on life-sustaining treatment, and ensure they’d be confident making potentially difficult decisions for you.

5. Will your attorneys be able to make decisions independently? 

Finally, if you’ll be naming more than one LPA, you’ll need to decide if they can make decisions independently or must act together.

Your LPA will state whether they must make decisions “jointly”, meaning all attorneys must agree, or “jointly and severally”, which means they could act independently. Being able to act severally might be useful if decisions need to be made urgently, such as those relating to medical treatment.

You can specify which decisions you’d like them to make together. For example, you might state they can handle tasks like managing your bills severally, but when it comes to selling property, they must make it jointly.

Contact us to make a Lasting Power of Attorney part of your estate plan

Naming an LPA can form part of your wider estate plan that considers how to manage your wealth later in life and when you pass away. If you’d like help creating an estate plan, please contact us.

As your financial planner, we may also understand your goals and what you’d like your LPA to consider when making financial decisions for you. We could offer support and guidance if they need to act on your behalf.

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

The Financial Conduct Authority does not regulate estate planning or Lasting Powers of Attorney

Regular financial reviews may help you get more out of every stage of life

Balancing your long-term goals with enjoying your life now can be a difficult balancing act. Regular financial reviews could ensure you get more out of your life at every stage by helping you to strike a balance that suits your needs.

It’s a common misconception that financial planning is simply about accumulating wealth. While managing your assets is a key part of effective financial planning, it’s about more than that. A financial plan could give you the confidence to enjoy life now while securing your future.

A financial plan could be valuable and help you reach your goals, but to get the most out of it, ongoing reviews may be just as important.

Your goals and priorities may change over time

What were your goals and priorities 20 years ago? While some may have remained constant throughout your life, others could have changed significantly.

Perhaps in your 30s, you were focused on progressing in your career and building wealth. However, once you start a family, your priorities may shift to improving your work-life balance so you can spend more time with your children.

Similarly, you might initially decide you want to retire when you’re 70, but later find you’d like to give up work sooner so you can travel or spend more time on hobbies you’re passionate about.

Your aspirations are an essential part of creating a financial plan. They will guide the decisions you make so they reflect what you want to get out of life.

So, regular reviews that provide an opportunity to talk about what’s important to you could help you enjoy life now and consider what you’d like to achieve in the future.

A review could ensure your financial plan continues to reflect your circumstances

It’s not just your goals that will change throughout your life. Your financial circumstances are likely to vary through different life stages too.

When you first create a financial plan, you might be building your career and as you progress, your salary could change significantly. Updating your plan could help you assess how to use your income to enjoy life – should you increase your disposable income now or put more away for retirement?

There isn’t a one-size-fits-all answer, so reviewing your financial plan could help you assess how to use your wealth in a way that continues to reflect your goals.

There are other reasons your financial circumstances may change too. Perhaps you receive an inheritance, start financially supporting elderly family members, or decide to reduce your working hours.

Cashflow modelling is a tool you can use as part of your financial plan to help you visualise your wealth. It could show you how your assets will change over time.

Cashflow modelling may be useful when you want to understand the effect your decisions will have. For example, you might model how increasing pension contributions could alter your retirement income, or how gifting assets to your children might affect your financial security later in life.

The results of a cashflow model are based on assumptions, such as expected investment returns or inflation, so they cannot be guaranteed. However, regularly updating the information you input into a cashflow model, from your income to the value of assets, could improve the outcomes.

Regular reviews could put your concerns about the future at ease

Worrying about the future is a common reason for being unable to enjoy the present or even look forward to long-term plans. Knowing that you’re being proactive in securing the future you want could ease some of these concerns.

A financial plan could address fears like whether you’re saving enough to retire. Reviews could also put your mind at ease about factors that are outside of your control.

For example, you might worry about what would happen if you need care later in life, which could affect life satisfaction today. According to a report in FTAdviser, 59% of people worry about developing Alzheimer’s because of the pressure it would place on their family, and 41% are concerned about the cost of care.

If this is something you’re worried about, your financial reviews could provide a time to talk about your concerns and adjust your plan to put your mind at ease. For instance, you might decide to put money aside to act as a care fund or name a Lasting Power of Attorney so someone you trust could handle your affairs on your behalf.

We’re here to help you create and review your financial plan

As your financial planner, we’re here to work with you to create and then regularly review your financial plan to help ensure it continues to support your short- and long-term goals. Please contact us if you’d like to arrange a meeting.

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

The Financial Conduct Authority does not regulate cashflow planning.

How “lifestyle financial planning” could help you reach your goals

Effectively managing your finances to get the most out of your assets often means going beyond paying into a pension regularly or selecting a fund to invest through. That’s why lifestyle financial planning could help you better align your finances with the life you want to lead now and in the future.

Financial advice alone might help you understand the benefits of investing money and which opportunities may suit your financial risk profile. While this is useful, it doesn’t consider how investing could support your lifestyle goals. Lifestyle financial planning could help you bridge the gap between your finances and aspirations.

Read on to find out more.

A lifestyle financial planning conversation starts with your goals

While you might expect a financial plan to start delving into the numbers straightaway, lifestyle financial planning is as much about your goals as your assets.

So, often conversations will start with what you aspire to in the short and long term. This approach means you can start to understand why you’ve set money goals. While you might have a target for your savings, what you want to do with the money is often what drives you to diligently add to the account every month.

For example, when building a nest egg, you might be:

• Planning to use it to retire early
• Improving your financial security by creating a safety net
• Dreaming about a once-in-a-lifetime cruise you want to take
• Putting money aside to help your children or grandchildren get on the property ladder.

Not only could your goals give your financial plan a direction, but it may provide useful motivation too.

Putting money aside for a retirement that is still a decade away might feel tedious, especially if there are experiences you’d like now. Yet, if you’re looking forward to a retirement that allows you to travel more or indulge in hobbies, you might be less likely to cut your contributions.

Having a clear idea about what you’re working towards may mean you find it easier to make sacrifices now. Yet, according to an Aegon report, just 1 in 4 people have a concrete version of the things and experiences their future self might want.

So, as part of creating a lifestyle financial plan, you might want to dedicate some time to thinking about what your goals are.

In addition to goals, you may also want to consider what you’re worried about. For example, when you consider your future, you might be concerned about how:

• To pay for care costs if needed
• Inflation might affect your retirement income
• Your partner would cope financially if you passed away first
• To pass on your wealth tax-efficiently during your lifetime or when you pass away.

Speaking about your worries as part of your financial plan might help you identify ways to put your mind at ease. For instance, if you’re worried about how the cost of care could affect your wealth and loved ones, you may decide to set money aside to cover a potential bill.

Your lifestyle goals are at the centre of your financial plan

Once your priorities are set out, it’s time to start thinking about the numbers – are your goals realistic and what steps might you need to take to reach them?

Starting with your goals means you can focus on how to use your wealth to live the life you want rather than simply looking at how to grow your assets.

Take retirement, for example. You might calculate that if you work until you’re 65, you can use your pension to create an income of £45,000 a year. But, if retiring early is what you really want, and you can retire at 55 with a lower, but still comfortable income, you might decide that building more pension wealth isn’t the right option for you.

Lifestyle financial planning could help put your wealth into perspective and allow you to see how it might be used to turn aspirations into reality.

Regular reviews could help ensure your lifestyle financial plan continues to align with your goals

During your lifetime, you’re likely to encounter obstacles, be presented with opportunities, or simply change your mind.

Your lifestyle financial plan isn’t static; it can evolve to suit your needs. Regular meetings are a vital part of ensuring your finances continue to reflect both your circumstances and aspirations.

For instance, seeing your grandchildren struggle to get on the property ladder might mean you’re keen to pass on wealth during your lifetime. If you’d previously planned to pass on wealth through an inheritance, you may benefit from reviewing how gifting now could affect your wealth now and in the long term.

Knowing that you have someone to discuss your changing wishes with could give you the confidence to pursue new goals.

In the above example, calculating if you’d still have a financially comfortable retirement after providing grandchildren with a property deposit could offer you peace of mind.

Contact us to create your lifestyle financial plan

If you want to create a financial plan that considers the lifestyle you want to achieve, please contact us. We’ll help you understand the steps you may be able to take to turn your dreams into a reality.

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

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

How understanding behavioural finance could improve your decisions

The study of how psychology affects financial behaviours is fascinating. Understanding the basics could improve your relationship with money and how it influences your financial decisions.

Behavioural finance looks at how psychological influences and biases affect the behaviour of investors. It aims to understand why people make certain financial choices and the effect it could have on returns.

The study argues that investors don’t always behave rationally or have self-control. Instead, your mental state and biases play a role in your decision-making.

As well as the effect it has on an individual’s wealth, behavioural finance notes that it could explain market anomalies, such as a sharp rise or fall in the value of a particular stock or even an index.

For example, one behavioural financial concept is the “emotional gap”.

The emotional gap refers to decisions based on extreme emotions. You might read a headline about how a company’s value is going to “plummet” in the newspaper. If you hold stocks with that company, it’s normal to fear or worry about what that could mean for your finances. These emotions might prompt you to sell the stock to avoid the perceived potential losses, even if that decision doesn’t align with your long-term financial plan.

If a large group of people read the same headline and also experienced fear, it could lead to the price of that company’s stock falling, even if its intrinsic value hasn’t changed.

So, how could improving your understanding of behavioural finance help you?

Awareness of behavioural finance may help you keep your emotions in check

It’s normal for your experiences to affect your emotions and decisions. Yet, when you’re investing, it could lead to you making decisions that don’t align with your goals and potentially harm your long-term plans.

Deciding to withdraw investments because you’re worried the value will fall might lead to lost returns when you look at the bigger picture.

It’s not just negative emotions that could influence your investment decisions either. You might also feel excited about an investment opportunity after you’ve read about it in the newspaper, so you proceed without fully assessing the risks or if it’s right for you.

According to an FTAdviser report, 61% of investors who take financial advice worry about short-term market movements. A similar proportion also regularly made decisions or proposals based on these concerns that “surprised” their adviser.

Being aware of financial bias could mean you’re able to keep your emotions in check.

Recognising bias could put you in a better position to evaluate information

Emotions are an important part of behavioural finance, and so is understanding how you evaluate information.

For example, loss aversion is a type of bias where your view is anchored to a particular piece of data. You might hold on to this information, even if it becomes irrelevant or separate data offers a different view.

Let’s say you first see a stock listed for £50. You might become fixated on this price regardless of other factors that may affect its value when you’re deciding how to manage the investment.

Once again, these types of bias could lead to decisions that aren’t right for you.

Understanding investor behaviour could help you feel more confident about market movements

As an investor, it can be challenging to keep your nerves in check when the market is experiencing volatility. Understanding what might be driving this could help to put your mind at ease.

The market moving up and down is part of investing. Numerous factors affect the value of the market and short-term movements are normal. Yet, when you see values fall, it can still be nerve-wracking. It can make it tempting to try and time the market to minimise losses.

However, as investors, and as a result the market, can act irrationally, timing the market consistently is impossible. Rather than reducing potential losses, it could mean you miss out on returns overall. Recognising this may help you feel more confident during periods of volatility so you’re more likely to stick to your long-term investment strategy.

Historical data shows that, despite short-term movements, the long-term trend of markets is an upward one. Even after periods of recession or downturns, the market has recovered when you look at returns over years rather than days or months.

It’s important to keep in mind that investment returns cannot be guaranteed and there is a risk. However, for most investors, taking a long-term approach makes financial sense.

Working with a financial planner could reduce the effect of emotions and bias

Recognising when your emotions or biases are influencing your financial decisions can be difficult. Working with a financial planner means you have someone to turn to when creating your financial plan if you’re thinking about making changes. With the benefit of a different perspective, you can identify when you might be responding to emotions or bias in a way that might harm your long-term goals.

If you’d like to talk to us about your financial plan, please contact us.

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

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

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

Inheritance Tax: 5 shrewd strategies for reducing a potential bill

If you take a proactive approach to managing your wealth, you could reduce how much Inheritance Tax (IHT) your estate may be liable for when you pass away.

Last month, you read about what IHT is and when estates become liable to pay it. Now, read on to discover some of the shrewd strategies you could use to reduce a potential IHT bill.

Around 1 in 22 estates are liable for Inheritance Tax

The latest HMRC figures show that around 1 in 22 estates are liable for IHT. In fact, in 2021/22, 4.39% of deaths resulted in an IHT charge. However, frozen IHT thresholds mean the portion of estates liable for IHT is slowly rising.

While only a small proportion of estates face an IHT bill, the standard IHT rate of 40% means it can lead to a sizeable amount going to HMRC rather than your beneficiaries. Indeed, according to the Office for Budget Responsibility, HMRC collected £7.1 billion through IHT in 2022/23. The organisation expects the figure to reach £9.7 billion in 2028/29.

So, if your estate could exceed the nil-rate band, which is £325,000 in 2024/25, you might want to consider these steps to reduce a potential IHT bill.

1. Write or review your will

A will is one of the key steps you can take to ensure your assets are distributed according to your wishes. Your will can also be used to manage IHT liability by distributing your assets in a way that allows you to use allowances.

For example, the residence nil-rate band could increase how much you’re able to pass on tax-efficiently if you pass on your main home to children or grandchildren. In 2024/25, the residence nil-rate band is £175,000, so it could significantly boost the amount you’re able to pass on before your estate needs to pay IHT.

Yet, according to a FTAdviser report, a third of adults aged 55 or over have not made a will.

If you already have a will in place, reviewing it may be worthwhile. You might find opportunities to reduce your estate’s IHT liability or that your wishes have changed.

It’s often a good idea to check your will every five years or following major life events, such as getting married, welcoming children, or relationships breaking down.

2. Gift assets during your lifetime

Giving away some of your wealth during your lifetime might bring the value of your estate under IHT thresholds or reduce the overall bill. It could also be useful for your loved ones, who may benefit more from financial support now compared to later in life.

Some gifts may be considered immediately outside of your estate for IHT purposes, including:

• Up to £3,000 in 2024/25 known as the “annual exemption”
• Small gifts of up to £250 to each person, so long as they have not benefited from another allowance
• Wedding gifts of up to £1,000, rising to £2,500 for your grandchildren or great-grandchildren and £5,000 for your child
• Regular gifts that you make from your income that do not affect your ability to meet your usual living costs. For example, you might pay rent for your child or contribute to the savings account of your grandchild. It’s important these gifts are regular and it’s often a good idea to keep a record of them.

However, other gifts may be known as a “potentially exempt transfer” (PET) and could be included in IHT calculations for up to seven years after they were received.

You might also need to consider how gifting could affect your long-term financial security.

If you want to gift assets to your loved ones during your lifetime, making it part of your financial plan could offer peace of mind. We may be able to help you understand how gifting will affect your wealth in the future and how to do so tax-efficiently.

3. Use your pension to pass on wealth

For IHT purposes, your pension usually sits outside your estate. As a result, it might provide a valuable way to pass on assets. According to a PensionBee survey, almost two-thirds of Brits were unaware of this, so your pension might be an option you’ve overlooked when considering IHT.

Choosing to use other assets to fund your retirement could help you pass on more to your loved ones through your pension. Considering your beneficiaries when you’re creating a retirement plan could help you decide which option is right for your goals.

While pensions aren’t normally liable for IHT, your beneficiary may need to consider Income Tax when accessing funds held in an inherited pension in some circumstances.

Your pension isn’t typically covered by your will. Instead, you can complete an expression of wish form to inform your pension provider who you’d like to receive it when you pass away.

4. Place assets in a trust

Provided certain conditions are met, assets that are placed in trust no longer belong to you. So, they normally won’t be included when calculating an IHT bill.

A trust is a legal arrangement that holds assets for the benefit of another person. As the benefactor, you can set out who will benefit from the assets and under what circumstances, which can give you greater control when compared to gifting or leaving an inheritance. In some cases, you may still benefit from the assets held in a trust, such as receiving the dividends from investments.

You can also name a trustee, who would be responsible for managing the trust in line with your wishes and for the benefit of the beneficiaries.

There are several different types of trusts and it’s important it’s set up correctly to ensure it meets your needs, including reducing a potential IHT bill if that’s one of your priorities. Taking legal advice might be valuable when creating a trust.

In addition, it may be difficult, and sometimes impossible, to reverse decisions related to a trust. As a result, you should think carefully about which assets you place in a trust and how your decisions align with your wider financial plan. Please arrange a meeting with us if you’d like to talk about putting some of your wealth into a trust.

5. Take out life insurance 

Life insurance isn’t a way to reduce your estate’s IHT liability. However, it could provide a useful way for your family to pay the bill.

Whole of life insurance cover would pay out a lump sum to your beneficiaries when you pass away. They could then use this payout to cover the IHT bill, so they wouldn’t need to consider how to use their inheritance to pay the cost. This option might ease the stress your loved ones are dealing with at a time when they’re grieving or handling your affairs.

It’s important to note that you’ll need to pay regular premiums to maintain life insurance coverage. The cost of life insurance can vary depending on a range of factors, from the size of the eventual payout to your health.

You might want to consider using a trust to hold the life insurance. Otherwise, the payout could be added to the value of your estate and increase the IHT that is due.

Legal advice may be useful when setting up a trust, which can be complex.

Contact us to talk about your Inheritance Tax strategy 

There might be other ways you could reduce a potential IHT bill too. If you have any questions about IHT or your wider financial plan, please contact us.

Next month, read our blog to discover how IHT in the UK compares to other countries and proposals to reform the tax.

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

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, trusts or Inheritance Tax planning.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

What the 2024 general election could mean for your finances

2024 has been called “the year of elections” with an estimated 2 billion people around the world heading to the polls.

Voters in the UK will have their say on 4 July. Now that each of the main parties has published their manifestos, here’s what the 2024 general election could mean for your finances.

Conservatives – more National Insurance cuts and the “triple lock plus”

Having already reduced National Insurance (NI) rates twice in 2024, the Conservatives have made further cuts to NI one of their flagship policies at this election.

They propose to:

• Take another 2p off employee NI by April 2027, reducing the rate from 12% at the start of 2024 to 6%. They say this represents a total tax cut of £1,350 for the average worker on £35,000.
• Abolish the main rate of Class 4 NI contributions for self-employed workers by the end of the next parliament. Crucially, this will not affect any entitlement to the State Pension. The Conservatives say this measure means that 93% of self-employed people – 4 million of them – will no longer pay self-employed NI.

The party also says it will keep Income Tax thresholds frozen until 2028 and will not raise the rate of VAT or Capital Gains Tax (CGT). They have committed to maintaining Private Residence Relief so that your home is protected from CGT and introducing a two-year temporary CGT relief for landlords who sell to their existing tenants.

Despite rumours that the Conservatives may reform Inheritance Tax (IHT), there is no mention of IHT in their manifesto.

In 2010, the coalition government introduced the State Pension triple lock, which guarantees a rise in the State Pension each year. The Conservatives say that the triple lock has seen the basic State Pension rise by £3,700 since 2010.

To enhance this protection for pensioners, the “triple lock plus” will ensure the Personal Allowance for pensioners also rises by the highest of prices, earnings, or 2.5% each year. This guarantees that the new State Pension will always be below the threshold at which Income Tax becomes payable.

Additionally, a new Pensions Tax Guarantee will pledge:

• No new taxes on pensions
• To maintain tax relief on pension contributions at a saver’s marginal rate
• To not extend NI to employer pension contributions.

In the Spring Budget, chancellor Jeremy Hunt announced an increase in the amount you can earn before you start to lose Child Benefit. Previously, it was taken away entirely when one parent earned more than £60,000. This has already been increased to £80,000.

The Conservatives are also pledging to move to a “household” rather than an individual basis for Child Benefit, by setting the combined household income at which a family will start losing Child Benefit at £120,000.

They then plan to gradually remove it until household income reaches £160,000, above which families will no longer receive Child Benefit. They say this will have a positive impact on more than 700,000 households, each gaining an average of £1,480 a year.

The party has committed to delivering 1.6 million homes in England in the next parliament and has already announced changes to the non-dom rules.

Finally, the Conservatives say that they will go ahead with their proposal for an £86,000 cap on social care costs for people who are older or disabled in England. It means no one would pay more than that for personal care over their lifetime. The party plans to introduce this in October 2025.

Labour – No plans for tax rises, but changes to private school fees and non-dom rules

While they have made no commitments to reduce personal taxation, Labour says that, if they win on 4 July, they “will ensure taxes on working people are kept as low as possible”.

They have pledged not to increase NI, VAT, or the basic, higher, or additional rates of Income Tax.

Instead, the party plans to address what it calls “unfairness” in the tax system by:

• Abolishing non-dom status and replacing it with a modern scheme for people genuinely in the country for a short period.
• Ending the use of offshore trusts to avoid IHT.
• Ending private schools’ VAT exemption and business rate relief. They plan to use this additional tax revenue to train more teachers, citing an estimated shortage of 6,000.

Interestingly, Labour has also confirmed that, in a change from their previous stance, they have no plans to reintroduce the pension Lifetime Allowance (LTA).

The LTA capped the amount you could hold in your pensions without paying an additional tax charge when you accessed the funds. Chancellor Jeremy Hunt removed the additional LTA tax charge in April 2023, before abolishing the LTA altogether in April 2024.

Labour has decided not to reintroduce the charge to provide certainty for savers and because they say it would be too complex to bring back the former rules.

With regard to CGT and IHT, the Labour manifesto contains no plans to change the rules – although the party has ruled out applying CGT to primary residences.

When it comes to social care, the manifesto does not provide any detail on how much an individual should pay for personal care over their lifetime. However, Labour have confirmed they “will not disrupt” an existing plan to implement an £86,000 care cap from October 2025.

To help first-time buyers, Labour will also introduce a permanent, mortgage guarantee scheme, helping prospective homeowners who struggle to save for a large deposit. They say this measure would support 80,000 young people to get on the housing ladder over the next five years.

Finally, in a nod to the Truss administration’s “mini-Budget”, Labour says that they will take a strategic approach that gives certainty and allows long-term planning. They have committed to one major fiscal event a year, giving families and businesses due warning of tax and spending policies.

Liberal Democrats – raising the Personal Allowance and reforming Capital Gains Tax

While the two leading parties have published no plans for changes to the Personal Allowance, the Liberal Democrats have made increasing the allowance their priority, when the public finances allow.

They say this would benefit “the vast majority of families” and take more low-paid workers out of paying Income Tax altogether.

Making the tax system fairer is another key Liberal Democrat pledge, and they propose to do this by:

• Reversing tax cuts for the big banks, restoring Bank Surcharge and Bank Levy revenues to 2016 levels in real terms.
• Increasing the Digital Services Tax on social media firms and other tech giants from 2% to 6%.
• Introducing a 4% tax on the share buyback schemes of FTSE 100 listed companies, to incentivise productive investment, job creation, and economic growth.

The party also says it would “fairly reform” CGT to close loopholes exploited by the super-wealthy – although they have published no specific details of what changes they would make.

In addition, the Liberal Democrats plan to remove the two-child limit for Universal Credit and Child Tax Credit, as well as the benefit cap – the limit on the total amount of benefits one household can claim.

Reform UK – tax cuts for individuals and business

With Nigel Farage having called himself the real “leader of the opposition” in recent weeks, Reform UK has surged in the polls.

If they were to win power on 4 July, the party has pledged to:

• Increase the Income Tax Personal Allowance to £20,000. This would remove 7 million people from paying Income Tax and save every worker almost £1,500 a year.
• Increase the threshold for paying higher-rate Income Tax to £70,000.
• Reduce fuel duty by 20p a litre for both residential and business users.
• Scrap VAT on energy bills.

Reform UK also wants to increase the threshold at which IHT is paid, so it only affects estates worth more than £2 million. They also propose to significantly increase the Stamp Duty threshold when buying a residential property in England and Northern Ireland, from £250,000 to £750,000.

In addition to pledges concerning personal tax, the Reform UK “contract” also includes several policies to support British businesses:

• Lift the minimum Corporation Tax profit threshold to £100,000.
• Reduce the main Corporation Tax rate from 25% to 20%, then to 15% from year 3.
• Abolish IR35 rules.
• Lift the VAT threshold to £150,000.
• Abolish business rates for high street SMEs and offset this with an Online Delivery Tax at 4% for large, multinational enterprises.

Reform UK also wants to support marriage through the tax system by introducing a UK 25% transferable Marriage Tax Allowance when finances allow. This would mean no tax on the first £25,000 of income for either spouse.

Green Party – a new wealth tax and changes to National Insurance for higher earners

Unlike other leading parties who are seeking to levy no more taxes, the Green Party manifesto proposes to raise up to £151 billion a year in new taxes by 2029 – equal to around 4.5% of GDP.

One of the main components of this is a new tax on the wealthy, which would be levied at 1% a year on the assets of people with more than £10 million, and 2% on those with more than £1 billion. The party say this new tax would raise about £15 billion.

The Greens also propose to change NI rates and to charge the basic 8% rate on income above the Upper Earnings Limit (the rate is currently 2%). The party says that, if you earn £55,000, the additional amount you pay under their proposals would be less than £6 a week. If you earn £65,000, it would be about £17 a week.

Other manifesto promises include:

• A renewed pledge to scrap university tuition fees and bring back maintenance grants.
• Nationalising the railway, water, and big five energy companies.
• Making personal care free (support with daily tasks like washing, dressing and medication), similar to the system already operating in Scotland.

Finally, the Greens have also pledged to reform CGT to align the rates paid by taxpayers on income and taxable gains. They say this would affect less than 2% of all income taxpayers.

Other regional parties

Scottish National Party – seeking greater tax powers and fairer maternity pay

Under the terms of devolution, the Scottish parliament has the power to make changes to a range of taxes including setting the bands and rates of Scottish Income Tax.

In their manifesto, the Scottish National Party (SNP) say that they will demand the full devolution of tax powers to enable them to create a fairer system that protects public services and invests in the local economy.

For example, they are seeking the devolution of NI so they could ensure rates and thresholds fit the progressive Scottish Income Tax regime.

Like the Liberal Democrats, the SNP say they would also abolish the two-child limit for Universal Credit and Child Tax Credit.

Furthermore, the party wants to see maternity pay increase to 100% of average weekly earnings for the first 12 weeks of leave for new mothers. Thereafter it would be set at either 90%, or the statutory minimum allowance (currently £184 a week) for 40 weeks, whichever is lower.

Plaid Cymru – seeking a fairer settlement for Wales

Like the SNP, Plaid Cymru has also called for greater devolved powers. The party has backed devolution since the start and ultimately wants the country to run all its affairs, and to correct what it sees as “unfair” funding from Westminster.

The party wants to see a change in the welfare system, which is controlled at Westminster, with an increase in Child Benefit payments of £20 a week. They also want an extension of the energy “windfall tax” to help redress economic unfairness.

In line with the Green Party, they would also equalise CGT with Income Tax, raising between £12 billion and £15 billion.

Democratic Unionist Party  – a new funding model and protecting family incomes

As with other regional parties, the Democratic Unionist Party (DUP) says it will continue to lead the charge for a new “needs-based” funding model for the region to enable it to provide quality frontline services.

The DUP has also committed to “protect family incomes” and to continue to campaign with whichever party forms the next government to “fully restore Northern Ireland’s place within the UK […] including removing the application of EU law in our country and the internal Irish Sea border it creates”.

Sinn Féin – more devolved powers and constitutional change

While Stormont is responsible for a range of issues, which mainly cover everyday life within Northern Ireland, including agriculture, education, the economy, finance, health and infrastructure, it does not have the power to set its own Income Tax levels – and this is something Sinn Féin would like to change.

Constitutional change is also a key part of the manifesto, although the party has published no timescale for a border poll as the timing remains in the hands of the Westminster government.

Get in touch

If you have any questions about how the general election could affect your finances, please get in touch.

The content of this article is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

Guide: How to find purpose and get the most out of your retirement

Retirement might be a chapter of your life you’ve been looking forward to for years. Perhaps you’ve been daydreaming about how you’ll make use of the extra time, or you’ve already planned an adventure to kickstart your life after work. 

Yet, for many people, retirement can be a difficult adjustment. 

While work often means less freedom, it might provide you with a sense of purpose and a structure to your days and weeks. Suddenly stepping away from a routine you may have followed for decades can be jarring. So, if you feel adrift when you retire, you’re not alone. 

Finding a new purpose you’re passionate about could be imperative to your happiness and wellbeing in retirement.

This practical guide offers some ways you could embrace a new lifestyle that balances freedom and purpose, including:

• Discovering your passions
• Finding a daily routine that works for you
• Prioritising your physical and mental health 
• Making time to connect with people
• Playing a role in your community.

Download your copy of ‘How to find purpose and get the most out of your retirement’ to read practical tips and key areas you might want to consider when you retire.  

If you have any questions about how to get more out of your retirement, please contact us. 

Uncertainty drives record numbers to take out income protection. Here’s what you need to know

Figures from the Association of British Insurers (ABI) suggest a record number of families are taking out income protection to create a safety net. Read on to find out how income protection works and whether it could be valuable for you.

Income protection would pay out a regular income if you were unable to work due to an accident or illness. As a result, it could provide you with a way to keep up with your financial commitments if your income unexpectedly stops. Income protection will normally continue to pay an income until you’re able to return to work, retire, or the term ends.

Usually, the sum provided through income protection is a proportion of your regular salary, such as 60%. You’ll need to pay a monthly premium to maintain the cover, the cost of which will depend on a range of factors, such as your age and lifestyle. While you might not want to increase your expenses, income protection could be cheaper than you think, and it may substantially improve your financial resilience.

Economic uncertainty could be driving more people to consider their financial resilience

According to the ABI statistics, a record 247,000 people took out income protection in 2023. The figure is almost four times higher than it was just 10 years ago. Critical illness insurance, which would pay out a lump sum if you were diagnosed with a covered illness, saw a similar rise between 2013 and 2023.

Yvonne Braun, director of policy, long-term savings, health and protection at the ABI, said: “Financial resilience – the ability to withstand a financial shock – is a hugely important issue. It’s encouraging to see that so many people recognise that income protection and critical illness insurance are an important part of financial planning and play a crucial role in providing a financial safety net.”

There are many reasons why you might consider how to improve your financial safety net.

A change in your circumstances can often be a trigger. For example, if you’ve purchased a property or have welcomed children, you may reevaluate your finances and take steps to improve your ability to weather a financial shock.

Wider economic circumstances are also likely to have played a role in the rising number of households choosing to take out income protection.

Over the last few years, the Covid-19 pandemic and subsequent period of high inflation may have led to more families facing unexpected changes to their budget. Indeed, a BBC report suggests 7 million adults felt “heavily burdened” by their finances at the start of 2024.

With many families having to absorb higher essential costs, from energy bills to grocery shopping, it’s perhaps not surprising that more are looking for ways to ensure they can overcome losing their income.

Income protection could safeguard your short- and long-term finances

If taking time off work might place pressure on your finances, it may be worth considering if income protection could be right for you.

It’s not just your income you may want to weigh up either. For example, your partner may be the main income earner in your household while you are responsible for the majority of childcare. In this scenario, you might want to consider how your household’s expenses would change if you were ill – your childcare bill could rise significantly or your partner might be forced to take time off work while you recover.

Income protection could complement your wider financial safety net

While you may already have measures in place to provide a short-term income if you are unable to work, income protection could still be useful.

You may have an emergency fund you can draw on, but how long would it last, and what would happen if you were unable to work for longer than expected? Similarly, your employer might provide enhanced sick pay, but this is often for a defined period, such as six months.

Assessing your financial resilience could help you see how income protection might complement your wider financial plan.

A financial shock could affect your long-term finances too

When you experience a financial shock, your focus is likely to be on the immediate impact it has on your budget. Yet, it could have long-term implications too.

If you’re unable to work you might stop paying into your pension, or cut back how much you’re adding to a savings account. Depending on your circumstances, income protection could allow you to stick to your wider financial plan. It may help you to maintain non-essential outgoings that might be crucial for your long-term goals.

Get in touch to discuss your financial resilience

Taking steps to improve your financial resilience could help you feel more confident about your future and mean you’re in a better position to overcome unexpected shocks. Please contact us to talk about your financial plan and whether income protection or other measures could be right for you.

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

Note that income protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

3 practical ways you could reduce your tax bill in retirement

The number of retirees who could face an Income Tax bill is expected to rise. If your total income could exceed tax thresholds, there might be some steps you can take to reduce your tax bill.

The Personal Allowance is the amount of income you can receive before you usually need to pay Income Tax on the portion that exceeds the threshold. For 2024/25, the Personal Allowance is £12,570.

Crucially, the allowance hasn’t increased since the 2022/23 tax year and it’s currently frozen until April 2028. In contrast, your outgoings and income are likely to rise in line with inflation. So, even though your income might not increase in real terms, you could find a greater proportion of it is liable for Income Tax.

For example, the State Pension has benefited from large increases in the last two tax years under the triple lock. In April 2023, it increased by 10.1%, and then by a further 8.5% in April 2024.

As a result, those who are eligible for the full new State Pension receive £11,502 in 2024/25. So, you only need to receive a small income from other sources before you might need to start considering Income Tax in retirement.

Luckily, there could be steps you can take to reduce your tax bill, including these three.

1. Access the tax-free portion of your pension in instalments

You might know that you can access up to 25% (up to a maximum of £268,275) of your pension as a tax-free lump sum. But did you know you can also spread out this tax-free portion of your pension?

If you choose this option, each time you withdraw money from your pension, 25% of it will usually be tax-free. You can take different amounts each time to suit your needs if you’d like.

As well as potentially making your income more tax-efficient, this method could allow your pension to grow further. The money that remains in your pension will typically be invested, so it has an opportunity to deliver returns.

Of course, investment returns cannot be guaranteed and it’s important that your investments match your circumstances. When you retire, your risk profile may change, so reviewing how your pension is invested could be useful. If you have any questions about investing in retirement, please contact us.

2. Know which allowances could reduce your tax bill

There are tax-free allowances you may be able to use to reduce your Income Tax bill.

The interest earned on savings held outside of a tax-efficient wrapper may be added to your total income and could become liable for Income Tax as a result. However, many people benefit from a Personal Savings Allowance (PSA). So, the interest your savings earn might be a practical way to boost your regular income.

Your PSA depends on the rate of Income Tax you pay. In 2024/25:

• Basic-rate taxpayers have a PSA of £1,000
• Higher-rate taxpayers have a PSA of £500
• Additional-rate taxpayers have a PSA of £0.

In addition, if you’re married or in a civil partnership, you may also be able to use the Marriage Allowance to increase your Personal Allowance.

If your partner doesn’t use their full Personal Allowance and you pay Income Tax at the basic rate, they may be able to transfer £1,260 of their Personal Allowance to you. It could reduce your overall tax bill by £252 in 2024/25.

We could help you understand which allowances might be right for you.

3. Supplement your pension by making withdrawals from your ISA

While a pension is often the main source of your income in retirement, you can supplement it with other assets.

During your working life, you might have built up savings or investments in an ISA. Now, you could use it to supplement your pension income. As an ISA is a tax-efficient way to save or invest, it could prove a useful way to boost your income without increasing your tax bill.

There might be other assets you can use to support you in retirement too, such as investments held outside of an ISA or property. However, you should be aware they might increase your tax liability. For instance, if you sold investments that weren’t held in an ISA, you might have to pay Capital Gains Tax (CGT) on the profits if you exceed certain thresholds.

We can help you understand how you might use other assets to fund your retirement goals.

Contact us to talk about your tax bill in retirement

Depending on your circumstances there could be other ways to reduce your Income Tax bill and you might be liable for other types of tax in retirement too, such as CGT. As part of creating a retirement plan, we can work with you to understand how to mitigate or reduce your tax liability. Please contact us to arrange a meeting.

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

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Making your present part of your financial plan could enhance your life

As financial planners, we often talk about the importance of working towards long-term goals and security. As part of your financial plan, you might be putting money into a pension for retirement or building an emergency fund to safeguard your finances if you experience a shock.

Considering your long-term ambitions is often important for turning them into a reality. Yet, enjoying the present is just as essential. While it can be difficult to balance your lifestyle needs now with those of your future, it may help you get more out of life.

Overlooking the present could mean you miss out on experiences

Planning for the future is important, but you don’t know what’s around the corner. If you take today for granted or put off experiences until later in life you could end up missing out.

You might cut back now and pool all your money into a pension with the plan to travel extensively once you give up work. But if you suffered from ill health before you reached that point, you might not have the opportunity to visit bucket-list destinations or have experiences you’ve been looking forward to for years.

The Great British Retirement Survey 2023 revealed that almost a fifth of people aged between 56 and 65 have faced a major life event that has changed their retirement plans. The most common reason was ill health.

Similarly, a higher-paying job might offer the chance to save more for retirement. But if you’re family-oriented and want to strike a better work-life balance, a promotion that will lead to longer working hours or more responsibility might not be right for you when you weigh up the effect it could have on your family life.

For many people, balancing short- and long-term financial needs is important for living a fulfilling life.

Doing things now and so giving yourself fond memories to look back on could improve your sense of wellbeing. This could be something small like enjoying a nice meal out with friends, or a grander expense, such as planning a trip to hike Machu Picchu in Peru if you love to travel.

Not only could embracing today in your financial plan make you happier now, but it could motivate you to stay on track when you’re working towards long-term goals. Perhaps a holiday that allows you to relax and focus on the things you love will mean you’re more inclined to top up your pension so you can retire and enjoy a slower pace of life sooner.

An effective financial plan can help you balance the present and future

It can be difficult to balance your short- and long-term needs. One of the key challenges is understanding how much you need for your future, as well as considering the effect unexpected events might have. That’s why working with a financial planner could prove invaluable.

Cashflow forecasting is one tool we could use to help you assess how to strike the right balance. It offers a way to visualise how your wealth might change based on the decisions you make.

Let’s say you want to increase your disposable income, so you have the freedom to spend money on days out doing things you enjoy, such as going to the theatre, eating out, or visiting historical locations. To do this, you may need to reduce the amount you are allocating elsewhere, such as your monthly savings or investments. Cashflow forecasting could let you see the impact this decision would have on your future finances.

Armed with this information, you can start to understand how to balance your expenses now with your future goals. You might find your long-term finances would still provide the security you need even if you spent more now, so you feel comfortable adjusting your expenses. On the other hand, you may find a compromise if it could affect your long-term goals.

Having a clear financial plan could mean you’re able to enjoy the present more too.

Financial concerns can take the joy out of experiences you might otherwise have been looking forward to. So, knowing that you’ve taken steps to create long-term financial security may help you live in the moment and take in what life has to offer.

Get in touch to talk about a financial plan that balances your short- and long-term needs

If you’d like to create a financial plan that balances your lifestyle needs now with long-term goals, please get in touch. We’ll work with you to understand what’s important to you and how you might use your assets to create financial security that lets you enjoy your life now and in the future.

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

The Financial Conduct Authority does not regulate cashflow planning.