Rachel Reeves’ Autumn Budget revealed significant tax reforms that could have a lasting impact on personal finances, particularly in terms of retirement planning, but what does this mean for you?
Changes to Inheritance Tax
Inheritance Tax (IHT) is a tax paid on the estate of a deceased person, which includes all possessions, money and property.
Currently standing at 40%, IHT is paid on the value of assets above the nil rate band of £325,000.
What’s changing?
The Chancellor revealed the Inheritance Tax (IHT) threshold, which is the amount people pass on without Inheritance Tax being paid, will be frozen until 2030.
As it stands, any money saved in a pension does not normally count towards this, but from April 2027, inherited pensions will now be included.
Your pension is there to provide you with money during your retirement, and this change could have an impact on how you plan for later life.
We recommend you contact your financial adviser as soon as possible to understand what impact the latest changes to IHT could have for you.
Capital Gains Tax
Capital Gains Tax rates (CGT) is a tax charged on any profit from the sale of assets that have increased in value. For example, the sale of a second property.
What’s changing?
Capital gains on residential property (that is not your main home) were previously subject to higher tax rates than other assets.
Following the budget announcement, CGT rates for other assets have been aligned with residential property increasing from 10% to 18% for the lower rate and 20% to 24% on the main rate.
While pensions themselves generally remain exempt from CGT, increased rates may impact other wealth management strategies, particularly for individuals with diverse portfolios.
Depending on your personal circumstances and investment strategy, it’s important to look at what changes might need to be made. For example, actively managed funds might be an option, enabling you to swiftly adapt to these changes by diversifying your portfolio and targeting lower capital gains sectors.
However, it is important to seek advice on any changes you might make now and how they will affect future planning.
We recommend you speak to a professional adviser before making any financial decisions or contact us if you need help with your retirement planning.
LV= has been specialising in providing trusted and regulated retirement advice for over 20 years.
To learn more and help you make the most of your pension savings safely and with confidence, request a call back from one of our friendly advisers today.
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