news

The £12.3 billion cost of delaying estate planning

Affluent families who delay estate planning could miss out on chances to reduce a potential Inheritance Tax (IHT) bill and pass more on to their families. Find out if you could benefit from considering IHT and how you might pass on assets tax-efficiently.

According to a report covered by Today’s Wills and Probate (5 June 2026), delays in estate planning could cost UK families £12.3 billion when changes mean pensions will form part of your estate next year.

Under the current rules, most pension wealth sits outside your estate for IHT purposes. This made pensions a useful way to pass on wealth. However, for many pension holders, that will change on 6 April 2027, as most pensions will be included in IHT calculations.

However, the new pension rules don’t account for all potential IHT savings. Indeed, £7.9 billion of the total sum is attributed to delaying estate planning.

The report states that a person beginning estate planning at 50 and making use of multiple strategies, such as exemptions, reliefs, and business relief investments, could, on average, pass on £397,000 more to loved ones than those who delayed estate planning until they were 70.

1 in 5 homeowners could be overlooking a potential Inheritance Tax bill

There are many reasons why families delay estate planning

It might seem like something you don’t need to worry about until later in life, or you may mistakenly believe your estate will not be liable for IHT when you pass away.

Yet, you could be closer to the IHT threshold than you think. According to an article in MoneyAge (16 June 2026), a study of homeowners aged 45 and over found that 1 in 5 people with estates worth more than £1 million describe themselves as “just getting by”.

In 2026/27, the nil-rate band is £325,000. If the total value of your estate is below this threshold, no IHT will be due. In many cases, if you leave your main home to a direct descendant, you can also use the residence nil-rate band, which is £175,000 in 2026/27.

You may pass unused allowances to your spouse or civil partner. As a result, you might be able to pass on up to £1 million before IHT is applied to your estate.

That might seem like a significant amount. However, your estate covers your assets, such as your home, investments, and personal possessions, as well as your pension from 6 April 2027. So, it is possible to unexpectedly leave your loved ones with an IHT bill.

Estate planning isn’t just about IHT either. It includes setting out how you want to pass on your assets so they go to your intended beneficiaries, as well as planning for your security later in life. So, even if your estate won’t be liable for IHT, you could still benefit from an estate plan.

4 gifting allowances that could reduce your estate’s Inheritance Tax bill

Gifting assets during your lifetime could reduce a potential IHT bill. However, it’s not as straightforward as simply transferring assets to your loved ones.

First, it’s important to be aware of how a gift could affect your long-term financial security. A financial plan could help you assess the potential impact.

Second, not all gifts are immediately excluded from your estate for IHT purposes. Some may be included in your estate and subject to a tapered IHT rate should the value of all your assets exceed IHT thresholds.

Using these four gifting allowances as part of your wider estate plan could provide a tax-efficient way to pass on assets.

1. Annual exemption

The annual exemption allows you to give away up to £3,000 each tax year without the value being added to your estate when calculating IHT. You may gift this sum to one person or split it between several people. You can carry forward any unused annual exemption for one tax year.

2. Small gift allowance

Small gifts valued up to £250 can be given to as many people as you’d like each tax year, so long as you have not used another allowance on the same person.

3. Wedding and civil partnership gifts

Celebrating a wedding or civil partnership also presents an opportunity to gift tax-effectively. You can gift £1,000 to the happy couple, and the gift will immediately fall outside your estate. This allowance rises to £2,500 for your grandchild or great-grandchild and £5,000 for your child.

4. Regular gifts from your income

Regular payments you make to another person can fall outside your estate, so long as:

• There is an established pattern of making these payments
• The payments are made from your regular monthly income
• You can maintain your usual standard of living after making the payments.

This could provide a valuable way to support your family while reducing a potential IHT bill. For example, you might use this allowance to:

• Pay the rent or mortgage for your child
• Contribute to a savings account for your grandchild
• Provide cash to a family member that they can use for living costs.

For this allowance to be applied to your estate when calculating IHT, there needs to be a pattern of making these payments. So, it’s important to keep accurate, clear records of these gifts.

Contact us

If you’d like to understand whether your estate could be liable for IHT when you pass away, and how you might mitigate a potential bill, please get in touch.

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

All information is correct at the time of writing and is subject to change in the future.

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

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.

How a cashflow model could provide clarity about your retirement income

Having a reliable income in retirement could give you the freedom to create a lifestyle you enjoy and achieve those bucket-list goals you’ve dreamed about for years.

In a 2023 survey by Legal & General, 94% of UK adults said their most important retirement dream is to feel financially secure for the rest of their lives.

However, working out what your income might look like many years from now can be complex. As such, you may feel in the dark about how your pensions, savings, and investments might support you in later life.

Indeed, research findings published by IFA Magazine reveal that just one in five people with a defined contribution (DC) pension understand what retirement income they can expect.

This uncertainty could leave you worried about your long-term financial security and unprepared for what lies ahead. That’s where financial advice comes in.

Keep reading to find out how a financial planner can use cashflow modelling to give you a clear picture of your retirement income and help you plan for the future you want.

The challenges of planning a sustainable retirement income

Calculating what your retirement income might be is challenging because you’re often trying to project decades ahead.

What’s more, your income could be affected by various external factors that are unpredictable and out of your control, such as investment returns and inflation.

Longer life expectancies add another layer of complexity. According to the Office for National Statistics’ (ONS) life expectancy calculator, a 45-year-old woman has an average life expectancy of 87 years, and a man of the same age could expect to live to 84.

This means that your retirement funds may need to cover about 30 years or more, depending on when you retire and your longevity. Of course, no one can predict exactly how long they’ll live, which makes it difficult to know how far your wealth will stretch.

These uncertainties could make retirement planning feel overwhelming.

A cashflow model could remove uncertainty and provide peace of mind

A financial planner can use smart software called cashflow modelling to help you plan your retirement income.

This is how it works in simple terms:

• Input data – Your financial planner enters information about your current financial position, such as your income, expenses, assets, and liabilities.
• Layer variables – They can then factor in variables such as investment performance, inflation, and your projected future income.
• Generate a cashflow forecast – The software will create a long-term projection of your finances based on your desired retirement age and life expectancy.

By tweaking the data entered, your financial planner can show you how a range of possible scenarios might affect your income. For example, you might want to see how a dip in the market or retiring earlier could affect your finances.

The power of cashflow modelling is that it removes the guesswork from retirement planning. You can clearly see how a change in your circumstances might affect your income and identify any potential shortfalls. This puts you in a strong position to adapt your strategy so that you stay on track to achieve your goals.

Your financial planner can ensure you get the most out of cashflow modelling

While there are many advantages of using a cashflow model to inform your retirement planning decisions, there are some potential drawbacks to consider too, including:

• It’s only as good as the data that’s input – Incorrect or incomplete information could result in a misleading forecast.
• It needs regular updating to be a useful planning tool – A cashflow model provides projections based on your current finances and assumptions about the future, such as the rate of inflation. This means that your model could quickly become outdated if your circumstances or external factors change.
• It requires oversight by a professional to be used effectively – A cashflow model can support retirement planning, but it can’t replace the expertise and guidance offered by a human professional.
• It could provide a false sense of security – A model can’t guarantee what your retirement income will be. It must be carefully stress-tested by a financial planner to ensure that projections are realistic and don’t appear more definite than they are. This involves exploring “what-if?” scenarios that might affect your retirement income, such as dips in the market and serious illness.

A financial planner can make sure you get the most out of your cashflow model by:

• Tailoring it to your needs and goals
• Regularly reviewing and updating it
• Stress-testing it against different scenarios
• Embedding it in your broader financial plan.

In other words, they’ll make sure your model is a valuable retirement planning tool that helps you make informed decisions with confidence.

Get in touch

If you have any questions about cashflow modelling and how it could help you gain clarity on your retirement income, we’d love to hear from you.

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

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate cashflow modelling.

Investing is a skill: How to build confidence and positive habits

How do you become a better investor? It’s a skill, and like any other skill, it can be improved by forming positive habits and expanding your knowledge.

Yet, many people think successful investors are born with the skills they need. According to an Aviva survey (26 May 2026), 61% of respondents think some people are just “born investors”. While there might be personality traits that support successful investing, no one is born knowing how to invest.

42% of people who took part in the survey said they would like to change how they manage their investments, and the good news is that you can.

Investing skills can be developed through education, practice, and consistency. Even experienced investors benefit from continuous learning.

5 steps that could improve your investing confidence

Step 1: Start by learning the investment basics

It’s never too late to learn the basics of investing. There are plenty of resources available online, and your financial planner could help too.

Understanding why you might want to invest is a good place to start. While cash savings are secure, the interest rate they earn is typically below the rate of inflation. As a result, the spending power of cash assets could fall in real terms.

When you invest, you have the opportunity to achieve above-inflation returns, allowing your assets to grow in real terms. However, unlike savings, you can’t guarantee what investment returns will be generated, and there’s a risk that you’ll lose some or all of your money. The good news is that you can choose investments that align with your risk profile.

As you get to grips with the basics of investing, here are some other questions you might ask your financial planner:

• How is my risk profile created, and how does it affect what investments are suitable?
• What does diversification mean, and is it part of my investment strategy?
• Does that level of investment return mean I am on track to meet my goals?

Learning more about investing could help you feel more confident and take the plunge if a lack of knowledge has been holding you back.

Step 2: Understand the importance of goal setting

It can be easy to think that the most important thing about investing is the returns generated. However, that’s just a number; what you really want to know is whether the returns will support your long-term goal.

So, take some time to think about why you’re investing. Perhaps you want to build a nest egg for retirement or to fund your child’s education. Your goal will affect important factors, such as the investment time frame and what level of risk is appropriate.

Having a clear objective could also help you maintain your focus and mean you’re less likely to stray from your investment strategy.

Step 3: Start by investing small amounts

Many people learn and build confidence by doing something themselves. Consistently investing, whether that’s through a pension or a Stocks and Shares ISA, could help forge positive money habits.

You don’t need to invest a large sum to get used to market movements. Even transferring £20 a month into an investment account could help establish good habits.

Step 4: Learn to trust your investment strategy

One challenging investment skill to learn is patience. Once you’ve invested your money, you might feel like you should be doing something, such as tracking daily market movements or searching for a new opportunity.

Yet, for many investors, investing in line with your strategy and holding assets over a long-term time frame makes financial sense. Mastering the discipline to sit back and trust your strategy can be difficult.

Tuning out the noise could make it easier to build this skill. Limit the time you spend reading newspapers or visiting social media channels that you know are likely to have market updates. Avoiding investment news until it’s time to review your portfolio’s performance could help you avoid making mistakes due to impulsive decisions.

Step 5: Continue asking questions and learning

Finally, don’t be afraid to ask questions, even if you’ve set an investment strategy. Whether you want to understand whether investment returns are on track to meet your goals or why a particular investment is suitable for you, your financial planner can continue to offer guidance.

Get in touch

We’re here to answer your investment questions and could work with you to create an investment strategy that suits your needs. Please contact us to speak to a member of our team.

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

All information is correct at the time of writing and is subject to change in the future.

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.

The psychology of fear in investing: Why mastering it could support long-term success

Investing is often as much about emotions as it is about numbers. One emotion that might affect how you invest at times is fear. Learning how fear influences investment decisions and how to master it could support your long-term success.

Fear could strike investors in multiple ways

There’s more than one form that fear can take when you’re investing. You might experience a fear of:

• Losing money, which could lead to you being overly cautious. You might even avoid investing altogether because of the perceived risk of losing some or all of your money.
• Making the wrong decision. As an investor, you often have multiple options, and this form of fear could lead to decision paralysis because you overthink or feel overwhelmed.
• Missing out. There’s a lot of investment noise, including people proclaiming that one investment or another is a must-invest. For some investors, this might generate a fear of missing out (FOMO) that could lead to impulsive decisions.
• Not being in control. Multiple factors that aren’t in your control will affect the performance of your investments, and this can be scary. Investors experiencing this type of fear might miss opportunities due to their worries or react in a way that doesn’t align with their strategy when new information is released.

Many things could trigger fear when making investment decisions, such as market volatility or even being reminded that investing involves risk. Indeed, according to FT Adviser (4 June 2026), more than half of UK adults said that reading a risk warning when investing in stocks and shares puts them off investing.

It’s natural to feel some worries in these scenarios, but mastering your fears could improve long-term outcomes.

Fear could lead to decisions that don’t align with your long-term strategy

Fear isn’t necessarily a bad thing when you’re investing. It might prevent you from rushing into an investment that isn’t suitable for you, but it could also harm your decisions.

For example, investing might play an important role in your long-term financial plan. It might help you grow your pension savings with the aim of delivering a more comfortable retirement. However, if you fear losing money, you might choose to hold your assets in cash instead, which would mean missing out on potential investment returns.

Investment returns cannot be guaranteed, and past performance may not be replicated. However, historically, markets have delivered returns over long-term time frames and recovered from periods of downturn.

It’s also important to note that there are different levels of risk when you’re investing, so you can choose opportunities that align with your risk profile. In addition, a balanced portfolio will spread your investments across a variety of assets, so while you might lose money in one area, gains in another could create balance.

A key part of mastering fear so it doesn’t hamper your long-term goals is understanding the difference between perceived and actual risks.

Acting out of fear when investing could make it more difficult to achieve your financial goals and increase stress. So, here are three things to keep in mind when you’re investing.

3 steps that could reduce investment fear

1. Focus on your long-term objectives

Emotional responses are often temporary, as are the factors that trigger them. Instead, focus on what your long-term objectives are. This can help you put current events into perspective and potentially reduce your concerns.

Some investors may find it useful to implement a decision delay, such as waiting at least a day before making any changes. This could provide time for strong emotions to ease and an opportunity to review what’s driving your initial reaction.

2. Recognise that market volatility is normal

One factor that often affects investor emotions is market volatility. However, if you look at past performance, you’ll see that rises and falls in investment values are normal.

Rather than looking at investment values daily or weekly, take a longer-term view. When you look at performance over several years, you’ll often see that the peaks and troughs smooth out, which doesn’t seem as scary.

3. Understand your investment strategy

Take some time to understand why your investment strategy is appropriate for you. Discussing with your financial planner why your risk profile is suitable for your current financial circumstances and overall goals could help ease fears.

A financial planner could reduce the impact of emotions when making financial decisions

Working with a financial planner could help keep emotions, including fear, in check when you’re making financial decisions.

Your financial planner will understand your goals and strategy, so they could provide an objective review of your decisions and factors that you might be worried about. Knowing you have someone who could provide tailored guidance might also help you tune out some of the noise that could trigger emotional responses and allow you to focus on what matters to you.

Please contact us to arrange a meeting with one of our team.

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

All information is correct at the time of writing and is subject to change in the future.

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.

Balancing your goals: How a financial plan could help you juggle different priorities

Most people will have multiple financial goals they want to achieve. A common challenge is balancing these competing goals and understanding how to use your assets to work towards them. It’s an area that a financial plan could help you with.

Over the last few months, you’ve read about short-, medium-, and long-term goals that might be important to you and different financial strategies that suit each time frame. Now, read on to find out how a financial plan could help you strike a balance that works for you.

Deciding which goal to focus on can be difficult

Without a tailored financial plan, it might be difficult to understand how you should use your assets to move closer to your goals. For example, if you have £500 left over each month after your regular expenses, would you be better off saving it in case of an emergency or contributing more to your pension?

On top of this, you want to balance working towards goals with enjoying your life now.

Unfortunately, there isn’t a one-size-fits-all solution that’s simple to follow.

Instead, your needs, income, and other financial commitments, along with your goals, will affect what strategies could suit you. A tailored financial plan could help you assess not only how to reach a goal, but how prioritising a certain goal might affect others.

4 ways a financial plan could help balance multiple goals

1. A financial plan identifies your goals

Your goals are central to your financial plan. So, working with a financial planner provides you with an opportunity to clearly set out what’s important to you and identify goals.

As part of creating a financial plan, you might set out clear time frames for when you’d like to reach each goal. In addition, it’s a chance to discuss why these goals are important to you and if they’re realistic, which might change some of your objectives.

For instance, you might have set a goal to have £500,000 in your pension before you’ve calculated how much income you need in retirement or how you’ll use other assets. As a result, after speaking with your financial planner, you might find the amount you need to save into a pension is lower, which could help you support other goals.

Similarly, you could find you’ve underestimated how much you need for a certain goal. Being aware of a potential gap sooner might mean you have more opportunities to close it.

2. A financial plan could model different scenarios

A key challenge to balancing goals is understanding how a decision to allocate to one might affect others. Would reducing pension contributions to build a nest egg for your child affect your security in retirement?

Your financial planner may create a cashflow model that could help you assess the long-term impact of your decisions. To create a cashflow model, you input information like your income and the value of your assets, and set certain assumptions, such as the rate of inflation and investment returns. You can then adjust these assumptions.

It’s important to note that while a cashflow model could provide useful insights, the outcomes are not guaranteed.

3. The data from a cashflow model could help you understand trade-offs

At times, you’ll need to decide which goal is more important to you. A cashflow model could give you access to the information you need to understand trade-offs.

You might look at how changing your pension contributions will affect your disposable income now and the income you might receive in retirement. Would you prefer to reduce your expenses now if it meant you’d have more to spend when you retire?

A cashflow model could be used to explore different scenarios to understand how the decisions you make now could affect various goals, so you can make decisions that align with your priorities.

4. A financial planner could adjust your plan as your goals change

A financial plan you put in place now may not still be suitable for you in 10 years. Over time, your goals and priorities might shift. Regularly meeting with your financial planner to review your plan could help ensure it continues to reflect your goals.

Contact us to talk about your goals

If you’d like our support in creating a financial plan that covers your short-, medium, and long-term goals, please get in touch.

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

All information is correct at the time of writing and is subject to change in the future.

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.

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.

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.

The Financial Conduct Authority does not regulate cashflow modelling.

Investment market update: June 2026

According to the Organisation for Economic Co-operation and Development (OECD), a global recession could occur if the conflict in Iran continued into 2027. The organisation warned that delays in agreeing a peace deal would affect global growth and cause energy shortages.

Indeed, the OECD said in a scenario where the conflict continues into 2027, global GDP could fall to 2.1% in 2026, compared to 2.4% in 2025.

Markets experienced volatility but recovered throughout June 2026

On 3 June, European markets opened in the red. US President Donald Trump threatened tariffs of between 10% and 12.5% on 60 countries, including the UK, the EU, and Australia, over allegations of forced labour. However, having seen similar tactics before, markets reacted more subtly than they have in the past.

The UK index, the FTSE 100, was up 0.13% when markets opened on 4 June, thanks to news of a ceasefire in the Middle East. However, this was short-lived as technology valuations slipped, leading to the index falling 0.46%.

The fall continued into the following day, with South Korea’s main index, the KOSPI, dropping 5%.

Renewed conflict in the Middle East hit markets on 9 June. The KOSPI fell more than 9%, triggering a circuit break, which halted trading for 20 minutes. Similarly, Japan’s Nikkei 225 (-3.8%), the US S&P 500 (-2.64%), and markets across Europe fell as AI and technology valuations dipped.

Markets did bounce back on 10 June, including the KOSPI rising 8.4%, which could suggest the drop was a blip rather than an AI market crash.

Despite hopes of a ceasefire earlier in the month, the US and Iran exchanged fire on 10 June. This led to volatility in Asian markets and European markets remaining flat as they opened.

On 12 June, SpaceX raised $75 billion (£56.8 billion) in the world’s biggest initial public offering (IPO), which valued the company at $1.77 trillion (£1.34 trillion).

News of a potential US-Iran peace deal on 15 June led to a global rally, with many markets opening in the green, including the Nikkei (5%), FTSE 100 (1%), and the S&P 500 (1.5%).

The following day, the Nikkei broke through the 20,000 point mark to reach a record high.

The technology sell-off reemerged on 24 June. Again, the KOSPI experienced a sharp fall of 10%, and trading was temporarily halted. European and US shares also fell, including the US technology-focused index, the Nasdaq, dipping 1% as SpaceX shares tumbled 16.4%.

Once again, the sell-off was short-lived, with several indices, including the Dow Jones and Stoxx 600, hitting record highs on 25 June.

UK

On 22 June, UK Prime Minister Keir Starmer announced his resignation. While markets reacted to the news relatively calmly, uncertainty over the coming weeks could lead to volatility.

According to the Office for National Statistics, inflation stayed at the same rate as the previous month at 2.8% in the 12 months to May 2026. Economists had expected a rise to 3%. This information is likely to have played a role in the Bank of England opting to hold interest rates where they are.

S&P Global’s Purchasing Managers’ Index (PMI) series measures the health of businesses, and the results for May were a mixed bag.

Despite facing substantial pressure as prices rise, UK factories recorded a reading of 53.9 (a reading above 50 indicates growth) and reached a three-month high.

On the other hand, the service sector, which accounts for around 80% of the UK economy, fell into contraction territory with a reading of 49.3.

Europe

Eurozone inflation increased from 3% to 3.2% in the 12 months to May 2026, according to Eurostat. The news prompted the European Central Bank to lift interest rates.

Further data shows eurozone GDP fell by 0.2% in the first quarter of the year, with Ireland’s GDP falling 12.1%. Two consecutive quarters of decline would place the eurozone in a technical recession, so economists will be looking closely at the bloc’s performance in the third quarter.

Economists at the research institute DIW warned that the German economy, the largest in Europe, was at risk of a recession due to a possible energy shock caused by conflict.

Despite this negative news, S&P Global’s PMI shows factory output increased to a four-year high in May, resulting in a reading of 51.6.

US

US inflation was in line with expectations at 4.2% in the 12 months to May 2026, but was higher than the 3.8% recorded in April.

In good news, the US economy added more jobs than expected. Economists had predicted 85,000 jobs would be added in May, but the reality far surpassed that at 172,000. The boost was partly attributed to the 2026 FIFA World Cup taking place in the US, leading to a hiring boom of hospitality workers to prepare for the influx of tourists.

US-based company Alphabet, the parent company of Google, said it plans to raise $80 billion (£60.6 billion) in equity to fund its vast AI infrastructure investments. It would mark the largest equity raising ever. The news led to shares falling by around 4%.

Asia

Chinese exports jumped 19.4% year-on-year in May, with chip exports more than doubling.

Inflation pressure led to Japan’s central bank hiking interest rates from 0.75% to 1%. While the increase might seem insignificant, it’s the highest rate in Japan since 1995.

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

All information is correct at the time of writing and is subject to change in the future.

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.

Financial protection: 3 useful questions to help you calculate appropriate cover

How to improve your financial resilience

How to use the “gifting from income” rule to reduce your estate’s Inheritance Tax bill

According to a Citywire report, forecasts from the Office for Budget Responsibility (OBR) suggest the amount of Inheritance Tax (IHT) paid to HMRC will have increased by 11.6% in 2024/25 compared to 2023/24.

This will mean that the total amount of IHT paid in the 2024/25 financial year will have reached a record high of £8.4 billion.

The report suggests that the big year-on-year increase has been primarily driven by the long-term freeze of the level at which IHT becomes chargeable, and the increase in asset values.

With the freeze on thresholds due to continue until 2030, this highlights the importance of ensuring you are taking effective estate planning measures to mitigate the amount of IHT payable on the value of your assets. Doing this can help ensure that your beneficiaries are not left with an unwelcome and substantial tax charge on your death.

There are series of straightforward measures you can make use of to reduce your IHT liability. One of these, which is often overlooked, is known as “gifting from surplus income”.

In this article you can read about how it works, and help ensure that as much of your wealth as possible passes to your beneficiaries rather than HMRC.

Gifting assets is an effective way to reduce your IHT liability

In the 2025/26 tax year, IHT is normally charged at 40% on the value of your estate in excess of the £325,000 allowance, commonly referred to as your “nil-rate band”.

If your primary residential property is included in your estate and it is passed to a direct descendant, your total tax-free allowance will likely increase to £500,000.

It’s also important to bear in mind that these allowances apply to individuals, so a couple can enjoy a combined tax-free allowance of up to £1 million.

The most common and straightforward way to reduce your IHT liability is by gifting assets – belongings, investments, or cash – to your beneficiaries during your lifetime, so they no longer form part of your estate.

You have three annual gift allowances you can make use of:

1. A £3,000 annual exemption, which can be split among as many recipients as you like. You can “carry forward” any unused allowance from one year into the next. This means that you and your spouse or partner could gift £12,000 immediately if you have not previously made any gifts
2. Wedding gift allowances of £5,000 for a child’s wedding, £2,500 for a grandchild’s wedding, or £1,000 for anyone else. This exemption counts in addition to the standard annual exemption.
3. Unlimited small gifts of £250 or less to other individuals, provided they have not been the recipient of another of the above exemptions.

Beyond these three allowances, all other gifts you make will be treated as potentially exempt transfers (PETs) and subject to the “seven-year rule”.

This means that if you live for seven years from the date of making the PET, no IHT will be payable. Within those seven years, however, a taper relief system is applied, which means that the amount of IHT will depend on how long you live after making the gift.

As well as allowable gifts and PETs, a further effective way to mitigate your IHT liability is by utilising the “gifts out of surplus income” rule.

Gifts out of income are usually Inheritance Tax-free

Making gifts out of your regular income is an effective estate planning measure. Not only are these gifts usually IHT-free, making them carries the added benefit of you being able to provide the recipient of your gifts with valuable ongoing financial support.

While there is no limit to the amount you can gift in this way, there are three strict conditions you need to comply with:

1. You must be able to demonstrate that the gifts you make are from your income, such as your salary or regular pension, rather than your accrued capital.
2. The gifts must be made on a regular basis and not simply be one-off transfers.
3. By gifting from your income, you must ensure that you are not reducing your own standard of living, and that the income in question is surplus to your requirements.

As well as not reducing your living standards, you will also need to assess how making such gifts on a regular basis could affect your own long-term financial plans.

You will need to review your own arrangements to confirm that the gifts you make are affordable when set against your other priorities, and that you are not creating future problems for yourself if the money you are gifting could be better allocated for other uses.

For example, you might you better off setting money aside for future care provision, or to cover moving costs if you intend to downsize to a smaller property.

You should also carefully consider how any gifts of this kind will be used. Earmarking these for a specific purpose can often be advantageous. This could include paying annual school fees for your grandchildren, or putting regular amounts into a Junior ISA, that they can then access when they are 18.

You should keep accurate records of all gifts you make

As with all your personal finance transactions, it’s important to keep detailed records of all gifts you make, whether they are out of income, within your gift allowance, or PETs.

This is certainly the case when it comes to gifts out of income and substantial PETs, as your executors are likely to need to provide these to HMRC when they are dealing with your estate on your death.

Accurate records can help expedite the process of obtaining probate, and ensure that your beneficiaries are able to enjoy your bequest to them without any unnecessary delay.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. 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 tax planning or estate planning.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.

Investment market update: March 2025

Trade wars and fears that tariffs could spark recessions meant investment market volatility continued in March 2025 and the start of April 2025. Read on to find out more about some of the factors that may have affected the value of your investments recently.

Tariffs imposed by US President Donald Trump affected markets negatively and, as other countries react to the measures, there continues to be uncertainty.

While market volatility and periods of downturn can be worrisome, remember it’s part of investing. Historically, markets have delivered returns over long-term time frames, even after periods of downturn, and often sticking to your investment plan makes financial sense. So, if you’re tempted to react to the news, reviewing your long-term plan and goals could be useful.

UK

Chancellor Rachel Reeves delivered the Spring Statement at the end of March, setting out the government’s spending plans, against a challenging backdrop.

The UK economy contracted by 0.1% in January 2025 when compared to a month earlier following a decline in factory output. In addition, while the rate of inflation is declining, at 2.8% in the 12 months to February 2025, it’s still above the Bank of England’s (BoE) 2% target.

The news prompted the BoE to hold its base interest rate at 4.5%, which will have disappointed households and businesses that were hoping for a cut to ease the cost of borrowing.

Data from Purchasing Managers’ Indices (PMI) was pessimistic too.

According to S&P Global, the manufacturing sector continues to face tough conditions. The headline figure was 46.9 in February. It’s the fifth consecutive month that the reading has been below the 50 mark which indicates growth. There were declines in output, new orders, and employment.

The construction data was similar, with the headline figure falling to 46.6, the biggest downturn since 2009 aside from the 2020 pandemic. There were steep declines in housebuilding and civil engineering activity.

Despite speculation that Reeves would increase taxes and reduce tax thresholds or exemptions, the Spring Statement focused on cutting the welfare budget. Indeed, the announcements made in the 2024 Autumn Budget remain intact.

Investment markets were affected by US trade wars and the war in Ukraine.

On 3 March, European leaders met in London for a summit to draw up a Ukraine peace plan. The meeting led to the pound and European stock market soaring as investors hoped for a resolution. Perhaps unsurprisingly, defence stocks saw the biggest gains, including the UK’s BAE Systems, which jumped by more than 14%.

However, the boost was short-lived. On 4 March, trade wars between the US and Canada, Mexico, and China triggered a drop of 1.27% on the FTSE 100 – an index of the 100 biggest companies on the London Stock Exchange.

There was an uptick in optimism towards the end of the month.

On 24 March, investors hoped that President Donald Trump would show flexibility ahead of the unveiling of new global tariffs in April. The FTSE 100 opened 0.5% up, with mining stocks leading the rally – winners included Anglo American (3.9%), Antofagasta (3.3%), Glencore (3%), and Rio Tinto (2.5%).

However, in early April, Trump unveiled tariffs on many countries, including the UK, which led to markets falling.

Europe

Data from the European Central Bank (ECB) shows inflation is moving closer to the 2% target. It was 2.4% in the 12 months to February 2025 across the eurozone.

The news prompted the ECB to cut the base interest rate by a quarter of a percentage point to 2.25%.

Data suggests the wider European economy is facing similar challenges to the UK.

Indeed, S&P Global PMI figures show a factory downturn. In addition, the headline PMI figure fell from 45.5 in January to 42.7 in February. Worryingly, the two largest economies in the EU, Germany and France, experienced the sharpest downturns.

The Euro Stoxx Volatility index, which tracks investor uncertainty, found stock market volatility hit a seven-month high in February and has more than doubled since mid-December 2024 due to investors feeling nervous about the global outlook.

So, it’s not surprising that there have been ups and downs for investors.

The 3 March summit in London benefited wider European stock markets. Again, defence stocks saw the biggest gains – Germany’s Rheinmetall, France’s Thales, and Italy’s Leonardo all saw an increase of at least 14%.

Expectations that US tariffs will hit the automaker industry led to stocks in the sector falling on 4 March. Among the shares affected were tiremakers Continental, which saw a 9% drop, as well as Daimler Truck (-6.6%), BMW (-5.5%), and Mercedes-Benz (-4.5%).

Similar to the UK, European markets were negatively affected by US tariffs at the start of April.

US

US inflation is nearing the Federal Reserve’s 2% target after a rate of 2.8% was recorded in the 12 months to February 2025.

However, there was negative news from the labour market. According to the Bureau of Labor Statistics, the unemployment rate edged up to 4.1% in February.

PMI readings for the manufacturing sector also reflected this trend. New orders fell in February and companies continued to lay off staff, which may suggest they don’t feel confident in the future. Yet, the sector has grown for two consecutive months.

On 3 March, in contrast to Europe, Wall Street dipped slightly. The technology-focused Nasdaq index was down 0.8% and the broader market indices Dow Jones and S&P 500 both fell 0.3%.

The following day, Trump declared 25% tariffs on imports from Canada and Mexico and 10% tariffs on imports from China. The news led to the dollar weakening, and indices tumbling further – the Nasdaq fell 2.6% and S&P 500 was down 1.7% – and the declines continued into the next week.

Technology stocks in particular have been hit hard by the market volatility. AJ Bell warned since the start of 2025, $1.57 trillion (£1.21 trillion) had been wiped off the value of the Magnificent Seven – seven influential and high-performing US technology stocks – as of 4 March.

Carmaker Tesla is among the biggest losers. As of mid-March, its share price had halved since it benefited from a post-election rally at the end of 2024, which has partly been driven by sales in the EU falling by almost 50%.

Once again, the uncertainty caused by trade wars led to volatility in the US markets.

Asia

As a country with a trade surplus and a large US market, tariffs are expected to hamper growth in China.

China’s GDP target is 5% for 2025, the same target it hit in 2024. However, economists believe replicating this in 2025 will be difficult. China succeeded in reaching the 2024 target thanks to an export boom at the end of the year – exports increased by 10.7%, as some businesses tried to beat the expected tariffs.

In contrast, between January and February 2025, Chinese imports fell by 8.4% year-on-year after economists had expected growth of 1%. The data might suggest that Chinese manufacturers are cutting back on buying raw materials and parts due to trade concerns.

Tariffs imposed by the US led to China unveiling similarly high tariffs at the start of April. The trade war is likely to affect China’s economy and its ability to reach GDP goals in 2025.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. 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.