The Autumn Budget and its impact on your retirement plans

The award winning wealth management and investment experts Killik & Co have opened a new space on Devonshire Road – House of Killik Chiswick. The Chiswick Calendar is pleased to share their guest blogs on how best to plan and save to acquire the wealth to achieve your goals.

Killik & Co won “Best Discretionary / Advisory Wealth Manager’ in the 2023 FT Investors Chronicle Awards.”

Could the Autumn Budget impact your retirement plans?

While Labour has been clear that they are not going to increase rates of VAT, Income Tax or National Insurance, Rachel Reeves has recently stated that the government will have to increase taxes in some capacity to raise revenue.

This has led to concern amongst our clients about changes to Capital Gains Tax, pension tax relief and Inheritance Tax legislation, which could result in higher tax bills for UK taxpayers, further highlighting the importance of taking advantage of tax-efficient savings opportunities.

 Ahead of what has been promised to be a “painful budget” on the 30th October, we have been speaking with clients at all stages of their financial journey about how they can best prepare themselves. 

 In this article, Phil Sole, Relationship Manager at House of Killik Chiswick, explores how these tax changes could impact retirees and discusses actions they should consider now.

Tax allowances could remain frozen

With the government outlining plans that would effectively ringfence taxes around workers, it is possible that Income Tax rates, including allowances, could remain frozen. The Personal Allowance was frozen during the 2021/2022 tax year when Rishi Sunak announced it would remain at £12,570 until the 2025/2026 tax year and later extended by Jeremy Hunt to the 2028 tax year. This move was referred to by some as a ‘stealth tax’ as the impact of inflation effectively means the value of the allowance continues to shrink. A further freeze would be concerning for retirees whose index-linked pension income i.e., the State pension, is pushed into taxable rates as a result.

Inheritance Tax exemptions could be reviewed

While the Inheritance Tax (IHT) rate is unlikely to change, speculation suggests the government could address the various allowances, reliefs and exemptions that surround IHT. As a reminder, IHT is charged at 40% on the taxable value of an estate over certain thresholds, and those thresholds have been frozen since 2009; affecting those seeking to mitigate the impact of IHT. In addition, there has been speculation about whether a Labour government might consider bringing pensions back into the Inheritance Tax mix as part of the taxable estate. This would impact those who may have deferred accessing their pensions in retirement in favour of withdrawing from assets like ISAs, which would form part of a taxable estate for IHT upon death.

Estate planning and wealth transfer could be impacted

Significant changes to tax legislation around IHT could also impact current strategies of transferring wealth to family members. For example, gifting can often be an effective way of mitigating an estate’s IHT exposure – particularly for those wanting to pass wealth to children or grandchildren – provided you live for seven years after making the gift (unless the gift is part of a trust). Other options for wealth transfer that help to mitigate IHT include making regular gifts out of surplus income or setting up a trust, with the latter allowing you to move the money outside of your estate and gain more control over how and when the funds are invested and distributed to beneficiaries.

Significant changes in IHT legislation may result in current mitigation strategies no longer being as suitable for clients as they once were, potential restrictions being introduced and limiting their effectiveness, or new mitigation strategies being introduced under a Labour government.

More ways we can help with family finances

Now is a critical moment to ensure family finances are arranged as tax efficiently as possible. While the most appropriate solution will depend on your individual circumstances, taking advantage of the existing allowances and known tax reliefs to meet your financial goals can help provide more peace of mind for the future. The sooner you start planning, the more control you can have.

Whether you are seeking assistance with saving and investing for your family, arranging your finances in a more tax-efficient manner or transferring wealth to the next generation, we have a team of experts, that are specialised in a broad range of financial areas, including investment management, wealth planning, tax, trusts, wills, lasting power of attorney and more.

To learn more about how we can help you to save, plan and invest to meet the financial goals you have for your family, please drop into House of Killik Chiswick for a complimentary chat or email chiswick@killik.com.

Please be aware that as with all investments, your capital is at risk and you may not receive back the same amount that you invest. Please note that tax treatments depend on personal circumstances and the rules may be subject to future change.

If you have any questions about this article, or wish to discuss your financial circumstances, please do not hesitate to contact Relationship Manager, Phil Sole and House & Community Coordinator, Emma Walker.

We welcome all Chiswick residents to House of Killik, no appointment necessary.  Pop in for a chat and a coffee at 13 Devonshire Road – we look forward to meeting you soon.