Wealth Management Update January 2025
Is your estate plan ready for the IHT changes?
The Autumn Budget has shaken things up for Agricultural and Business Relief (ABR) on Inheritance Tax (IHT). While the government hasn’t scrapped ABR entirely, big changes are coming in April 2026 that could affect your estate planning.
At the moment, ABR offers 100% IHT relief on qualifying business and agricultural assets, like shares in unquoted companies or farmland. From April 2026, this drops to 100% relief on the first £1 million of assets, and just 50% relief on anything above that. If you’re married or in a civil partnership, you’ll each get a £1 million allowance, but you can’t share any unused portion.
There’s more: shares on markets like AIM will only qualify for 50% relief, and Trusts holding these assets will now face limits too. Any Trust set up after 30 October 2024 will share a £1 million allowance across all relevant trusts created by the same person.
These rules also apply to lifetime gifts made after 30 October 2024 if the donor passes away after April 2026. So, keeping detailed records of any gifts or transfers is a must to avoid nasty surprises later.
For many, this means higher IHT bills or the potential need to sell assets to pay them.
Check out our Budget Briefing breakdown here for more information and join us on Tuesday 18th March for a Tax Briefing, where we will
For more information, get in touch to receive a recording of our Budget Briefing session, or join us on Tuesday 18th March for our Tax Briefing. Contact us on 02920 450 143 or email us on info@penguinwealth.com to find out more details.
LPAs: Choose your attorneys wisely
LPAs: Choose your attorneys wisely
Setting up a Lasting Power of Attorney (LPA) is a smart way to prepare for the future, and the majority of people should have them in place. However, you need to make sure they are put in place correctly and safely. You may have seen recent news reports that have revealed how some vulnerable people lost control of their money and property after trusting the wrong person.
One shocking case involves a situation where clients, after trusting a partner at a law firm based in Essex as their attorney, found themselves locked out of their bank accounts, with large cash withdrawals they didn’t approve. Some had their homes sold for less than market value, and others discovered their legal documents had been changed without their consent.
While most people appoint family or close friends as their attorneys, not everyone has that option. This is where professionals can step in, but as these cases show, they don’t always act in the client’s best interests. This is why we almost always suggest using laypeople instead of professionals as attorneys.
Here’s how to protect yourself:
- Pick someone you trust: Ideally, a family member or close friend who truly has your best interests at heart.
- Know what you’re signing: Make sure you understand the powers you’re giving to your chosen third party and get advice if you’re unsure.
- Keep an eye on things: Regularly review what’s happening with your money and property if you are able to.
Whilst these documents may seem straightforward to put in place, there are pitfalls that an experienced and trustworthy professional can help you avoid. If you’re feeling unsure about an existing LPA or thinking of setting one up, we always recommend talking to a Financial Adviser or a Legal Adviser. Contact us on 02920 450 143 or email us on info@penguinwealth.com for more information.
Plan to pass on your Pension
From April 2027, Pension death benefits will no longer be free of inheritance tax (IHT), bringing big changes for clients who plan to pass their Pensions to the next generation. While this won’t affect most people relying on their Pension for Retirement income, it’s a game-changer for those using Pensions as a tax-efficient wealth transfer tool.
For these clients, Pensions will now be included in their estate for IHT purposes. However, it’s not time to panic—there are still plenty of planning opportunities to minimise the impact. Working with your Financial Adviser to review your overall assets, rather than focusing solely on Pensions, will be key.
Despite this change, Pensions remain one of the most tax-efficient vehicles. Unlike other assets, they allow income and gains to grow tax-free, even though death benefits may now face IHT. Alternatives like gifting non-pension assets or using surplus income to fund life insurance policies can help offset the potential IHT liability.
It’s worth noting that while the rules around gifting and exemptions can be tricky, regular gifts from surplus income could still be immediately exempt from IHT. This could include using Pension withdrawals to fund gifts or Investments for your children or grandchildren, such as ISAs or Pensions in their name.
Ultimately, the right strategy depends on your unique circumstances. With the right advice, it’s still possible to strike a balance between reducing tax liabilities and ensuring you have enough to meet your retirement and future care needs. We have briefings on IHT and Pensions coming up in May and September, so keep an eye out for future announcements as they will be sessions you won’t want to miss.
What zero growth means for the UK economy
The UK economy didn’t grow at all between July and September 2024, according to the latest figures. It’s not great news, but what does it actually mean for you?
GDP, or gross domestic product, measures the value of everything our economy produces—basically how much is being made, sold, and spent. When GDP grows, it’s usually a sign of a healthy economy: people are earning more, businesses are thriving, and there’s more tax money for public services like schools and hospitals.
But when GDP stalls, like it has now, things can feel a bit stuck. It can lead to pay freezes, job cuts, and less money for public spending. The recent zero growth follows a small bounce earlier this year, but analysts think the Budget changes in October—like higher employer National Insurance and a minimum wage hike—might have put extra pressure on businesses.
Looking ahead, forecasts for 2024 have been revised down, with the UK now expected to grow by just 0.9% next year. It’s not all doom and gloom, but it’s a reminder that the economy is still on shaky ground.
So, what should you do? Times like these make it even more important to have a solid Financial plan. Whether it’s reviewing your savings, planning for Retirement, or managing Investments, speaking with your Financial Adviser can help you stay on track, no matter what’s happening in the economy.