Chris Britton from Reward Gateway/Edenred reiterates the importance of getting financial planning right. This new priority is coming just as we expect a slew of new tax regulations any day now. Yet the Chancellor’s salary sacrifice changes won’t come into force until just over three and a half years’ time. This simple adjustment will encourage people to reconsider their spending plans. Financial advisers at RBC Brewin Dolphin recently conducted a survey that revealed a surprising trend: 73% of affluent individuals have never made financial gifts while still alive. This alarming statistic raises some key questions. Its response shows how conscious the public is about gifting as a financial strategy, particularly with IHT thresholds currently frozen until April 2031.
With thoughtful planning, the inherited versus outright gifted rules subsidize affluent financial planning. Under the “potentially exempt transfer” rules, there is no limit on the amount or value of gifts an individual can bestow on anyone. These gifts will only be exempt from IHT if the giver survives for seven years after making that gift. RBC Brewin Dolphin, an investment management firm, reminds clients that planning early is key. Specifically, they recommend that clients start the gifting process as early as possible.
Understanding Inheritance Tax and Gifting Opportunities
The recently announced freezing of IHT thresholds until 2031 further heightens the incentive for the rich to sort their estates in good time. Or, like many other wealthy folks, they have not used the gifting strategies available to them. That makes right now an excellent time to increase tax efficiency with strategic financial planning.
Chris Britton pointed out that even with upcoming changes, it is essential to remain proactive in managing pensions and investments. “It’s easy to assume that continuing to increase your pension contributions is no longer valuable, but this is not necessarily true,” he explained. We should thank Marc for urging everyone to see pension contributions as part of a long-term strategy, even in this rapidly changing environment.
Furthermore, the regulations governing gift exemptions offer a backdoor route for minimizing future tax obligations. Gifts that fall under the potentially exempt transfer rules can be made without immediate tax implications, allowing families to transfer wealth more strategically.
“Our advice … is to start the process of gifting as soon as possible,” – RBC Brewin Dolphin.
Investment Strategies Amidst Tax Changes
As financial regulations change, so too should investment strategies. From April 2029, any payments over £2,000 per year will lose the advantage of an NI exemption. Contributions of up to £2,000 will continue to be free from income tax. This is a very low threshold, so it’s very important that people do the most to make their contributions count under this limit.
Commenting on the move, Sarah Coles from Hargreaves Lansdown said this shift could spark a reckoning on how investments are approached. “This will leave more growth-oriented investments outside the tax wrappers,” she stated. “It may be subject to capital gains tax, but this can be deferred and managed through annual allowances.” Her broader insights indicate that though tax-efficient accounts, such as ISAs, are still advantageous, knowing what investments you’re investing in is more critical than ever.
To complicate matters further, there’s the fact that the annual £20,000 annual limit on payments into tax efficient accounts hasn’t budged. This provides a long-term, reliable, and multi-generational investment in people. They can keep building on their savings and investments, confident that no new restrictions will be imposed for years to come.
“If it makes sense to open a cash ISA, and you have the money and allowance available, it’s worth acting sooner rather than later, while there are still strong rates around,” – Sarah Coles.
Leveraging Spousal Allowances for Maximum Benefit
As married couples, taking advantage of spousal allowances can make the financial benefits extremely powerful. Read more on our website. Jason Hollands of Evelyn Partners pointed out the advantages of moving assets between spouses. “This involves shifting investments and cash to a spouse,” he explained. “It does not give rise to a taxable event which it would in the case of unmarried couples.”
This clever CMA strategy lets married couples use two dividend allowances and two ISAs to shield even more of their investments from tax. It does this without building up new tax liabilities, allowing it to essentially double their investment capacity. At the moment there are no restrictions on how much you can have altogether in an ISA. This is great news because it creates incredible new opportunities to invest in growth-oriented infrastructure.
With ever-evolving financial regulations, newly engaged couples are often introduced to investment opportunities for the first time. They should consider how to deploy these new options in concert with their other financial strategies for greatest combined effect.