PROSPERITY
PRIVATE CLIENT NEWSLETTER
WELCOME
Welcome to the latest edition of Prosperity.
It has been quite a season. The resignation of the Prime Minister has added a layer of political uncertainty that few anticipated entering the summer. Markets have, for now, responded with characteristic pragmatism, but questions around policy continuity - particularly on taxation and public spending - remain open. We await the outcome with interest, and in the meantime, we think it prudent to plan around what we know, while remaining alert to what may change.
And there is plenty we do know. The inheritance tax landscape has shifted considerably, with reforms to Agricultural and Business Property Relief now in force and the treatment of pension pots set to change from April 2027. These are not abstract policy questions - they directly affect how wealth passes between generations, and our specialists set out clearly what has changed and what steps are worth considering now.
As always, the themes in these pages are intended to prompt thought, not replace advice. If anything resonates with your own situation, please do get in touch.
Reme Holland Partner
Albert Goodman Chartered Financial Planners
Are Your Pension Plans Still Tax-Efficient?
Key Changes from 2027
Inheritance Tax will apply to “unused pensions” on deaths occurring on or after 6 April 2027.
This change is set to reshape the retirement and estate planning. Since 2015, it’s made sense for people with an IHT problem to build up their defined contribution pension, leaving it untouched for long as possible to treat it as a legacy asset. Leaving the pension pot until “last” meant it could potentially be passed on death free of IHT and tax efficiently to beneficiaries.
The Finance Act 2026 has received Royal Assent, so from 6 April 2027 it’s no longer tax efficient to use a defined contribution pension pots as an inheritance tax-planning vehicle. Saving in a pension is still the most tax-efficient way to save for your retirement income needs, but a pension won’t be as inheritance efficient.
Scope of the new framework
From 6 April 2027 most “unused pension funds” and certain other death benefits will now be within the scope of IHT. The current rules will still apply for deaths occurring before 6 April 2027 even if pension benefits are paid to beneficiaries after this date
Primarily the change to IHT rules is likely to impact on people who have benefits in “Defined Contribution” pension arrangements such as Personal Pensions, Workplace Pension, as well as “Self-Invested” schemes such as SIPPs and SSAS Schemes. It will also catch certain defined benefit lump sum death benefits and annuities.
Personal representatives and beneficiaries are jointly and severally liable for IHT on the pension. This expands the role of a Personal Representative – they’ll become central coordinators of information across multiple pension schemes with significant responsibility.
Below is a summary of what’s affected by the new farmwork in terms of benefits and beneficiaries
Pension Benefits In scope – subject to IHT
Most defined contribution pension death benefits.
Which pension benefits are affected
Certain defined benefit lump sum death benefits.
Annuities with guaranteed periods, value protection, or similar features.
Out of scope – not subject to IHT
Dependants’ scheme pensions – typically these are paid from defined benefit schemes.
Joint-life annuities set up on a joint basis from outset.
Most employment linked death-in-service benefits for current employment.
There is a distinction between exempt and non-exempt beneficiaries. Transfer of death benefits to spouses, civil partners and qualifying charities will remain free of IHT. Transfers of death benefits (above the available nil rate band) to children, grandchildren, cohabitees and trusts will not.
Beneficiaries
Non-exempt beneficiaries - subject to IHT
Children, grandchildren, step-children, foster children.
Which beneficiaries are affected
Exempt beneficiaries – not subject to IHT
Long-term UK resident spouses and civil partners.
Cohabitees (even if lived together for many years). UK registered charities.
Most trusts including Spousal Bypass Trusts. Registered political parties.
Non long-term UK residents.
National institutions.
One consequence of the new rules is the risk of double taxation where death occurs from age 75, as income tax also applies to withdrawals taken out by the beneficiaries. The majority of people (7 in 10) are likely to die AFTER age 75 but 3 in 10 people will die before age 75, so it’s important not to delay seeking advice.
Death Benefits Nomination
Who receives your pension benefits on your death isn’t covered by your will. You need to complete an “Expression of Wish”, which tells your pension scheme provider who you wish to leave your pension pot to on your death. Without one, the Pension Scheme trustees must investigate who your beneficiaries are and may require Grant of Probate or Letters of Administration before releasing funds, causing delays to the payout.
Without a named beneficiary, the trustees may be forced to pay out a one-off lump sum to a beneficiary instead of keeping the funds in the pension pot for the beneficiary to take regular pension withdrawals (beneficiary drawdown) which can be more tax-efficient. Not all pension scheme rules allow beneficiary drawdown.
An Expression of Wish isn’t strictly legally binding, but it’s a guide trustees use and you can update it anytime. Whilst your beneficiaries can use a legal process known as a Deed of Variation, to vary who benefits from your Will after your death, it can’t be used to vary how the pension benefits are paid out after your death.
This shift in IHT rules means that it’s 1) who you nominate on an Expression of Wish as well as 2) the specific rules of your Pension Schemes, that have direct tax consequences.
Please get in touch with us to discuss how the new IHT rules might impact on you and your beneficiaries and the options available to minimise the impact.
This content is for information only and does not constitute advice.A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). 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.
CLAIRE MUSSON Financial Planing Director claire.musson@albertgoodman.co.uk
Gifting Wealth Through a Trust
If you are considering passing wealth to the younger generations, you may wish to consider a trust, which is a tax efficient vehicle when structured correctly.
This type of gifting works well for grandparents wishing to benefit grandchildren. This is not recommended for parents gifting to minor children due to anti avoidance rules that make this type of gifting ineffective for tax planning purposes.
This article focuses on the use of a discretionary trust. Whilst similar results can be reached through a bare trust, this type of arrangement would mean the beneficiary is able to call on the assets when reach the age of 18, when they are perhaps not yet mature enough to hold assets in their own right. A discretionary trust ensures that the trustees control the trust assets until they can be passed to the beneficiaries, when appropriate, at the trustees discretion. Alternatively, the assets can be kept within the trust and used to benefit future generations.
Discretionary trusts for children are commonly used to fund school fees in a tax efficient manner but may also be used later in life for university fees, housing deposits or starting a business. It is important to note that following any gift, the transferor cannot benefit from the trust property as this would be considered a gift with reservation of benefit which would render the gift ineffective for tax planning purposes. The transferor must therefore be prepared to relinquish any future benefit from the asset(s) in full.
There are various taxes to consider when gifting to a trust.
Inheritance Tax (IHT)
Individuals are entitled to a nil rate band (NRB) of £325,000 and, provided the transferor has not made other chargeable transfers in the 7 years prior to the gift, the trust will receive its own NRB of £325,000. Therefore, a married couple could create a trust valued up to £650,000 with no IHT due and provided the transferor survives 7 years from the gift, this transfer will fall outside of the transferor’s estate.
Assuming the transferor survives 7 years, this creates an IHT saving of £130,000 or £260,000 for a couple. After 7 years the transferor’s NRB is fully restored and available to use against the death estate or, if appropriate, the process could be repeated.
As an example, if an individual were to start gifting at age 50, they could potentially create 3 discretionary trusts of £325,000, removing a total of £975,000 from their estate and saving IHT of £390,000 (or £780,000 for a couple). By the age of 71, the NRB is fully restored. Of course, this assumes the tax legislation remains unchanged during this time, however, as illustrated above, even one trust creates a substantial IHT saving.
It is possible to gift assets valued in excess of the NRB but the excess value will be taxed at the IHT lifetime rate of 20%. It is therefore much more common to limit gifts to £325k.
Within the trust, the assets are subject to IHT, however this is limited to 6% of the asset growth every 10 years compared with the current 40% death rate.
Capital Gains Tax (CGT)
Capital gains on any gifts to a discretionary trust can be deferred until a future disposal by the trust using holdover relief.
Income Tax
Income arising to a discretionary trust is subject to income tax at the rates applicable to trusts.
However, where income is distributed it is paid with a tax credit of 45% and, assuming the beneficiary pays tax at a lower rate, they will be able to offset this credit against tax due on their other income or claim a repayment. This works well for minor beneficiaries who have a full personal allowance available.
For example, a distribution of £6,500 would be grossed up to £11,818 and as this falls within the current personal allowance of £12,570, the beneficiary could claim a tax repayment of £5,318. They therefore receive the full £11,818 free of tax.
This is just a snapshot but, as you can see, it is possible to gift wealth, retain control, save IHT, defer capital gains and distribute income in a tax efficient manner using a discretionary trust.
It should of course be noted that trusts are complex and there are various costs associated with the creation and running of a trust but, when structured correctly and managed efficiently, the savings can outweigh the costs whilst providing the peace of mind the assets gifted are protected.
Please do get in touch if this is something you wish to explore.
KAYLEIGH OATEN Trusts & Estates Manager kayleigh.oaten@albertgoodman.co.uk
BENEFITS AND CONSIDERATIONS OF LIFETIME GIFTS
Gifting can be a useful way of passing on assets to your family and/or reducing your inheritance tax liability if this is applicable.
Currently, just 5% of estates are subject to inheritance tax in the UK. Every individual has a nil rate band available of £325,000 and a further £175,000 if the main residence is passing to children or grandchildren (direct descendants). Unused nil rate bands are transferable between spouses meaning that married couples have up to £1m of allowances between them. It should be noted that for estates over £2m, the residence nil rate band of £175,000 is restricted.
There is no limit to how much you can gift to individuals each tax year, however, if the gift is not covered by an exemption (see below), the value of the gift stays on your ‘7 year clock’ for inheritance tax purposes. If you survive more than 7 years after making the gift, the gift is exempt and outside of your estate.
If you die within 7 years of making the gift, the value of the gift forms part of your death estate and, if there is not adequate nil rate band to offset, any inheritance tax is payable by the person who received the gift, at a rate of up to 40% depending on how much taper relief is available, if any.
When making gifts to trusts, the nil rate band is used immediately if available. Any value exceeding the nil rate band is immediately chargeable to inheritance tax at the lifetime rate of 20% if paid by the trustees, or 25% if paid by the person making the gift.
As mentioned above, there are gifts that can be made and do not get added to the ‘7 year clock’. This includes the annual exemption of £3,000 per person, and you can also
use the previous year’s annual exemption of £3,000 if this was not used. There are also other exemptions including small gifts of £250 per person per annum, certain gifts on marriage and gifts made from excess income (if regular and does not affect standard of living).
When gifting cash, there are no capital gains tax considerations. However, for other assets, a gift will trigger an event for capital gains tax purposes. If a gift is made - or an asset is sold for less than market value - the gift will be treated as a capital disposal at market value and capital gains tax will be payable if the gain exceeds £3,000 and any capital losses brought forward. The capital gains tax rates are 18% and 24%, depending on income levels in the year the gift was made.
For some business assets and gifts made to trusts, it is possible to defer the capital gain by effectively transferring the asset at base cost. This means the capital gains tax would be payable by the person or trust receiving the gift if they were to sell the asset at a later point.
If you would like any advice in respect of gifting or inheritance tax planning, please do not hesitate to get in touch.
SOPHIE BAKER
MARKET UPDATE
If you were hoping for a quiet summer of unremarkable markets and predictable interest rates, we have some news. Pull up a chair. Possibly make a cup of tea. This one has everything: British and geopolitical drama, eye-watering IPO valuations, and the very real prospect that your petrol bill is about to test your feelings about public transport.
The equity market has been remarkably resilient, markets delivered a broadly positive few months, with the S&P 500, European indices, and emerging markets all posting gains, with emerging markets leading the way. Diversified portfolios behaved as they should, the more growthoriented investors participated more fully in the upside, while cautious investors saw steadier, more modest returns. That is rather the point of diversification, and it is pleasing when it works as advertised.
The picture heading into the second half of 2026 is, nonetheless, one of cautious optimism. Corporate earnings remain solid, and AI-related investment continues to underpin technology sector valuations. However, with several major IPOs on the horizon (more on those shortly), markets face an unusual bout of supply pressure. When three of the world’s most valuable private companies arrive at the stock exchange simultaneously, even the most
enthusiastic investors begin doing arithmetic.
With regards to Bonds, the good news is that yields are attractive again, and UK gilts in particular are offering genuinely competitive income for those prepared to accept the trade-off. The less good news: inflation remains sticky, and the Bank of England’s anticipated rate cuts are looking increasingly unlikely, with rate hikes a small possibility. Following the resignation of Keir Starmer, we await confirmation of our new Prime Minister. A new Prime Minister is highly likely to result in a new Chancellor, and we wait with interest to see the shift in fiscal policy this will bring.
The AI trade has also arrived in the bond market, with hundreds of billions in new debt expected from large technology borrowers funding data centre construction. This is both a sign of corporate confidence and a reminder that even the most exciting industry in living memory requires a lot of very ordinary bricks and electricity.
The biggest story dominating the spring months is Iran, oil, and the impact on inflation. In late February the US and Israel launched military strikes against Iran, triggering retaliatory attacks across the Middle East and a swift and unpleasant response from global energy markets. Oil prices
crossed £75 a barrel for the first time since 2022, and petrol prices at UK forecourts jumped from around 131p per litre in February to nearly 149p, with diesel hitting 175p. None of this was in the budget - yours or the Chancellor’s.
The OECD has warned that the UK faces the largest economic hit of any G20 nation from the conflict, with 2026 growth forecasts cut from 1.2% to just 0.7% and inflation now projected to average 4% this year, this is far above the Bank of England’s 2% target. The National Institute of Economic and Social Research suggests UK inflation could reach anywhere between 3% and 5% by late summer, depending on how the conflict develops. With regards inflation, the energy price cap adjustment in July will be the moment this really lands on household bills and possibly on client conversations about cash flow planning.
It is going to be a busy summer. As opposed to bird watching, why not try your hand at IPO watch! Ones to watch out for are SpaceX, OpenAI & Anthropic. If geopolitics is the anxiety of 2026, the IPO pipeline is its excitement. SpaceX has formally launched its public offering on the Nasdaq, targeting a valuation of approximately £1.3 trillion and raising around £56 billion making it the largest IPO in history and, by a considerable margin, the most expensive way to buy a piece of Elon Musk’s ambitions.
Hot on its heels, Anthropic (makers of Claude, the AI assistant) is targeting a UK-friendly public listing as early as October at a reported £670 billion valuation, while OpenAI is expected to follow in Q4. Together, these three
companies could raise close to £149 billion, more than the total raised in all US listings combined since 2022. These are real businesses with real revenues, which is more than could be said for some companies that floated during the dot-com era. Whether the growth expectations baked into the valuations are equally real is the question that will define portfolios for years to come.
We are watching closely, and will be discussing implications for client portfolios as these listings progress. As ever, if any of this prompts questions about your own financial plan or simply the urge to discuss the geopolitical situation over a coffee, our door is open. That is, after all, what we are here for.
The following information is accurate as at the date of writing on 10 July 2026.
The content of this article is for information purposes only and does not constitute individual advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. Past performance is not a reliable indicator of future returns.
ONSHORE AND OFFSHORE DISCLOSURES TO HMRC
The Autumn 2025 Budget confirmed that HMRC would continue to have investment to facilitate their increased focus on compliance and reporting obligations. This means it is more important than ever to demonstrate full transparency in relation to your tax affairs – this includes both onshore and offshore matters.
The expectation is you take a proactive approach to identifying and correcting any errors or omissions in historic tax years, however, with HMRC’s increasingly datadriven and compliance-focused approach, it is essential.
HMRC offer several ways to disclose errors or omissions, so it is key to ensure that you have a full understanding of the process and associated implications.
There are slightly different methods available for onshore and offshore disclosures. A UK disclosure typically arises where UK-based income or gains have not been fully reported to HMRC. Some of the more common examples include undeclared rental income, inaccuracies in business profits, or incorrect claims for reliefs.
Disclosures of this nature are usually reported using HMRC’s Digital Disclosure Service, which allows taxpayers to bring these matters forward voluntarily. In our experience, early and unprompted disclosure significantly reduces exposure to penalties. Should HMRC identify any error or underreporting then this does give rise to much higher penalties. By proactively informing HMRC and being fully cooperative, penalties can often be mitigated to a much lower level.
Offshore disclosures of income or gains are generally more complex and higher risk. Penalties for offshore non-compliance can also be substantially higher than for onshore matters, particularly where jurisdictions are classified as non-cooperative.
HMRC have made it clear that offshore non-compliance remains a key priority, supported by increased information exchange between tax authorities worldwide. This means that UK taxpayers with overseas bank accounts,
investment portfolios, or property holdings are far more visible to HMRC than ever before.
For offshore matters, HMRC operates the Worldwide Disclosure Facility (WDF). This is the principal route for disclosing historic tax issues involving non-UK income and/or assets.
Both of the above disclosure processes involve notifying HMRC of the intention to disclose, followed by detailed reporting to quantify tax, interest, and penalties. While this can feel daunting, structured and early engagement with HMRC typically leads to a more favourable outcome. Importantly, HMRC also distinguishes between deliberate evasion and genuine error, so full transparency and cooperation are critical in demonstrating the latter.
A key message for anyone who thinks they may have made an error or under-reported income and/or gains, is that timing really matters. HMRC receive large volumes of data from both UK and overseas institutions, and once an enquiry has been opened, the opportunity to make a voluntary disclosure and benefit from reduced penalties is significantly curtailed.
Our team here at Albert Goodman have extensive experience of dealing with and negotiating both UK and worldwide income disclosures, so please do get in touch if you are concerned that any of the above may impact you. Early and proactive advice will not only be beneficial financially, but also gives you peace of mind.
A NEW ERA FOR INHERITANCE TAX: WHAT THE 2026 APR & BPR REFORMS MEAN FOR YOU
The legislation changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), effective from 6 April 2026, are one of the most significant inheritance tax (IHT) changes for business owners and farming families in recent years. Historically, these reliefs could provide up to 100% relief on qualifying business and agricultural assets with no overall cap, allowing many family businesses and farms to pass between generations free of IHT.
That changed following the Autumn Budget 2024, when the Government proposed capping 100% APR and BPR at £1 million per person, with only 50% relief above that level. The proposal caused widespread concern, because it could have created substantial IHT liabilities without providing an obvious source of funds to pay for them.
Following consultation and strong industry lobbying, the final rules were softened. Everyone now has a £2.5 million allowance that can still qualify for 100% APR and BPR, with qualifying assets above that level receiving 50% relief. Importantly, the allowance is transferable between spouses and civil partners, meaning a couple may be able to pass up to £5 million of qualifying assets free of IHT, before taking standard nil-rate bands into account.
Even so, the principle has changed fundamentally as relief is no longer unlimited. Larger estates, diversified farming operations and family-owned trading businesses may now face an IHT exposure where previously there was little or none. This is especially relevant where land or business values have risen significantly, pushing total asset values above the new thresholds.
The reforms also affect certain investments, for example, shares quoted on markets such as AIM. These previously qualified for 100% BPR but will now generally receive only 50% relief. This reduces the effectiveness of some inheritance tax planning arrangements and makes it more important for clients and advisers to review how investment portfolios fit into wider estate planning.
Lifetime gifting can remain a useful strategy for removing value from an estate, subject to the seven-year survival rule, but care is needed because anti-forestalling provisions
may affect gifts made around the reform period. Timing and structure matter more than ever, and seeking advice is highly recommended.
With a defined allowance now in place, it is vital that both spouses or civil partners can make full use of their available relief. This may require changes to wills, succession planning and the way business or agricultural assets are held.
In addition to structural changes, many families are now considering insurance-based solutions, such as wholeof-life policies written in trust, to provide funds without forcing the sale of core assets. Whilst this does not mitigate the IHT, it can be viewed as a simple solution to paying the tax at the right time.
Overall, APR and BPR remain valuable reliefs, but the April 2026 reforms introduce a more restricted framework and greater planning complexity. For affected families, early review of gifting, ownership and protection arrangements will be essential to ensure the wider family goals are met.
If you would like to discuss these changes and the impact on your personal situation, please get in touch.
Please note that this article is for information only and does not constitute advice. The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts.
Close Company Reporting for Directors
From 6 April 2025 (for 2025/26 tax returns) it is necessary for company directors to declare additional information on the employment pages of their personal tax returns.
When a company is considered a close company, its directors are required to report:
The name and registered number of the company.
The amount of dividends received from the company, even if nil.
The percentage of share capital held during the year, even if nil.
Broadly speaking, a close company is one which is controlled by five or fewer participators (often shareholders) or by any number of participators who are also directors.
Therefore, the new rules will impact most owner-managed and family-owned companies.
COMMON QUESTIONS ANSWERED:
The new rules do not result in all directors being obligated to file a tax return, but the requirement applies to directors who are already within self-assessment.
Where an individual is a director of more than one company it is necessary to report a separate employment page for each company.
The percentage shareholding should be calculated by reference to the nominal value of shares and should include other share types, for example preference, nonvoting and redeemable shares.
If the share percentage changes in the year, the highest percentage owned during the year should be included.
The dividends entered on the employment pages do not impact the tax position. This will be calculated on the dividends entered within dividend income.
It is important to complete the required boxes even if the figures are nil.
HMRC may issue penalties of £60 for failure to provide the required information.
There are a couple of areas where it is hoped that HMRC will supply further information later in the year.
Please do let a member of the team know if you have any questions.
SOPHIE HARRIS Personal Tax Senior Manager sophie.harris@albertgoodman.co.uk
PERSONAL PENSIONS–ARETHEY STILL WORTHIT?
Currently, defined contribution pension pots do not form part of your taxable estate on death. This makes them a popular vessel for passing on wealth to future generations without incurring an inheritance tax (IHT) charge, providing they remain untouched.
However, from 6 April 2027, the IHT treatment of pension pots is changing and they will be brought in to form part of your taxable estate on death. For estates with a value in excess of the nil rate band (currently £325,000 per person), this means pension pots will now be subject to an IHT charge of 40%.
For those who pass away after the age of 75, the beneficiaries will also be subject to income tax on receipt of the pension income. This can result in an effective tax rate of over 60% in some cases, which begs the question, is it still worth investing in a pension?
While the tax advantages for pensions on death are due to come to an end, they can still provide tax saving opportunities during your lifetime.
Contributions made into a personal pension benefit from a 20% top-up from the government, essentially providing basic rate tax relief. In addition, higher rate and additional rate taxpayers can extend their basic rate and higher rate tax bands by their gross pension contributions. This means more income will be taxed at a lower rate, saving up to 20% tax.
For example, a higher rate taxpayer that makes monthly contributions of £1,000 into their personal pension will receive an additional £200 by way on a government top up, totalling £2,400 in a single tax year. On top of this, their
basic rate band of £37,700 will increase to £52,100, saving them tax of £2,880 a year.
Pensions can also provide a useful source of income in later life, particularly where significant care costs start to be incurred, such as planning for your future income requirements. Our Financial Planning team would be delighted to assist you with this.
It is worth noting that the amount you can contribute into a pension in any one tax year is limited by your annual allowance and net relevant earnings. This includes both personal contributions, those made under salary sacrifice and by your employer. The standard annual allowance is currently £60,000, but this can be subject to tapering depending on your income levels. Contributions made in excess of your annual allowance or net relevant earnings can result in tax charges or the withdrawal of the government top-up.
If you would like assistance in determining your available pension contribution allowances or advice on your IHT position, please get in touch with a member of the personal tax team who would be happy to help.
KATHRYN LOADER
INHERITANCE TAX CHANGES - TIME TO REVISIT YOUR STRATEGY
For many years, pensions and other tax efficient portfolios have played a central role in inheritance tax (IHT) planning. With recent changes to IHT and more due in 2027, those who have relied heavily on tax efficient portfolios as key to their IHT strategy may now need to reconsider their approach.
Pensions - A Shift in Treatment
From April 2027, most unused pension funds will form part of an individual’s estate for IHT purposes. This represents a clear change from the long-standing position where pensions typically sat outside the estate.
As a result, unspent pension funds could be subject to IHT at 40%, reducing their effectiveness as a vehicle for passing on wealth.
This change is particularly important for those over 57 because it may influence when and how pension benefits are taken. There are a wide range of options and the most tax-efficient route during someone’s lifetime and after their death needs careful consideration.
Individuals with an IHT liability who have previously planned to retain pensions for beneficiaries will need to revisit that strategy. In some cases, it may be sensible to spend or gift pension funds more actively during lifetime and preserve other assets (such as cash or investments held personally).
Advice is often needed to decide how withdrawals should be structured, the pace of withdrawals, use of tax allowances and tax bands, and the interaction with other income sources. This is rarely a one-off decision: but an ongoing strategy that should be reviewed as legislation, investment markets, personal circumstances and estate values change.
Now is also a sensible time to revisit any death benefit nomination (often called an expression of wish) attached to pension arrangements. Pension death benefits are not typically distributed through a will. Ensuring nominations remain up to date and reflect current intentions can help align pension wealth with the broader estate plan.
AIM Portfolios - A Changed Risk-Reward Balance
AIM investments have often been used as a shorter-term IHT planning solution, benefiting from 100% Business Relief after two years.
From 6 April 2026, this relief reduces to 50%. In practical
terms, this could mean an effective IHT rate of 20% on these portfolios, prompting a reassessment of whether the level of investment risk remains justified.
AIM portfolios are high risk investments and not suitable for many investors.
Business Relief & Agricultural Relief: A New Cap
From April 2026, Business Relief and Agricultural Relief will be subject to a combined £2.5 million allowance.
The first £2.5 million of qualifying assets will continue to receive 100% relief.
Any value above this threshold will receive relief at 50%.
For couples, this allowance can be combined, allowing up to £5 million to pass free of IHT. Despite this, the changes represent a meaningful shift for business owners and farming families.
Taking Stock and Planning Ahead
With several established planning routes becoming less effective, this is a natural point to review existing arrangements.
There remains a range of options available. Trust planning, lifetime gifting, structuring of business interests, and revisiting pension and investment strategies can all play a role in building an effective approach under the new rules.
As always, the right solution will depend on individual circumstances. A structured review with a financial adviser can help ensure plans remain aligned with both current legislation and long-term objectives.
Please be aware, the Financial Conduct Authority does not regulate estate planning or trusts.
Winter Fuel Payment
DO I NEED TO REPAY?
During winter 2025, the Winter Fuel Payment (WFP) was once again paid to individuals of state pensionable age, but there is an important tax consequence for higher-income pensioners, which was brought into effect from April 2025.
If an individual’s total income for the 2025/26 tax year exceeds £35,000, the full amount of their WFP will be ‘clawed back’ through the tax system. Crucially, this is not the same as making the payment itself taxable. Instead, HMRC imposes a separate tax charge equal to the amount received.
Therefore, in practice, anyone who earns just above the £35,000 threshold may find that the whole payment is clawed back, creating a sharp cliff edge.
Total income is assessed on an individual basis, not by household. Each individual has their own WFP entitlement, even if it is paid as a combined amount, to a husband and wife for example. As such, if only one person’s income exceeds £35,000, the clawback will apply to them alone, with the other remaining unaffected.
The figure used is total income before deductions, such as the personal allowance, or relief for charitable gift aid donations, and includes pensions, employment income, savings income, dividends rental profits, and other sources.
For taxpayers within Self-Assessment, the charge will be collected through the 2025/26 tax return. For those outside Self-Assessment, HMRC will recover it by adjusting the PAYE tax code for 2026/27, meaning slightly higher monthly tax deductions. This can come as a surprise to pensioners who thought the payment was tax-free support.
Individuals just exceeding the £35,000 limit may wish to review whether they want to continue claiming the WFP, or whether to opt-out for simplicity.
KATIE HODGE Personal Tax Senior Manager