From April 2027, pensions are set to become subject to Inheritance Tax (IHT) for the first time. For many families, this could mean a larger tax bill on death, unless proactive planning is put in place.

Let’s explore what’s changing, what it could mean in practice, and the key ways you can still protect your wealth for future generations.

What’s Changing?

At the moment, pensions sit outside your estate for IHT purposes. That means when you pass away, your pension funds can usually be passed to your chosen beneficiaries free from Inheritance Tax, and often income-tax-free if death occurs before age 75.

However, from 6 April 2027, the government plans to include unused pension funds within your taxable estate, meaning they could now face the 40% IHT charge — just like your property, ISAs or other investments.

While final details are yet to be confirmed, this could make a significant difference to what your family ultimately inherits.

What Could the Difference Look Like?

Example 1: Current Rules (2025/26)
Sarah has a £1 million pension pot and passes away aged 80. She has already used her £325,000 nil-rate band elsewhere.
Under current rules, her pension is outside her estate — so no IHT is due.
Her beneficiaries receive the full £1 million (subject to income tax as they draw it).

Example 2: Post-2027 Rules
If Sarah dies after April 2027 and her pension is brought into her estate, the same £1 million could now face 40% IHT, resulting in a £400,000 tax bill.
Her beneficiaries could be left with just £600,000 — a huge difference for the same pot of money.

Why This Matters for Wealthy Clients

For some clients whose total wealth — across property, investments, and pensions — already exceeds as little as £325,000, this change could significantly increase their exposure to inheritance tax.

In short, pensions will no longer be the “tax-free wrapper” for intergenerational wealth they once were — and ignoring the issue could cost your beneficiaries dearly.

How to Reduce the IHT Impact

Thankfully, there are several smart, tax-efficient strategies that can help reduce or even eliminate the IHT bill.

1⃣ Business Relief (BR) Investments

Certain qualifying investments — such as holdings in trading businesses or AIM-listed shares — can qualify for Business Relief (BR), offering powerful inheritance tax advantages.

Under current rules:

• The first £1 million of qualifying business assets (per person) can attract 100% IHT relief after just two years.

• Any value above £1 million can still benefit, but would typically be subject to 20% IHT instead of the full 40% rate.

• AIM-listed shares will qualify for 20% rather than 40% inheritance tax

This makes Business Relief investments a flexible option for those wanting to retain access to capital while still reducing the taxable value of their estate.

However, business relief is a high-risk investment and isn’t right for everyone.

2⃣ Whole of Life Insurance – Creating Liquidity for the Tax Bill

Even with the best planning, many families will still face some level of IHT. That’s where Whole of Life insurance can come in.

This type of policy is designed to pay out on death, providing a lump sum to cover the IHT bill.
When written in trust, the proceeds fall outside your estate, so the money can be accessed quickly to pay HMRC — without selling property, investments or business assets.

It’s an effective way to create liquidity at exactly the time your family needs it most.

3⃣ Trust Planning

Trusts remain a cornerstone of good estate planning. You could consider moving surplus income or capital into trust, reducing the value of your taxable estate while maintaining control over how and when funds are distributed.

A spousal bypass trust can also help direct pension death benefits outside of your beneficiaries’ estates, keeping wealth flexible and protected for future generations.

4⃣ Gifting and the ‘7-Year Rule’

If you have more than you’ll realistically spend, lifetime gifting can be one of the simplest and most effective IHT-reduction strategies.

• Outright gifts are IHT-free after seven years

• You can use your £3,000 annual exemption each year

• Regular gifts from surplus income are immediately exempt, provided they don’t affect your standard of living

Even modest, regular gifting can make a meaningful difference over time.

5⃣ Charitable Giving

Leaving 10% or more of your estate to charity can reduce the IHT rate on the remaining estate from 40% to 36% — allowing you to support causes you care about while reducing your family’s tax bill.

6⃣ Review Your Pension Nominations

Even though pensions may soon fall within IHT, they remain a flexible estate-planning tool.

Make sure your expression of wish is up to date and reflects your current circumstances and intentions — especially if you’re considering new strategies like trusts or insurance.

Taking a Holistic Approach

Every client’s situation is unique. The right plan depends on your wealth, income needs, family structure, and long-term goals.

We take a holistic view, combining investment management, tax-efficient structuring, and protection planning to ensure your money supports both your lifestyle today and your legacy tomorrow.

Final Thoughts

The proposed changes to pensions and IHT represent a major shift in how wealth may be taxed in the UK.
But with early planning — through Business Relief, trusts, lifetime gifting, and Whole of Life cover — you can still stay one step ahead and ensure your wealth passes smoothly to those who matter most.

If you’d like to explore how these changes could affect your estate, or what planning options might work best for your family, please do get in touch.
I’d be happy to help you review your position and create a plan that gives you — and your loved ones — peace of mind.

FAQs

Will my pension be taxed when I die after 2027?
Yes. Under the proposed changes, unused pension funds are expected to be included in your estate for IHT purposes from April 2027.

How can I reduce inheritance tax on my pension?
Consider strategies such as Business Relief investments, trust planning, lifetime gifting, and Whole of Life insurance to cover any remaining tax liability.

What is Business Relief for Inheritance Tax?
Business Relief allows certain business or qualifying AIM investments to be passed on with up to 100% IHT relief on the first £1 million of value (20% IHT thereafter).

How does Whole of Life insurance help with IHT?
A Whole of Life policy, written in trust, pays out on death to provide cash to settle the IHT bill — ensuring your family doesn’t need to sell assets to pay the tax.

You can find more information about how to reduce your inheritance tax bill here

You can also read my previous blog, Investments & Inheritance Tax Planning: Keeping More in the Family, here

 Risk warnings 

·  The value of investments, and the income from them, can go down as well as up.

·  You may not get back the full amount you invest.

·  Past performance is not a reliable indicator of future results.

·  The tax treatment of investments depends on individual circumstances and may change in the future.

·  Pensions: Your eventual retirement income will depend on contributions, investment performance, and tax rules at the time

·  ISAs: Tax advantages depend on your personal circumstances and may change.

·  Property/Alternative Investments: The value of property and specialist investments can be harder to sell (illiquid) and may rise and fall in value more sharply.

·  Business Relief / EIS / VCTs: These are higher-risk investments and may not be suitable for all investors. They are often illiquid, and tax benefits depend on HMRC rules.

·  Investments should always be considered in line with your risk profile and personal circumstances.

·  You should seek professional advice before making any investment decision.

The post 💬 Big Pension Changes Ahead: What the 2027 Inheritance Tax Rules Could Mean for You appeared first on Alice Douglass.

What Is Inheritance Tax?

Inheritance Tax is a tax paid on the value of your estate when you die — including your property, savings, investments, and certain other assets. The current IHT rate is 40% on the portion of your estate that exceeds your available allowances.

The Nil-Rate Band – Your Basic Allowance

Every individual has a Nil-Rate Band (NRB) — the amount you can pass on before Inheritance Tax applies. The standard Nil-Rate Band is £325,000. Anything above this is generally taxed at 40%, unless it qualifies for an exemption or relief. If you’re married or in a civil partnership, you can transfer any unused allowance to your spouse or partner, meaning a couple can currently pass on £650,000 before IHT is due.

The Residence Nil-Rate Band (RNRB)

Introduced in 2017, the Residence Nil-Rate Band (RNRB) helps families pass on the family home to direct descendants. As of 2024/25, the RNRB is £175,000 per person and applies in addition to the standard £325,000 Nil-Rate Band. To qualify, you must own (or have owned) a home and leave it to direct descendants, such as children or grandchildren. This means a married couple could potentially pass on up to £1 million free of Inheritance Tax.

The Taper Rule – How Large Estates Lose the Extra Allowance

If your total estate is worth more than £2 million, your Residence Nil-Rate Band starts to taper away. For every £2 over £2 million, you lose £1 of RNRB. That means once your estate exceeds £2.35 million, the RNRB is lost completely.

Example: James and Sarah have an estate worth £2.2 million. They’re £200,000 over the threshold, so they lose £100,000 of their RNRB (£1 for every £2 over). Instead of £175,000 each, they can only claim £75,000 each. Their total tax-free allowance reduces from £1 million to £850,000.

Gifts and Lifetime Exemptions

You can reduce your taxable estate by making gifts during your lifetime. The main exemptions are:

• Annual exemption – £3,000 each tax year (carry forward one year)
  • Small gifts – £250 to as many people as you like each year
  • Wedding gifts – £5,000 to a child, £2,500 to a grandchild
  • Regular gifts from surplus income – immediately exempt if they don’t affect your standard of living
  Larger gifts fall under the ‘7-year rule’ — if you survive seven years, they’re normally free from IHT.

What Happens When You Die?

When someone dies, their executors calculate the estate’s total value, apply the allowances, and work out any tax due. The tax must usually be paid before probate is granted — within six months of death. Many families use Whole of Life insurance to cover this bill, so assets don’t have to be sold to pay HMRC.

Ways to Reduce Inheritance Tax

Here are a few strategies to consider:
1⃣ Use both allowances — the Nil-Rate Band and Residence Nil-Rate Band
2⃣ Make lifetime gifts and keep records
3⃣ Consider trusts to move wealth out of your estate
4⃣ Invest in Business Relief assets — up to 100% IHT relief after two years
5⃣ Use life insurance written in trust to provide funds for any tax liability.

FAQs: Inheritance Tax Explained

What is the current Inheritance Tax threshold?
Each person has a £325,000 Nil-Rate Band plus, if applicable, a £175,000 Residence Nil-Rate Band. Married couples can combine these for up to £1 million of relief.

At what rate is Inheritance Tax charged?
40% on the value of your estate above allowances (or 36% if you leave 10% or more to charity).

How does the taper rule work?
If your estate exceeds £2 million, you lose £1 of the Residence Nil-Rate Band for every £2 over that amount.

How can I reduce my IHT bill?
By gifting, using trusts, investing in qualifying business assets, and ensuring your estate plan uses all available allowances.

Final Thoughts

Inheritance Tax doesn’t have to be inevitable. By understanding how allowances work — and planning early — you can ensure more of your wealth passes to your loved ones and less to HMRC. If you’d like to review your estate or explore steps to protect your family’s future, please get in touch — I’d be happy to guide you through your options in plain English.

To find out more, read my other blogs on inheritance tax here.

 Risk warnings 

·  The value of investments, and the income from them, can go down as well as up.

·  You may not get back the full amount you invest.

·  Past performance is not a reliable indicator of future results.

·  The tax treatment of investments depends on individual circumstances and may change in the future.

·  Pensions: Your eventual retirement income will depend on contributions, investment performance, and tax rules at the time

·  ISAs: Tax advantages depend on your personal circumstances and may change.

·  Property/Alternative Investments: The value of property and specialist investments can be harder to sell (illiquid) and may rise and fall in value more sharply.

·  Business Relief / EIS / VCTs: These are higher-risk investments and may not be suitable for all investors. They are often illiquid, and tax benefits depend on HMRC rules.

·  Investments should always be considered in line with your risk profile and personal circumstances.

·  You should seek professional advice before making any investment decision.

The post 💬Understanding Inheritance Tax: How It Works and How to Reduce It appeared first on Alice Douglass.

 Investments & Inheritance Tax Planning: Keeping More in the Family

Why inheritance tax matters

Inheritance tax is charged at 40% on estates worth more than the current allowances. For many families — particularly those who own property or have built up sizeable investments — it’s a real issue. Without planning, a large chunk of your wealth could end up going to HMRC instead of your loved ones.

Where investments come in

A balancing act

Why take advice?

The post Investments & Inheritance Tax Planning: Keeping More in the Family appeared first on Alice Douglass.

As the end of the tax year draws near, it’s time to put your financial house in order. While it might feel like a bit of a chore, getting your finances in shape before the tax year end is not only smart—it can also save you a significant amount of money. In this blog, we’ll walk you through some top tips for financial planning and why you should pay attention to the tax year-end deadlines. Think of it as a spring clean for your finances!

Why Is the Tax Year-End Tax Planning So Important?

In the UK, the tax year runs from 6th April to 5th April the following year. The end of the tax year marks a crucial point in time when your financial situation is assessed, and the actions you take before the 5th of April can have a huge impact on your tax liabilities.

So, why should you care? Well, making sure your finances are in order could help you reduce your tax bill, boost your savings, and ensure you’re maximising the allowances available to you. Plus, it’s a chance to take stock of your overall financial health—something we can all benefit from!

Top Tips for Financial Planning Before the Tax Year-End

1. Use Up Your ISA Allowance

Individual Savings Accounts (ISAs) are a fantastic way to save tax-free, so it’s important to make sure you’re using your full allowance. For the 2025/26 tax year, the ISA allowance is £20,000 per person. If you don’t use it by the 5th of April, you’ll lose it—so why not make the most of this opportunity?

You can choose between a Cash ISA, Stocks & Shares ISA, or an Innovative Finance ISA, depending on your financial goals and risk appetite. Just be mindful of the deadline, and don’t leave it until the last minute!

2. Consider Contributing to Your Pension

One of the best ways to reduce your taxable income is by contributing to your pension. Pension contributions come with tax relief, so if you’re looking to reduce your tax liability, this is a strategy worth considering. You can contribute up to £60,000 per year into your pension (or 100% of your earnings, whichever is lower), but be aware of the rules around annual allowance and the carry-forward option if you haven’t maximised contributions in previous years.

The end of the tax year is a great time to boost your pension pot if you’ve got the means to do so. After all, you’re not just saving for your future, you’re saving on your taxes, too!

3. Make Use of Your Capital Gains Tax Allowance

Every tax year, you’re allowed to realise up to £3,000 worth of capital gains before you have to pay any tax on them (for the 2025/26 tax year). If you’ve made any profits from selling investments, property, or other assets, consider selling them before the tax year-end to make use of your annual exemption. You could also think about transferring assets to a spouse or civil partner, as they have their own allowance.

By carefully planning your asset sales, you can reduce your overall capital gains tax bill and keep more of your hard-earned money.

4. Review Your Tax Code and Check for Errors

It might sound tedious, but reviewing your tax code can help you avoid paying more tax than necessary. Mistakes happen, and your tax code could be wrong without you realising it. If you think something’s amiss, get in touch with HMRC before the year ends to get it sorted. The sooner you spot an error, the quicker you can rectify it and avoid overpaying.

5. Charitable Donations: A Win-Win

If you’re feeling generous, making charitable donations before the end of the tax year can also be a clever way to reduce your tax bill. Donations to charity are tax-deductible, and if you’re a taxpayer, you can claim Gift Aid on top of that.

You could donate to a cause close to your heart, and at the same time, benefit from a reduction in your taxable income. It’s a win-win!

Other Tips

Keep Track of Your Business Expenses

For those running a business, the tax year-end is a great time to take stock of any business expenses you’ve incurred. Be sure to claim all allowable expenses for the year, as they will reduce your taxable profit and, therefore, your tax bill. Think office supplies, travel expenses, or any work-related purchases. Keeping detailed records throughout the year will make this process far easier when it comes to tax time.

Organise Your Documents

As you prepare for the end of the tax year, it’s crucial to get your paperwork in order. Gather all relevant documents, such as your P60, P45, payslips, bank statements, and receipts for any business expenses. Having everything in one place will help you stay on top of your finances and make filing your tax return much smoother.

Start Early: Avoid the Last-Minute Rush

As tempting as it is to put things off, starting early can save you a lot of stress in the long run. Procrastination can lead to missed deadlines, rushed decisions, and potentially lost opportunities. Set aside some time each week leading up to the 5th of April to ensure you’re on top of everything.

Final Thoughts on Year-End Tax Planning: Get Ahead of the Game!

The end of the tax year is a great opportunity to reassess your financial situation, maximise your allowances, and reduce your tax bill. By following the tips above, you’ll not only be better prepared for the year ahead but also take advantage of opportunities to save money.

Financial planning doesn’t have to be overwhelming—just a little organisation can go a long way. So, why not get a head start and make sure you’re ahead of the game before the 5th of April? Your future self will thank you!

Do you have any tips for making the most of the tax year-end? Share your thoughts in the comments!

Get in touch here if you could benefit from the expertise of a friendly financial adviser.

The post Financial Planning and Year-End tax planning: A Guide to Getting Organised appeared first on Alice Douglass.

Here are some key financial decisions you should consider making before the end of your business year. These steps can save you money, reduce your tax burden, and ensure you’re in a strong position to start the new year off right. So, let’s dive in!

Get Ahead of Your Tax Planning

Ah, taxes – they’re not the most exciting topic, but planning now can save you a lot of stress (and possibly money) down the road. Here are a few steps to help you manage your tax situation before the year ends: 

• Review Your Profit and Loss Statement: Now is a good time to check your year-to-date profit and loss statement to see if your business is on track with your expected tax liabilities. 

• Claim All Your Eligible Expenses: If you’ve made any business purchases, don’t forget to ensure you’ve recorded them as deductible expenses. This includes office supplies, travel costs, and even some home office expenses if applicable. 

• Consider Making Contributions to Pensions: Contributing to a pension scheme can reduce your corporation tax liability, and the earlier you do this, the better. A pension contribution for yourself or your employees could be a great way to reduce your tax bill before the year ends. 

You should definitely speak with your accountant to ensure you’re optimising your tax position and making the most of any reliefs available to you (I am not a tax specialist). You may also want to speak to a financial adviser about pension contributions.

Maximise Your Tax-Advantaged Savings Accounts

As a business owner, it’s vital to focus on your long-term financial security. Whether you’re paying into a pension for yourself or your employees, now is a great time to make sure you’re contributing as much as possible before the year’s out. 

If you have a Pension, you may want to consider topping it up before the end of the year to take advantage of the tax relief. This can also help reduce your overall corporation tax bill for the year, making it a win-win for your business and your retirement planning. 

For those who have employees, you might want to ensure that pension contributions are up-to-date or even increase employer contributions. After all, supporting your team’s future is a great way to retain talent!

Review your business insurance

Another essential area to review before year-end is your insurance cover. Your business insurance needs may have changed throughout the year. Did you hire new staff? Take on a new office space? Or acquire any new equipment? If so, it’s time to ensure your insurance policy is up-to-date and properly covering all aspects of your business. 

Consider getting a second opinion on your policy from an insurance expert to ensure you’re not over- or under-insured. If you’re in an industry with changing regulations, now may also be a good time to check whether you need any additional insurance cover. 

You may also want to consider lesser thought about insurance to cover you in instances such as: 

• What happens to shares on the death or critical illness of a shareholder 

• Debt repayment on death of a shareholder 

• What would happen on the loss of a key person 

For more on this, click here.

Review employee and personal benefits

Before the end of your business year, you may want to think about wider financial decisions for the coming year. Think about taking out life cover for your employees and/or, if you are a small company/sole director, for yourself. Cover of this type can often be taken out by the company with premiums both free from Corporation Tax and not treated as a benefit in kind. You can save tax and provide a valuable benefit to your employees at the same time.

Consider giving charitable donations

If you’ve been thinking about giving back, the end of the year is a perfect time to consider making charitable donations or supporting causes important to you. In the UK, businesses can claim tax relief for charitable donations, so this can be a way to lower your tax liability while also contributing to a cause you care about. 

Of course, you’ll want to make sure the charity is registered with the Charity Commission (you can do that here), and keep track of your donations for tax purposes. 

Final Thoughts on Business year-end financial decisions

The end of the year is a great time to take a financial snapshot of your business and make strategic decisions that can positively impact your bottom line, taxes, and long-term success. By tackling these key areas now, you’ll head into the new year feeling more confident and prepared. 

I hope this list helps guide you through the year-end process but remember—you don’t have to do it all alone! If you have any questions about your specific situation or need help making these financial decisions, I’m always here to chat. 

Here’s to a successful year-end and an even more successful year ahead! 

P.S. Feel free to get in touch here if you need any help with retirement planning or reviewing your year-end tax strategy! I’m here to help.  

I am a busy working mum and my office days are Monday and Tuesday. I will endeavour to reply to any emails outside of this time.  

The post Financial Decisions Every Business Owner Should Make Before their Business Year End  appeared first on Alice Douglass.

Divorce and Your Finances: What You Need to Know

When you go through a divorce, everything from your savings to your property can be affected. It’s not just about emotional separation – it’s about disentangling financial commitments and figuring out how to move forward financially. For many people, one of the biggest worries is the financial fallout of a divorce, especially if you’ve been married for years or share a business. In the UK, the courts aim to be fair and reasonable when dividing assets, but it can still be a complex process.

1. Understanding Asset Division

In England and Wales, there is no set rule for how assets are split during a divorce. Instead, the court will consider several factors, such as:

• Length of marriage: Longer marriages often result in a more equal division of assets.
• Financial contributions: This includes earnings, inheritances, and property brought into the marriage.
• Non-financial contributions: The work done at home, like raising children, can also be factored in.
• Future needs: Considerations of each spouse’s future needs, especially if children are involved, will influence the division.

It’s essential to get a clear picture of your assets and liabilities before proceedings begin. Make a list of everything you own – from property and investments to savings accounts and pensions. If you have a business or shares, you’ll need to have those appraised too. It may also be wise to hire an independent financial adviser to help with this process, especially if your finances are complicated.

2. Pensions: Don’t Forget About Your Retirement Fund

Pensions can be one of the most overlooked aspects of financial planning during divorce. A pension isn’t just “out of sight, out of mind” – it’s a significant asset that should be properly considered. Depending on your circumstances, pensions may be divided between you and your ex-spouse, either by sharing them or offsetting their value against other assets like property.

It’s worth noting that pensions can be divided in a few ways:

• Pension sharing order: The court can divide the pension pot and give you a share of your spouse’s pension.
• Pension offsetting: Instead of dividing the pension, you might receive a larger share of other assets, such as the home, to make up for it.

Be sure to get professional advice here, as pensions are notoriously tricky to navigate without expert guidance.

3. Spousal Maintenance and Child Maintenance

A common question during divorce is whether one party will be required to pay spousal maintenance, which is ongoing financial support to a former spouse. This is not automatically awarded, but the court may decide to grant spousal maintenance if one spouse is unable to support themselves financially.

The amount of spousal maintenance depends on:

• The length of the marriage
• The standard of living during the marriage
• The financial needs of both spouses
• Any children involved

Child maintenance, on the other hand, is usually worked out based on the non-residential parent’s income and how many children are involved. The Child Maintenance Service (CMS) can help you calculate the appropriate amount to be paid, depending on your income and circumstances. You can find out more about the CMS here.

4. Protecting Your Financial Future

It’s important to plan for your future, and that means putting together a solid financial strategy after the divorce is finalised. Here are a few steps to help you stay on track:

• Budgeting: Take stock of your new financial situation and create a realistic budget. This will help you manage your expenses while you adjust to your new lifestyle.
• Debt management: If you and your spouse accumulated debt during the marriage, make sure you understand who is responsible for paying what. The court can help divide the debt fairly, but it’s essential to be clear on your obligations.
• Building credit: Divorce can sometimes have an impact on your credit score, especially if joint accounts are involved. Work on rebuilding your credit by keeping on top of bills and ensuring accounts are in your name only.
• Investing and savings: Once the dust has settled, it’s a good idea to start saving for your future. Look into setting up individual savings accounts, stocks, and other investments to secure your financial independence.

5. Seeking Professional Advice

The financial side of a divorce can be complicated, and mistakes can be costly. Seeking professional financial advice from a certified financial planner or divorce financial specialist can help you make informed decisions. They can assist in assessing your assets, providing recommendations on pensions, assist with pension sharing, and help you plan for life after the divorce.

Divorce can also be a good time to consult with a solicitor who specialises in family law. They can guide you through the legal processes and ensure that your financial settlement is fair and equitable.

Final Thoughts

Divorce is undoubtedly one of life’s most stressful events, but with proper financial planning and expert advice, you can take control of your future. By understanding how assets are divided, ensuring that pensions and maintenance are properly addressed, and planning ahead for your financial independence, you can set yourself up for a fresh start.

If you’re facing divorce in the UK, don’t go through it alone. Seek professional financial and legal support to help guide you through the process and secure your future – it’s one of the best investments you can make for peace of mind.

6. Financial Planning and Divorce

If you would like financial advice from a friendly and supportive professional, please get in touch here.

To read similar blogs on this subject, click here.

I am a busy working mum and am in the office on Mondays and Tuesdays. Outside of these times, I will get back to you as soon as I can.

The post Navigating Financial Planning and Divorce in the UK: Your Essential Guide appeared first on Alice Douglass.

While “to err is human”, it’s important to learn from these missteps to avoid repeating them, as doing so can prove costly in the long run.

The idea of making errors over and over again is the theme of the revered film, Groundhog Day. In the 1993 classic, Bill Murray’s character relives the same day stuck in a loop until he learns to change his behaviour.

Financial blunders can feel just like this cycle and be just as hard to break.

Since 2 February 2025 so recently marked Groundhog Day, the event that shares its name with the film, this could be the ideal time to take a closer look at five financial mistakes that are best avoided… and certainly not to be repeated.

1. Not “paying your future self first”

While budgeting is one of the cornerstones of good financial planning, it can be surprisingly challenging to get right.

As an example, imagine you have £5,000 to spend each month. After covering your mortgage and bills (£2,500, say), paying for essentials such as food and travel (£1,000), and indulging in discretionary expenses (another £1,000), you’d be left with £500.

You may intend to save or invest this £500 at the end of the month, but this approach could backfire. It’s easy to overspend and find you have little left to put aside.

As such, you might want to “pay your future self first” by contributing regular amounts to your savings as soon as your pay lands in your account, rather than at the end of the month.

This ensures that your financial goals take priority, all while helping you to build a consistent saving habit. Over time, this could make a significant difference in helping you reach your financial milestones.

2. Paying only the minimum into your pension each month

If money is tight, or funds are required elsewhere, you might find that you regularly pay only the minimum amount into your pension each month.

While you’re at least contributing something, it might not be enough to secure the retirement lifestyle you dream of.

Increasing your contributions now could give your fund an initial boost while allowing you to benefit from increased tax relief.

The Annual Allowance is the total amount you can contribute to your pension tax-efficiently in a single tax year; it includes personal and employer contributions, as well as tax relief.

For 2025/26, it stands at £60,000, or 100% of your earnings, whichever is lower.

Tax relief sees the government “top up” pensions when you contribute, so a £100 contribution would only “cost” basic-rate taxpayers £80.

Meanwhile, it would only “cost” higher- or additional-rate taxpayers £60 or £55, respectively, so long as they claim the extra relief through their self-assessment tax return.

Taking proactive steps to increase pension contributions now could bolster your fund, helping to support your ideal lifestyle in retirement.

3. Relying on borrowing when the unexpected strikes instead of saving an emergency fund

You can’t ever know when an unexpected expense is right around the corner. Whether it’s a sudden car repair, a broken boiler, or even lost income during a period of illness, you may find that you rely on borrowing to cover costs if you’re unprepared.

But high-interest debt from credit cards, for example, can quickly snowball, resulting in financial stress and eroding your peace of mind.

Instead, it might be prudent to build an emergency fund of between three and six months’ worth of essential household expenses in an easy access savings account.

If you’re self-employed, retired, or have many dependants, you might want to save between one and two years of expenses.

This financial safety net means you’re more able to handle unexpected costs without needing to rely on debt or dipping into savings and investments.

Beyond the practical benefits, your emergency fund can offer invaluable peace of mind, knowing you’re prepared for the future.

4. Panic-selling during periods of downturn

Even though volatility is an inherent part of investing, you might be tempted to follow your emotions during periods of downturn and sell your investments.

This could be due to a desire to cut your losses, but remember that it’s “time in the market, not timing the market” that counts. A knee-jerk sale of shares during a market dip could inadvertently affect the long-term performance of your portfolio.

Take the chart below, for example, which shows the 20 best (represented by cyan bars) and worst (the orange bars) trading days since 1 January 1980.

Source: Vanguard

As you can see, the market’s best and worst days often occurred close together, so if you rush to sell shares after a downturn, you won’t be invested when the markets recover.

While it’s normal to feel concerned during periods of downturn, it’s often wise to remain invested and stay the course.

5. Staying silent about financial worries rather than discussing them

Money remains a taboo topic for many in the UK, even though communication can help you deal with your worries.

Research from Virgin Money UK shows that only 56% of Brits feel comfortable discussing money with their friends.

Even if you feel awkward bringing up your concerns, or shame at the mistakes you’ve made, you shouldn’t let this deter you from speaking with friends, family, or peers.

A simple chat could actually lift a weight from your mind, allowing you to see things from a new perspective. Otherwise, worries could just build up in your head until they seem impossible to deal with.

Similarly, you might also want to talk through your worries with a financial planner. They could help you deal with the issues that cause you the most concern and suggest ways to tackle the errors you constantly find yourself making.

If you’d like this invaluable support, email me on a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046.

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

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

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

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

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

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

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

The post <em>Groundhog Day</em>: 5 ways to stop repeating the same financial mistakes appeared first on Alice Douglass.

There’s no getting around the fact that most of us would rather avoid this eventuality altogether – but if you are getting divorced, there are ways you can be proactive and regain control over your life and finances.

However, new research suggests that “grey divorce” rates are higher than you might think. Legal & General reports that in 2021 (the latest available data), 1 in 4 took place over the age of 50.

Divorcing over 50 could present its own unique challenges. Here are five ways this situation could affect your wealth, and how a financial planner might be able to offer support.

1. If you’ve been married for decades, you likely have several shared assets that will now need to be divided

Dividing assets on divorce is an important part of the process. But if you and your spouse or civil partner have been together for many years, asset sharing could present a greater challenge than it does to younger couples.

It’s likely that you and your spouse share:

• A home, or several properties
• Savings accounts
• Protection policies, including joint critical illness cover and income protection
• Other valuable belongings such as a car.

With so much to divide, it could take weeks or months to come to an agreement. This may even increase the likelihood of legal proceedings becoming necessary, if you can’t come to a decision between you.

2. You may need to draw funds from your retirement pot to pay for legal fees

If you’re engaging the services of legal professionals to complete your divorce, this comes at a cost.

Figures published by MoneyHelper in December 2023 say that:

• Uncontested divorces (which don’t involve professional legal support) could cost between £1,300 and £2,600 for the petitioner, and between £400 to £800 if you’re the respondent.
• If you need to hire a solicitor, the fees can increase substantially. The initial court fee is £275, but solicitors may charge between £10,000 and £15,000 for only a few court appearances.

For anyone, no matter their life stage, these fees are substantial. But if you’re about to retire or are already accessing your pension, using your retirement fund to pay these costs could put your quality of life at risk down the line.

With a finite pot from which to draw money that is designed to sustain your lifestyle for as long as you need, spending £15,000 or more on legal services may affect your future plans.

3. Pension sharing could be more complex if one or both parties is already taking their benefits

On the subject of pensions, these assets may be discussed as part of your divorce settlement – although according to PensionsAge, more than two-thirds of couples don’t put pensions on the table at all.

Seeing as your pensions could be some of the most substantial assets to your name, and you’ll likely be discussing the sharing of property wealth too, it’s crucial to talk about whether pensions could be shared to reach a fair settlement.

For instance, some couples opt for one person to take ownership of their shared home, while the other may acquire both people’s pensions to even the split.

But with each decision related to pension sharing, comes consequences for your retirement. Giving up your pension wealth on divorce when you’re on the cusp of retiring, or are already taking your benefits, could put your future viability at risk.

So, discussing your financial options with a financial planner as a later-life divorcee could be of vital importance. A professional can help you weigh up your choices and ensure you separate from your partner with the wealth you need to fund the retirement you deserve.

Read more: What is “lifestyle financial planning” and how could it help you achieve your goals?

4. Retiring as a single person could be more costly

The Pensions and Retirement Living Standards (PLSA) report for 2024 reveals that retiring as a single person could cost more each year than retiring as part of a couple.

According to the report, a “comfortable” standard of living – which involves two weeks’ holiday in Europe each year, regular beauty treatments, theatre trips, and £80 a week on meals out – costs a couple £59,000 a year, or £29,500 each. But for a single person to achieve the same lifestyle, it would cost £43,100 a year.

This annual disparity of £13,600 adds up over time – for a 25-year retirement, this means a single person would need £340,000 more in their fund to achieve the same lifestyle as someone who lives with their spouse or partner.

If you’re getting divorced, it is essential to take a step back and re-evaluate your income, expenses, and goals. You might consider downsizing your home to reduce costs, and could think about pushing back your retirement date (if you aren’t already retired) to save more.

Planning a single retirement without help, however, can lead to knee-jerk decisions that aren’t backed by data. That’s where professional guidance may prove invaluable: a thorough review of your assets and income could help you make informed choices that support your retirement goals as a single person.

5. Your estate plan might need to change

Divorce can be an all-encompassing life event that makes it hard to think about the long-term future. But if you’re going through it later in life, you might want to cast your mind ahead and think about your estate plan, also known as your inheritance plan.

If you and your ex-spouse or civil partner share children, having a conversation about your inheritance plans could benefit all parties both emotionally and financially.

Plus, there’s Inheritance Tax (IHT) to consider. When you were married, your nil-rate bands – the allowances within which you can pass down money IHT-free – could be combined. As a single person, you’ll only benefit from your individual nil-rate bands, potentially increasing the likelihood of your estate being subject to IHT when you pass away. What’s more, due to changes to the IHT regime in the 2024 Autumn Budget, diligent estate planning is now all the more crucial for everyone, not just divorced individuals.

Finally, if you have a will that names your ex-spouse as the executor and sole beneficiary of your estate, you may want to alter this to reflect your new wishes.

Talk to a financial planner if you’re going through a divorce over 50 (or at any age)

Working with an impartial professional who has your best interest at heart could be of huge benefit when you’re getting divorced – particularly if this is likely to affect your retirement plans.

Email me on a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046.

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

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

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

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

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

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

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

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

The post 5 ways a “grey divorce” might affect your finances appeared first on Alice Douglass.

If you plan to sell your business upon retirement and use these funds to sustain your lifestyle, you’re not alone. Wealth and Finance reports that 30% of business owners plan to do the same, and 49% want to partially transfer the business to family members while continuing to draw an income from it in retirement.

While either may turn out to be an excellent strategy, relying on the continued high value of your business to fund your retirement might be a risky move. If the value of your business decreases for any number of reasons, this could have a serious impact on your retirement prospects.

Moreover, it’s important to consider how you can extract wealth from your business throughout its life span, not just when it’s time to sell up or pass the reins to the next generation.

Here are three wealth extraction strategies to consider for business owners.

1. Pay yourself a salary

You might be reluctant to pay yourself a salary as a business owner, especially if you’re focused on ensuring the business remains solvent and builds capital. Despite these doubts, a salary could offer you the best of both worlds: wealth extraction to benefit your personal circumstances, and tax efficiency for your business too.

On a personal level, a consistent salary may help you to:

• Save and invest your personal wealth
• Make all-important pension contributions (more on this later)
• Support your family financially
• Pay National Insurance contributions (NICs) that boost your State Pension entitlement
• Gain financial peace of mind as you approach retirement.

And, as you may know, employee salaries are an “allowable expense” that can help you cut your business’s Corporation Tax bill. In paying yourself a regular salary, you could actually improve your company’s finances rather than hurting them.

2. Make consistent pension contributions

If you are self-employed or a sole trader, you could be one of the 80% who do not have a private pension, according to an Enterprise Nation report.

After all, if you are planning to retire in the coming decade, all your attention could be placed on readying your business before it changes hands. But ignoring the importance of building pension wealth in the meantime could leave you with a worrying shortfall when the time comes.

This is especially true considering that the cost of retirement is rising. The Pensions and Lifetime Savings Association (PLSA) reports that as of 2024:

• The “minimum standard of living” in retirement now costs £14,400 a year, or £22,400 for a couple. This includes one week-long holiday in the UK a year, £95 a week for groceries, and relying on public transport instead of having a car.
• A “moderate” lifestyle now requires £31,300 a year for a single person or £43,100 for a couple, including eating out once a week, a week-long holiday in Europe each year, and running a small second-hand car.
• A “comfortable” retirement now costs £43,100 a year for a single person or £59,000 for a couple. This accounts for regular activities like theatre trips, two weeks’ holiday abroad each year, and regular meals out.

So, if the value of your business diminishes between now and when you wish to retire, your quality of life in retirement could be jeopardised.

On the other hand, if you have saved and invested consistently into a personal pension, you could enter retirement with a more reliable income strategy.

Remember: as of the 2025/26 tax year, most earners can pay up to £60,000 (gross) into a private pension without these contributions being subject to a tax charge. This is called your Annual Allowance, and it may be reduced if your earnings exceed certain thresholds or you have already flexibly accessed your pension.

With this in mind, it may be useful to begin making consistent contributions that make use of your Annual Allowance, if you don’t already. As a business owner, these savvy investments could give you greater peace of mind when you eventually retire.

3. Run allowable expenses through your business

You might be reluctant to run the appropriate expenses through your business, but doing so could lighten the burden on your personal finances and allow you to extract wealth tax-efficiently.

For example, if you have a car you use for work, putting these expenses through your business could free up more personal wealth and allow you to save and invest more effectively.

Similarly, you could think about taking out life insurance through your business, known as a “relevant life plan”. This death-in-service benefit functions very similarly to other types of life insurance: if you pass away while employed by the business, your family could receive a tax-free lump sum to help them cover costs.

Paid for by your business and counting as an allowable expense, a relevant life plan could help to reduce your personal outgoings while still providing the financial protection your family may need in future.

What’s more, as you read earlier, allowable expenses deduct the amount payable in Corporation Tax for many businesses. So, while ensuring your personal wealth is secure, you could simultaneously be making your business more tax-efficient.

Get in touch for bespoke advice on your personal finances

If you’re heading towards retirement as a business owner, there is so much to think about.

I offer bespoke personal wealth advice that helps busy, successful people like you gain financial peace of mind and plan for a prosperous future.

Email me on a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046.

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

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

All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

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

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

Workplace pensions are regulated by The Pension Regulator.

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

The post 3 simple ways to extract personal wealth from your business and build a prosperous future appeared first on Alice Douglass.

Moving from growth to decumulation can present a number of challenges – one of which is how much income you should draw from your pension. Spend too much, and you run the risk of having a shortfall later in retirement. Spend too little, and you may prevent yourself from enjoying the retirement you’d hoped for.

With This is Money reporting that 48% of retirees worry about outliving their pension, it’s crucial to understand how you could use your wealth to provide an appropriate level of income throughout your retirement.

One strategy for extracting income from your pension is the “4% rule”

Devised by US financial planner William Bengen in 1994, the 4% rule was once thought to be a useful way to work out how much you could take from your pension each year.

In short, Bengen believed that making 4% withdrawals each year would provide a comfortable retirement while still allowing for growth.

This may sound like a simple and effective retirement strategy. But look closer and you might discover that while this rule may be a reasonable starting point, it won’t necessarily meet your unique needs.

So, read on to find out why relying on the 4% rule may be unwise, plus how bespoke financial planning could help you draw a sustainable retirement income.

4 compelling reasons the 4% rule may not be right for you

1. You may have other investments to draw on

Narrow in its scope, the 4% rule only considers how you could use your pension savings to generate your retirement income.

And yet, if you’ve enjoyed a successful career and diligently saved for your future, the chances are you’ll have assets and investments that you don’t hold in a pension.

For example, you may have a combination of dividends, ISA investments, or income from buy-to-let properties, all of which could be utilised to enhance the income you receive from pension payments. Plus, the State Pension may provide a reliable boost when you stop working.

If, on the other hand, you don’t have additional forms of income, your personal pension will need to stretch further.

A sensible way to manage your retirement and provide yourself with peace of mind that your savings will last a lifetime is to stick to a financial plan designed around your specific needs and circumstances.

2. The rigid rule doesn’t account for your fluctuating income needs

While it may not be easy to calculate how much money you’ll need throughout your retirement, it’s important to recognise that it’s unlikely to remain at the same fixed amount.

In fact, each stage of retirement will change how much you might need:

• On the go – During the early stages of retirement, there’s a strong chance you’ll spend more on travel, hobbies, or home improvements.
• Slowing down – While you may be slightly less active, you’re still busy with hobbies, but you may be less inclined to long-haul travel.
• Coming to a stop – In later life, your mobility may be more limited, and you could require care.

Understanding that your income needs are likely to change, cashflow modelling can be a helpful tool to illustrate whether your savings are sufficient to support you throughout your life.

Your financial planner can input data such as your current assets and savings, key event dates such as your expected retirement date, and any financial commitments you have now, or in the future. To forecast your future income, the software makes assumptions about the expected returns on investments, and how inflation might change things.

By regularly reviewing your cashflow model, you will understand how much income you are likely to need. Then, together with your planner, you can decide the best options for how to generate the appropriate amount, taking your pension and other assets into account.

3. Increasing life expectancies mean your pension may need to last longer

Bengen devised his 4% rule on the basis that retirees need to create a retirement income for 30 years. But with life expectancy increasing, there’s every chance that your retirement could last far longer.

Data from the Office for National Statistics reveals that:

• A man aged 55 has an average life expectancy of 84 years and a 4% chance of living to 100
• A woman aged 55 has an average life expectancy of 87, with a 7% chance of living to 100.

So, if you decided to access your pension at age 55, it may need to last you for more than 40 years.

As life expectancies continue to rise, so too does the chance that you’ll need to draw on your pension for longer. As such, applying the 4% rule could prove a risky strategy.

4. Investment volatility means returns cannot be guaranteed

Another problematic assumption the 4% rule makes is that your investment returns will continue to grow throughout your retirement.

Yet investment returns cannot be guaranteed, and the value of your pension fund will fluctuate.

Though periods of short-term volatility needn’t affect your long-term financial plan, they could have an impact on your withdrawals in the short term.

When markets fall, you may find you need to sell more invested units to achieve the same level of income. This could deplete your fund faster than expected, making budgeting and managing your withdrawals that much harder.

Get in touch

Whether you’re on the road to retirement or already there, I can help you understand all available options for generating a sustainable income and support your lifestyle goals.

Email me on a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046.

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

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

The Financial Conduct Authority does not regulate cashflow planning.

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

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

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, tax legislation, and regulation, which are subject to change in the future.

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

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

The post Should you apply the 4% rule to your pension income? appeared first on Alice Douglass.