Category: news

Inheritance Tax (IHT) has long divided opinion, but it’s not only controversial – many people also misunderstand how IHT works and how it’s possible to navigate the rules surrounding it.

With rising property prices and an extended freeze on IHT thresholds until 2028, more people are falling into the IHT trap.

Read on for some popular myths and learn the facts around how sensible estate planning could help you mitigate any IHT liability and leave more of your wealth to family and loved ones.

1. “It raises a lot of money for the government”

While it’s true that the UK government raised a record £7.1 billion in IHT during the 2022/23 financial year. This was more than predicted due to rising house prices, which increased estate values. In fact, HMRC’s figures showed that IHT takings had grown by £1 billion compared to the previous tax year.

By comparison, tobacco duty bought in £10 billion.

So, although there’s been an increase in IHT receipts in recent years, it doesn’t actually raise as much money as some may think.

2. “IHT only affects the super-wealthy”

While you may think that it’s only incredibly rich people who are likely to have to pay IHT, increasing property prices have meant that more people are finding themselves liable.

The good news is that a carefully considered estate plan can help protect your family and loved ones. Plus, it helps to ensure that your money and possessions are passed on according to your wishes.

Your estate is made up of your property, assets, bank account and investments. If you have a spouse, young children, or other dependants, it’s important that you write a will.

Allocating certain assets to your beneficiaries in your will can help you to ensure your estate plan is as tax-efficient as possible.

3. “My partner will inherit everything I leave free of IHT”

Don’t fall in to the trap of assuming that your spouse or civil partner will automatically inherit everything. If you haven’t written a will, your estate could become subject to the rules of intestacy.

Even if you don’t have children, if you haven’t written a will, there’s no guarantee that your spouse will inherit everything. This is just one reason why it’s so important to make sure you put your wishes in writing, in a legally binding will.

Read more: 6 important reasons to write and regularly revisit your will

Having a will is especially important if you’re co-habiting with your partner – particularly if you have children. If you’re not married, you don’t receive any special exemption on money you leave to your partner.

In the 2023/24 tax year, you and your spouse or civil partner each have an IHT allowance of £325,000. You both also have an additional £175,000 nil-rate band if you leave your home to a child or grandchild – this can also include great-grandchildren, adopted children, and foster children.

A surviving spouse or civil partner can claim any unused IHT allowances. As a result, a surviving spouse could have up to £1 million of IHT allowances, as shown below:

• 2 x £325,000 (standard IHT allowance) = £650,000
• 2 x £175,000 (property-related IHT allowance) = £350,000

So, if a surviving spouse left a £1 million estate, including a £350,000 family home, to their children, there would be no IHT charge.

4. “I can only gift £3,000 a year before it’ll be taxed”

It’s a mistake to think you can only gift up to £3,000 a year before attracting IHT.

However, there are no rules to how much you can gift in any given year, and you could choose to give away more. The catch to understand is that anything you gift above £3,000 becomes a “potentially exempt transfer” (PET).

If you survive for seven years after making the gift, no IHT will be due on its value. However, if you

die within four to seven years after making the gift, a reduced rate of IHT may be payable on the value.

This can be a complicated area to understand, so it’s a good idea to seek advice. If you’d like to give a financial gift to your family and loved ones, we can help you understand all the implications of your decision.

It may also be useful to remember that there’s an exemption on “small gifts”, allowing you to make unlimited gifts of up to £250 to different people.

Plus, for wedding gifts, you’re able to gift:

• £5,000 to a child
• £2,500 to a grandchild or great-grandchild
• £1,000 to anyone else.

5. “If I move abroad, I won’t have to pay IHT”

If you live in the UK and are domiciled here, your entire estate is potentially taxable on your death regardless of where your estate is situated.

Should you have plans to retire abroad and think this will mean you can avoid paying IHT, think again. For most people, if your estate exceeds the IHT threshold of £325,000, it will be assessable by the UK authorities in the same way as if you lived in the UK.

An estate plan can help make sure more of your money goes to those you love

Being able to pass on your wealth to your loved ones can be a challenging area to navigate. While you may think that estate planning is simply about IHT, that’s just one part of the puzzle.

We can help to protect your assets and help make sure that more of your money goes to the people you love and care for.

Get in touch

If you’d like to discuss ways you might be able to reduce a potential IHT bill and ensure those you love benefit from all your hard work, please get in touch.

Email hello@bluewealth.co.uk or call us on 0117 332 0230.

Please note

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

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.

Blue Wealth Ltd is not responsible for the accuracy of the information contained within linked sites.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

As a business owner, effectively managing your finances is important. It can help you get the most out of your assets, potentially reduce tax liability, and improve the success of your business.

There are many different areas you may need to consider, from what taxes your business could be liable for to planning for your retirement. This e-zine covers essential topics and offers practical tips that could improve your finances.

The e-zine is split into four sections that cover different areas:

1. Managing your finances and long-term security
2. Getting to grips with business finances
3. Finances and your employees
4. Planning your exit strategy

Download your copy of “The complete guide to managing finances as a business owner” now.

If you have any questions about the topics covered in the e-zine or would like to review your finances, please contact us.

There’s nothing quite like the magic of live theatre. The heightened sense of anticipation as you settle into your seat, the dimming of the lights, the hushed thrill as actors take to the stage…

Even better is being able to enjoy all this and more at an open air performance.

With live entertainment being performed at outdoor venues around the UK, here are five special places worth planning a visit to this summer.

1. The Bishop’s Palace and Gardens, Wells

Come summer, open air productions are held on the stunning South Lawn of The Bishop’s Palace and Gardens.

Opera lovers should head here for La Bohème, on 30 June, and/or La Traviata the following night, on Saturday 1 July.

If pop is more your bag, grab your tickets for Bring On Back To The 80s and get ready “for a trip back in time for a night of non-stop retro anthems which will leave you captivated!”

With many more performances planned throughout summer, find out more on The Bishop’s Palace website.

2. Minack Theatre, Cornwall

Backdrops don’t come much more spectacular than at the famous Minack Theatre. Cut into granite cliffs, the extraordinary auditorium provides a stunning view over the deep-blue waves of Cornwall’s Porthcurno Bay.

Local theatre enthusiast, Rowena Cade, created this spectacular space by carving terraced seating from the rock of her cliff-top garden.

While performances take place most summer evenings, you can also tour the gardens and auditorium at other times of the year.

With live theatre, music, and comedy shows, there’s something for everyone.

This year’s highlights include Calvino Nights running from 7 to 22 June, Shakespeare’s Measure for Measure for three nights only in early July, and Louis de Bernières’ Captain Corelli’s Mandolin with eight performances between 30 July and 3 August.

For a sneak preview of what to expect, check out the live webcam on their website, but warning – it’ll be hard resist a visit once you’ve seen it on screen!

3. Regent’s Park Open Air Theatre, London

One of the largest theatres in London, this award-winning theatre sits on the edge of one of the most beautiful Royal Parks.

This summer, performances include a re-imagined version of Shakespeare’s The Tempest (suitable for everyone aged six and over), a musical revival of Jerry Herman and Harvey Fierstein’s show-stopping classic, La Cage aux Folles, and much more besides.

With plentiful performances to choose from, as well as great food and drinks available on site, a trip to this outdoor theatre will turn a trip to the capital into something extra special.

4. Brownsea Open Air Theatre, Dorset

Based in Poole, this open-air Shakespearian theatre company has been putting on large theatrical productions since 1964.

One of the biggest theatrical projects in the south, each year the annual theatre performance is set in the beautiful surroundings of The National Trust’s Brownsea Island in Poole Harbour, Dorset.

Celebrating 60 seasons on Brownsea Island, this summer you can enjoy a brilliant production of Romeo and Juliet between Wednesday 26 July and Friday 11 August.

5. Waddesden Manor, Aylesbury, Buckinghamshire

Waddesdon Manor hosts all manner of music, film, and theatre. And if you’re a movie fan and prefer large screen action, why not enjoy your favourite movies under the stars instead.

In September 2023, you can watch The Great Gatsby, Top Gun: Maverick, Elvis, or Harry Pottery and the Philosopher’s Stone on the big screen outdoors.

Monday 29 May 2023 will mark 70 years since the first ascent of Mount Everest.

Few events have encouraged and inspired people to pursue their own dreams in quite the same way as climbing Everest. Successfully climbing the highest mountain in the world requires resilience, patience, and teamwork to safely reach the peak, as does saving and investing for your future.

As challenging as it is to ascend Mount Everest, descending the mountain is far more treacherous and deadly.

According to a report in Scientific American, 56% of climbers died on their descent from Everest’s 8,850m summit. This compares with only 15% who died on their way up or before leaving their final camp.

You may be wondering what all this has to do with financial planning. Well, actually, reaching retirement is a lot like reaching a mountain summit – and the decumulation phase of your financial life can present dangers, too.

“Decumulation” is the formal word for when you begin to spend your wealth in retirement

Decumulation is the process of drawing on your accumulated assets to maintain your quality of life when you have retired.

While you may only think about financial advice in terms of accumulating and protecting your wealth, when you retire, and begin to decumulate your assets, expert financial guidance is arguably more important.

Spending your hard-earned wealth when you retire requires a careful and considered approach. And a financial planner can help ensure you have a stable and sustainable income throughout your whole retirement.

A well-laid plan is essential when you’re preparing to spend

After spending several decades in your career, contributing to a pension, and accumulating your wealth, once you’re no longer working you may think the rest is plain sailing.

Yet, when the time comes to start spending your life’s savings in retirement, financial advice is even more vital.

So, here are three important steps to help ensure a safe and secure retirement.

1. Make sure your retirement savings last a lifetime

To establish a sustainable income, first figure out how much money you need to live on, and how long your savings will need to last.

Life expectancy in the UK, according to the Office for National Statistics, is 79 years for males and 83 years for females.

As a result, depending on when you start drawing your pension, the money you’ve saved may need to last another 30 years or more. Ensuring you can live the lifestyle you want while remaining financially secure and able to leave a legacy to your loved ones will require careful budgeting.

Remember too, that your spending pattern in retirement won’t be uniform. You’re likely to be more active in the earlier years. This may mean you spend more on world travel, eating out with friends, or doing home improvements, which can be costly.

Following several years of activity, while you’ll hopefully remain busy with hobbies, you may be less inclined to travel long distances and may dine out less often.

As you enter later life, your mobility may become more limited, and you might require care, which can be costly.

A financial planner can help you work out the changing pattern of expenditure. We can act as your financial Sherpa guides, helping you find a path to sustainable retirement income and formulate a plan that gives you peace of mind that your money will last as long as your retirement.

2. Structure a sustainable and tax-efficient income

While tax-efficient accumulation helps enhance your wealth for the retirement lifestyle you desire, tax-efficient decumulation helps preserve your capital and increases the chance of having money to leave to your loved ones.

The most efficient retirement income strategy should be planned well in advance and take full advantage of all relevant tax allowances and exemptions.

If you are married or in a civil partnership, make sure you plan together. This will allow you to allocate your income and assets to maximise tax efficiency.

So, make sure you maximise all your tax allowances including:

• Income Tax allowances
• The Dividend Allowance
• Personal savings allowance.

3. Plan the order you should spend your savings – and put your pension last

When drawing up your retirement spending plan, it’s important to consider the order in which you should decumulate your savings.

Many people consider their pension to be the foundation of their retirement plan, but it may pay to delay drawing on your pension if you have other income that you can use instead.

This is because pension funds benefit from tax-free growth, interest, and dividends. As a result, leaving your pension invested can be especially helpful for maintaining capital value.

Plus, pension funds aren’t usually subject to Inheritance Tax (IHT). So, leaving your pension intact while you draw on other investments could also be an effective way to reduce your IHT liability.

Ideally, you should use cash first, followed by taxable investments, ISAs, and finally pensions.

Get in touch

Whether you’ve reached the summit and are ready to retire now or you’ve still some distance to climb, it’s never too soon to put a decumulation plan in place. If you’d like help to create a plan to structure a tax-efficient income in retirement, we can help.

Email hello@bluewealth.co.uk or call us on 0117 332 0230.

Please note

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

Blue Wealth Ltd is not responsible for the accuracy of the information contained within linked sites.

The value of your investment 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. Your pension income could also be affected by the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

While growing wealth is often an important part of a financial plan, understanding how you can use your money to reach goals and improve your wellbeing is crucial. It could help you get the most out of your wealth and lead to a more fulfilling life.

This guide offers practical steps that could help you improve your relationship with money by understanding how it’s related to happiness. It covers four essential steps to creating a financial wellbeing plan that’s tailored to you:

1. Understanding the sources of happiness that are true for everyone
2. Understanding what makes you happy
3. Creating a clear path to your objectives
4. Travelling along that path in the most effective and efficient way possible.

Download your copy of ‘Financial wellbeing: 4 steps to creating a financial wellbeing plan’ now to find out what you could do to boost your long-term wellbeing.

Each month, we share some of the highlights of what’s been happening in and around Blue Wealth.

Thank you for your continued generosity in recommending us to your family, friends, and colleagues. It means that, once again, we’ve made more donations to BillyChip, helping to support the work they do in delivering kindness to rough sleepers and homeless people.

Naomi is on a roll and has passed another financial planning exam

Naomi Davidson is firing on all cylinders in 2023. In January, she passed her R03 exam, which tested her knowledge and understanding of personal taxation. Now, just three months later, she’s passed the R05 exam, testing her knowledge on everything to do with financial protection.

Naomi tells us more…

Taking this exam on the back of the R03 exam must have been a lot of work – how did you find the revision and study needed for the R05 compared to the earlier exam?

I found it a lot easier to go straight into the next exam, as I was used to studying regularly and had established a good routine. I also don’t like to procrastinate too much as I find it hard to pick things back up after a while.

I did have a couple of weeks’ break over Christmas and the new year, though, which was nice.

How did you celebrate your success?

I’m waiting to pass my final exam before I celebrate properly! But I was relieved to be able to relax at home afterwards.

How do you manage your time between work and study?

I would usually study on one of my weekend days, and then pick a couple of evenings after work to do some mini sessions.

Are you already plotting your next exam, or are you taking a well-earned break before cracking on?

I’ve got R06 booked for 25 April. This is a case study based exam which, by the time this is published, I’ll already be studying for.

How many exams do you still have to pass before you gain your Diploma in Regulated Financial Planning?

Just one to go, which is the final written exam and all booked in.

There are six modules to the diploma, but I did the R04 exam a couple of years ago at my previous job, as it was about pensions and the one they felt was most important for me to have. So I sat that ahead of the others, which is why I ended up doing them slightly out of order.

Nathan celebrated his 10-year work anniversary

This month marked Nathan Jones’ 10th year with Blue Wealth. We acknowledged his achievement with a celebratory lunch and a voucher to his favourite restaurant – Pasture, a great steak house in the Bristol.

Here, Nathan shares more about how he came work with Rob and the changes he’s seen over the decade.

What were you doing before you joined Blue Wealth?

I was working in a compliance role for the network that Blue Wealth was authorised under. Part of my job was checking Rob’s files, which is how Rob and I knew each other. Rob reached out as he was starting to get to a stage where support was required.

Do you remember your interview and what was the role you were first hired for? 

Rob hired me as Blue Wealth was starting to grow. The business was at the very early stages, so me and Rob both took a gamble on each other. I’d like to think it has paid off!

How has your job changed over the last 10 years?

The business has gone from just Rob and I, to a business with three financial planners and a team providing support to the planners.

My initial role was to provide support to Rob as the sole planner, but as the business has grown, I now manage the whole support team as well as still providing technical and paraplanning support, too.

It has been quite a learning curve, from just having to manage myself and my own workflow, to now managing a team.

What’s been the most significant change during your time with Blue Wealth?

The growth of the business in general. We started in a small office just big enough for two of us and have moved premises twice more to accommodate the growing business.

For me, personally, it’s the changing mindset, from just managing myself to now managing a team.

What do you consider your biggest professional achievement, to date?

Three things stand out.

1. Helping grow the business to what it has become today and being an integral part of that team
2. Achieving Chartered Financial Planner status
3. Winning the Personal Finance Society “Paraplanner of the Year” award 2021/22.

What advice would you give to someone looking to work in the financial services industry?

I would always promote the financial planning industry to someone looking to get into it. There are a number of varied roles to suit differing traits in a person and it can be a very rewarding career.

What do you love most about your job?

The problem-solving element to our work. It’s satisfying to be given a complex piece of planning work for a client, which I have to analyse and provide solutions for.

The outcome of this work can also have a very positive impact on our client families’ lives, which is also very rewarding and the reason we do what we do!

Last month, Jeremy Hunt delivered his spring Budget. In it, he set out his plans to get the economy back on track and inflation under control.

His focus was on economic growth, and a large part of his plan – delivered at the very end of his hour-long speech – was to encourage people to return to work – including retirees.

To achieve this, he introduced several major changes to pension allowances.

The key pension changes announced in the spring Budget

• The pension Annual Allowance has increased from £40,000 to £60,000.
• The tapered Annual Allowance has been updated.
• The Money Purchase Annual Allowance (MPAA) has increased from £4,000 to £10,000.
• The Lifetime Allowance has been removed.

Here’s how these changes could affect you.

The Annual Allowance increase means you can now receive tax relief on up to £60,000 of pension contributions

In the 2023/24 tax year, the Annual Allowance for pension contributions will increase from £40,000 to £60,000. This means that you can now receive tax relief on pension contributions up to £60,000, or 100% of your annual earnings, whichever is lower.

You can continue to pay into your pension once you hit this limit, but you would no longer be able to do so in a tax-efficient way – any contributions over your Annual Allowance may incur a charge.

The “Annual Allowance charge” essentially claims back any tax relief you receive on contributions over this limit.

Tax relief can be an easy and valuable way of boosting your pension contributions, so it’s important that you make sure you’re not missing out.

While most basic-rate taxpayers benefit from “relief at source”. This requires pension providers to claim basic-rate tax relief of 20% on behalf of their customers and put it in their pensions.

However, if you’re a higher- or additional-rate taxpayer, you have to claim the additional 20% or 25% relief from HMRC. You will normally do this through your annual self-assessment – even if you’re employed.

The tapered Annual Allowance will be increased to £10,000

If you’re a high earner, you may have come across the Tapered Annual Allowance (TAA). The TAA gradually reduces the amount you can save into your pension fund each tax year, depending on your earnings.

This allowance has increased to £10,000 and “adjusted income” has also been increased to £260,000. This means that very high earners will be able to save £10,000 into a pension tax-efficiently rather than just £4,000.

If you think this change may affect you, please get in touch to discuss how you can make the most of the new, increased allowance.

The MPAA increase could benefit those taking a phased retirement

The MPAA has increased from just £4,000 to £10,000. This is good news if you are planning a phased retirement and wish to continue working and contributing to your pension pot.

This £6,000 increase is an important change, but triggering the MPAA could still lead to an unwelcome tax bill.

Generally, the MPAA won’t be triggered if:

• You only access your tax-free lump sum, usually 25%
• You buy an annuity
• You move your pension into a Flexi-Access Drawdown scheme but don’t withdraw an income
• Your pension is valued at less than £10,000.

The MPAA rules can be complex. If you’re unsure if your plans could cause you to trigger the MPAA, please get in touch.

Jeremy Hunt has removed the Lifetime Allowance and plans to abolish it entirely

The Lifetime Allowance (LTA) is the total amount you can accrue across your pension savings during your lifetime without facing a tax charge when you come to draw on your funds.

Previously set at £1,073,100, the chancellor announced that the LTA would be removed completely from 6 April 2023, with legislation to abolish the LTA set to come at some point in the future.

If your pension savings exceeded the LTA, you’d need to pay a tax charge on anything over the allowance, or “excess”.

However, Labour are opposing this change and said they will reverse this decision, so time will tell if this change remains in place.

In the meantime, where previously you would have faced a tax charge of 25% if you drew your pension as income, or 55% if taken as a lump sum, this change means that there is no cap on what your pension can be worth to enjoy the full tax benefits. So, now you can save without fear of breaching the limit and being hit with a painful tax bill.

The catch to watch out for

While the removal of the LTA is good news for high earners, there is a catch.

The maximum Pension Commencement Lump Sum (PCLS) will be retained at its current level of £268,275 (25% of the current LTA of £1,073,000) and will be frozen thereafter.

This means that, unless you have existing rights, it isn’t possible to amass a £2 million pension pot and take 25% as a tax-free lump sum.

These significant pension changes also present opportunities elsewhere in your financial plan

From a planning perspective, these changes could present a valuable opportunity for your estate planning.

If you have other assets that you can use for your retirement income, the pension rule changes could help you to save on any potential Inheritance Tax (IHT) liability. This is because pensions normally fall outside your estate for IHT purposes.

In addition, while these changes were announced with the aim of keeping older, more experienced people in work, you could now save really hard and accrue a larger pension pot quicker than you would have previously been allowed. Ultimately, this may mean that you can save for a shorter time frame and be able to afford to retire sooner.

Get in touch

If you are interested in discussing all the ways you could benefit from the new pension rules and how they may affect your life goals and financial plan, please get in touch.

Email hello@bluewealth.co.uk or call us on 0117 332 0230.

Please note

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

Just six months ago, Kwasi Kwarteng stood up in the House of Commons and delivered his controversial “mini-Budget”.

The announcements ultimately brought down the short-lived Truss administration, with current chancellor, Jeremy Hunt, announcing a series of policy measures in November 2022 aimed at calming the markets.

Having taken “difficult decisions to deliver stability and sound money”, the chancellor has delivered the next part of his plan: “a Budget for growth”.

Read on to find out who were the winners and losers from the 2023 spring Budget.

Winners

Over-50s returning to work

In his speech, the chancellor said that “older people are the most skilled and experienced people we have”. So, he announced steps to make it easier for those over 50 to work for longer.

Firstly, the government announced an enhancement to the “midlife MOT” strategy – offering reviews to help individuals take stock of their finances and wellbeing to prepare for a more secure retirement.

Hunt also introduced a new kind of apprenticeship – called a “returnership” – aimed at over-50s who want to return to work.

The chancellor also announced some significant pension reforms aimed at encouraging more over-50s to remain in work, or to return to work. This brings us to…

Pension savers

The Lifetime Allowance (LTA) restricts the amount of tax-efficient pension savings an individual can accrue in their lifetime.

Having reached a peak in 2012, the LTA has been frozen at £1,073,100 since 2020.

To encourage people to remain in work, rather than retiring to avoid punitive tax charges for exceeding the lifetime limit, Hunt made the unexpected decision to abolish the LTA. The government will remove the LTA tax charge from April 2023, and completely abolish it in a future Finance Bill.

In addition, the Annual Allowance that restricts the amount that you can save tax-efficiently in any one year will also rise, from £40,000 to £60,000 in April 2023. You will also continue to be able to carry forward unused Annual Allowances from the three previous tax years.

Finally, many high earners are also affected by the Tapered Annual Allowance. The chancellor announced that the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from 6 April 2023.

In addition, the adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from the same date.

These are major steps that will allow pension savers to accumulate significantly more tax-efficient pension savings over their lifetime, and reduce some tax disincentives to work.

In addition, once an individual flexibly accesses their defined contribution pension savings, the total tax-relieved pension savings they can make each year is restricted to the level of the Money Purchase Annual Allowance (MPAA).

To support those who have left the labour market to return and supplement their income, or build up their retirement savings, the government will also increase the MPAA to £10,000 from April 2023.

Parents with young children

In what is likely to be a key battleground ahead of the next election, the chancellor announced an expansion of free childcare.

In an attempt to boost growth and get more people into work, working families will have access to 30 hours of free childcare each week for children aged between nine months and four years.

This is alongside boosts to subsidised childcare for parents on Universal Credit including upfront support.

Support will be phased in until every single eligible working parent of an under-five gets this support by September 2025.

Households with high energy bills

Back in November, Hunt announced that the government’s Energy Price Guarantee – an initiative of the Truss administration – would continue in its present guise until April 2023.

Under the guarantee, for six months from 1 October 2022, the average household has been paying energy bills equivalent to around £2,500 a year.

In April 2023, the guarantee was set to rise to £3,000, however the chancellor announced that the Energy Price Guarantee would be extended by a further three months.

This is designed to keep bills at £2,500 on average and the Treasury says this will save the average family £160 on top of the energy support measures already announced.

Drivers

With inflation remaining high, the chancellor argued that now is not the right time to uprate fuel duty with inflation, or increase the duty.

So, he announced a one-year extension of the 5p cut in fuel duty, saving the average driver £100 on top of the £100 saved so far since last year’s cut.

In addition, the chancellor announced an increase of £200 million to the “potholes fund”, taking the annual amount allocated to £700 million. The increase is expected to fix the equivalent of up to 4 million additional potholes across the country.

Swimmers

Hunt talked about the risk to swimming pools and other community facilities of rising costs.

In response, he announced a £63 million fund to keep public leisure centres and pools afloat.

Pubgoers

In a populist measure, Hunt announced his “Brexit pubs guarantee”.

While duty rates of all alcoholic products produced in, or imported into, the UK will increase in line with inflation, from 1 August, draught relief in pubs will be up to 11p lower than the relief for supermarkets. This is in addition to changes already due to come into effect in August.

As Hunt said: “British ale is warm but the duty on a pint is frozen.”

Losers

Businesses with larger profits

Back in 2021, when he was chancellor of the Exchequer, Rishi Sunak announced that Corporation Tax would rise in April 2023 for businesses making more than £250,000 in profits.

The Budget confirmed that this increase will proceed in April as planned – with around 10% of companies paying the top rate.

Companies with profits of less than £50,000 will continue to pay Corporation Tax at 19%.

However, businesses will be able to offset 100% of their UK investment in IT equipment, plant, and machinery against profits to reduce their tax bills. This is an effective cut to Corporation Tax of £9 billion a year, and the government aim to make the scheme permanent when it is responsible to do so.

Taxpayers

In his November statement, the chancellor reduced the Income Tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes.

He also announced that Income tax, National Insurance, and Inheritance Tax (IHT) thresholds would be maintained at their current levels for a further two years, to April 2028.

Over the next five years, this is likely to see many people pay more Income Tax, as rising earnings push them into a higher tax bracket.

In addition, as house prices and asset values rise, it is likely that more and more estates will face an IHT bill over the next five years.

Savers

While it may now be possible to contribute more to your pension tax-efficiently, the subscription limits for tax-efficient ISAs were frozen at:

• £20,000 for an adult ISA
• £9,000 for a Junior ISA.

Smokers

In the Budget document, the Treasury confirmed that duty rates on all tobacco products will increase by RPI plus 2% from 6 pm on Budget day.

The rate on hand-rolling tobacco will increase by RPI plus 6% and the minimum excise tax will increase by RPI plus 3% this year.

Get in touch

If you have any questions about whether you are a winner or a loser from the spring Budget, and how it will affect you and your finances, please get in touch.

All information is from the spring Budget document and the government’s spring Budget bulletin.

The content of this spring Budget summary 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.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

On Wednesday 15 March 2023, chancellor Jeremy Hunt presented his spring Budget.

Focusing on the government’s aims to halve inflation, reduce public debt, and boost economic growth, Hunt delivered his first official Budget alongside the latest economic and fiscal outlook from the Office for Budget Responsibility (OBR).

“Despite continuing global instability, the OBR report today that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.”

Hunt opened his speech by admitting that, in the autumn, the government “took difficult decisions to deliver stability and sound money”.

Today, he promised “a budget for growth”.

“Not just growth from emerging out of a downturn. But long-term, sustainable, healthy growth that pays for our NHS and schools, finds good jobs for young people, provides a safety net for older people […] all whilst making our country one of the most prosperous in the world.”

Here are the key points of the spring Budget, and what they might mean for you.

Encouraging early retirees back into work

Jeremy Hunt’s primary focus with his spring Budget is to encourage Britain back to work. Around 7 million working aged adults are classed as “economically inactive”. Of these, more than a million people have taken early retirement.

To address this issue and to stop pension limits “from acting as a barrier to remaining in work”, the chancellor announced increases to pension allowances and abolished the Lifetime Allowance.

Pensions Lifetime Allowance abolished

Following conversations with senior doctors in the NHS and other experienced professionals, the pensions Lifetime Allowance (LTA) has been abolished.

The LTA is the maximum amount of tax-efficient pension savings you can accrue in your lifetime and includes the total value of your pensions, including your contributions, your employer’s contributions from your workplace pension, tax relief, and investment returns.

From April 2023, there will be no limit on the amount of total tax-efficient pension savings you can accrue.

Pensions Annual Allowance increased

The chancellor announced that the Annual Allowance will increase from £40,000 to £60,000 from 6 April 2023.

The Annual Allowance is the amount that you can save into your pension each tax year (6 April to 5 April) while still being able to benefit from tax relief. In the 2023/24 tax year, this will now be £60,000.

Money Purchase Annual Allowance to increase

Another useful incentive to encourage experienced people to return to work, the chancellor announced an increase to the Money Purchase Annual Allowance (MPAA).

The MPAA limits the amount of money you can save tax-efficiently into your pension after you have started drawing flexibly from your defined contribution pension savings.

The MPAA will increase from £4,000 to £10,000 from April 2023.

Tapered Annual Allowance to increase

From April 2023, the minimum Tapered Annual Allowance will increase from £4,000 to £10,000. The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

These announcements have increased the amount people can put aside for their pensions

In abolishing the LTA and increasing the Annual Allowance, MPAA, and Tapered Annual Allowance the government has increased the amount people can put aside for their pensions each year and save over their lifetime, all while minimising tax. The hope is that this will also dissuade people from retiring early.

Savers and investors see key subscription limits frozen

The annual subscription limit for adult ISAs will remain at £20,000.

Junior Individual Savings Accounts (JISA) and Child Trust Fund accounts will also remain static at £9,000.

No changes to planned Corporation Tax rises, but a new incentive to invest

From April 2023, Corporation Tax will increase from 19% to 25%. In acknowledgement of this move and to limit the impact of the increase, Hunt will allow businesses to offset 100% of investments in infrastructure and factory and machinery assets against profits for tax purposes.

The full force of this tax rise will hit those businesses with profits exceeding £250,000. Meanwhile, companies with profits of between £50,000 and £250,000 will get marginal relief.

For those with profits of less than £50,000 there is no change. They will continue to pay Corporation Tax at 19%.

Plan for business growth

As part of the Treasury’s plan to stimulate the UK’s sluggish economic growth and to spur regional activity outside London, up to 12 successful investment zones will receive funding of £80 million each over five years. This money can be directed towards tax relief for businesses, training, and infrastructure.

Eight places in England have been shortlisted to host investment zones. These are:

• East Midlands
• Greater Manchester
• Liverpool
• North East
• South Yorkshire
• Tees Valley
• West Midlands
• West Yorkshire

A further four zones will sit across Scotland, Wales and Northern Ireland.

Energy price guarantee extended

The energy price guarantee (EPG) that limits the typical annual bill to £2,500 has been extended.

The EPG had been due to change in April, with the ceiling increasing to £3,000 a year, but now the present level will remain for a further three months, until the end of June 2023. Hunt said: “This temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”

The chancellor added, “This measure will save the average family a further £160 on top of the energy support measures already announced.”

Fuel duty

As petrol and diesel prices continue to be volatile, the chancellor announced continuing support for households and businesses by extending the temporary 5p fuel duty for a further 12 months.

“That saves the average driver £100 next year and around £200 since the 5p cut was introduced,” Jeremy Hunt said.

This one-year extension will cost £6 billion.

Draught Relief

In good news for beer drinkers, Hunt announced that he would “significantly increase the generosity of Draught Relief”. From 1 August, the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.

As the chancellor said, “British ale may be warm, but the duty on a pint is frozen.”

Get in touch

If you have any questions about how the spring Budget will affect you and your finances, please get in touch.

All information is from the spring Budget document and the government’s spring Budget bulletin.

The content of this spring Budget summary 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.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

Despite the importance of having a will, you may be surprised to hear that many in the UK are yet to write one.

Indeed, according to a recent survey from MoneyAge, an alarming 51% of UK adults don’t have a will, and, of those who do have one, 43% haven’t updated their wishes since it was first written.

It’s of the utmost importance that you have an up-to-date will, as it remains one of the best ways to ensure that your estate is distributed according to your wishes when you die. Doing so can reduce your Inheritance Tax liability, diminish the chance of disputes, and even alleviate stress on your family.

Even if you already have a will, you should update it regularly to ensure that it remains appropriate for your current needs and that your assets are passed on to the right people.

So, read on to discover six important reasons it’s essential that you write, and regularly update, your will.

1. You can identify guardians for your children

While your will is a means of allocating your estate to your next of kin, it also allows you to express direct wishes about what will happen to your children after you die.

If your dependents are below the age of 18, you can use your will to appoint appropriate legal guardians for them.

The ramifications for not doing so can be serious, as a family court would likely need to decide what happens to them, and they could assign a guardian you usually wouldn’t have chosen.

2. It could mean less hassle for your family

When you die, your family typically needs to deal with your estate, all while dealing with the grief of your passing. So, writing or reviewing your will could make it easier for your family to make any necessary arrangements.

Without a will, this entire process can often be more stressful and time-consuming, and it could take longer for your assets to pass on to your loved ones.

3. It ensures nothing is left behind after you die

If you don’t have a will when you die, your family may struggle to deal with all the paperwork relating to your finances. When dealing with your estate, they could easily miss a previous pension, any protection you had, and even old savings accounts.

With an up-to-date will, you can clearly identify all your assets and allocate these to your chosen beneficiaries. This will ensure that your family doesn’t miss out on any wealth you would’ve otherwise wanted them to have simply because they didn’t know it existed.

Also, as you progress through life, your wealth will likely change. If you don’t regularly update your will, there could be a chance that some of your assets will be missed when your estate is divided.

4. It can help avoid disputes after you pass

When you pass away, it’s common for your family to go through a period of heightened stress and grief. So, dividing up an estate can sometimes be the perfect storm of stress and emotions, leading to disputes and arguments amongst your beneficiaries.

In fact, information from IBB Law shows that 75% of people are likely to experience a will or inheritance dispute case at some point in their life.

If your next of kin start to argue about your estate after you die, it can permanently damage their relationships and cause schisms in the family. It could also potentially cost thousands in legal fees.

If you have a well-written and up-to-date will, these disputes can potentially be avoided, and the process of dividing up your estate can be as painless as possible.

If your will isn’t regularly updated, disputes could potentially become more common. As an example, if you remarry and forget to update your will, your estate could potentially pass to the wrong people, resulting in a potential challenge and arguments and disputes after you die.

5. You could potentially mitigate Inheritance Tax

The total value of your estate will dictate the amount of Inheritance Tax (IHT) your next of kin will pay after you die.

As of the 2022/23 tax year, the IHT threshold rests at £325,000. You also have an additional £175,000 nil-rate band if you leave your home to a child or grandchild.

Anything left above this value is typically subject to the standard IHT rate of 40%.

Fortunately, a well-written will can often reduce your IHT liability. For instance, if you clearly specify you want to leave your home to a direct lineal descendent, such as a child or grandchild, you can make full use of the additional residence nil-rate band. This could substantially reduce the IHT liability on your estate.

With a will, you can allocate certain assets to your beneficiaries to ensure your estate plan is as tax-efficient as possible.

6. It gives you peace of mind

Above all, having an up-to-date will in place can give you the peace of mind that your affairs will be dealt with in a way that aligns with your wishes. The thought that your loved ones’ future is secure can take a weight off your shoulders and allow you to enjoy the present.

If you die without a will, the law will rule on issues from the guardianship of your minor children to the distribution of your estate. By putting a current will in place now and updating it after significant life events, you can take back control and rest assured that the right people will receive your wealth after you die.

Get in touch

We can discuss your will and your wishes and help to ensure you have peace of mind that your beneficiaries will be well looked-after in the unfortunate event of your death.

To find out more, please email hello@bluewealth.co.uk or call us on 0117 332 0230.

Please note

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.