The Wire Winter 2025 Archives - HFMC Wealth

Welcome to your winter edition of The Wire

Mon, 24 Nov 2025 14:43:24 +0000

After a year of unpredictable politics and resulting market turbulence, the excitement didn’t let up in November. Rachel Reeves delivered an unusually late Autumn Budget, but only after the Office for Budget Responsibility (OBR) accidentally leaked the details online, via the early publication of its economic forecast.

As the dust settles on her announcements, tax-efficient and long-term financial planning is set to become more important than ever in 2026 and beyond.

Important life milestones and events can always shift your priorities, and none of us can ever truly know what is around the corner. With that in mind, we begin our winter 2025 edition of The Wire with two major life events: divorce and death.

First up, read about how a recent high-profile divorce case has highlighted the need for divorce lawyers and finance professionals to understand the evolving landscape of digital wealth. Cryptocurrency is just one area where assets can be hidden, forgotten, or misvalued. But the right advice at the right time can pay dividends, especially for those with a high net worth.

Next, the death of rock superstar Ozzy Osbourne in July left millions of adoring fans mourning their “Prince of Darkness”. But his death also exposed the legacy and inheritance challenges that frequently arise for high net wealth individuals (HNWIs).

Ozzy’s estate – estimated at $220 million – was split between his UK and US homes and set to be distributed among his blended family. Read about how HFMC’s team of professionals could help you to iron out the issues in your estate plan to ensure you don’t leave unnecessary headaches for those you leave behind.

Elsewhere, the festive period is upon us, and while contributions to their pensions might not be high on your children or grandchildren’s Christmas list, an investment could prove to be the gift that keeps on giving. Read about how to give your loved ones a stable financial start in life and how doing so could be tax-efficient for you too.

Next, fiscal drag has been a mainstay of financial planning for the last few years. Allowance and threshold freezes are set to continue. Read about how your tax bill as an HNWI will increase between now and 2031 and how expert advice can help to mitigate this rise.

Finally, it wouldn’t be December without a Christmas market, and Europe boasts some of the best. Read your rundown of five incredible markets to visit as part of your last-minute winter getaway.

I’d like to take this opportunity to thank you all for your continued trust in HFMC Wealth. I wish you and your loved ones all the best for a merry festive season, and I look forward to our continued partnership in 2026.

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3 compelling reasons to give your child the gift of a pension investment this Christmas

Mon, 24 Nov 2025 14:43:19 +0000

Ask for a peek at your child or grandchild’s Christmas list, and depending on their age, you might find the Bluey Family BBQ playset or the latest next-gen games console.

You’re unlikely to see “Contributions to my pension”. However, providing loved ones with a stable financial start in life is probably high on your own list of priorities – and with good reason.

According to This is Money, Generation Z (those born between 1997 and 2012) will need more than £3 million in their pension pots to retire “comfortably”. To amass that kind of pension wealth, they’ll need to start saving early.

In light of upcoming changes to the Inheritance Tax (IHT) treatment of unused pension funds, you might be looking for tax-efficient ways to lower the value of your estate. Paying into a child’s pension could prove an effective strategy for you and your loved ones.

Keep reading to find out how.

Preparing for retirement is a long-term strategy, so starting early is key

According to This is Money, a 25-year-old who wants to finish work aged 65 and live a “comfortable” retirement will need a pension pot worth £3.1 million. “Comfortable” in this context includes an annual overseas holiday and the occasional UK-based weekend break. The figure rises to £4.3 million for a two-person household.

The Pension and Living Standards Association (PSLA) annual report on the cost of retirement confirms that the equivalent figure for a single person retiring today is around £800,000.

This shows the impact of inflation during a 40-year career. Moreover, your 25-year-old child will likely want more than a comfortable retirement at 65. They’ll want to live their dream lifestyle, which comes at an additional cost.

3 reasons why you might opt to pay into a pension on behalf of your child this Christmas

1. A pension provides valuable money lessons alongside future financial stability

You can set up a pension on behalf of your child (if they are below the age of 18) as their parent or legal guardian. Once it’s set up, other family members, such as grandparents, can contribute on your child’s behalf.

Once they turn 18, your child becomes the account holder, but you can continue to contribute if you wish.

As with any pension, funds cannot usually be accessed until the minimum retirement age (currently 55, rising to 57 in 2028). This means your child’s money will be invested until then, hopefully providing financial security in later life. However, this also means the money is effectively tied up and can’t be accessed to pay education fees or used towards a first home, for example.

We know that our relationship with money is formed early. Introducing your child to concepts like long-term investing, risk versus reward, and the benefits of compounding from an early age could set them on the right financial track.

2. Contributions to a loved one’s pension attract tax relief, so it can be incredibly tax-efficient

You’ll be aware that the pension Annual Allowance in 2025/26 stands at £60,000 (or 100% of your earnings, if lower). The Annual Allowance is the maximum amount you can contribute to your pension in a single tax year without facing an additional tax charge.

As a high net worth individual, you may have already maxed out your own Annual Allowance for this tax year or be subject to the Tapered Annual Allowance, limiting the tax-efficient contributions you can make. You may also make contributions through your business as an allowable expense where wholly and exclusively for the purpose of the business.

Either way, you could opt to help a child (or your partner) make tax-efficient use of their pensions by contributing up to their Annual Allowance. Contributions into the account of a child below age 18 (or anyone without earnings) can receive tax relief on contributions of up to £3,600 gross without a child needing relevant earnings. This means you can contribute up to £2,880, with £720 added by the government in the form of tax relief.

A gift to an adult child that they then contribute to their pension, could have additional benefits, such as helping them to avoid the so-called “Child Benefit tax trap”. Be sure to get in touch if you think pension contributions could help your loved ones.

3. Giving while living could be tax-efficient for you, lowering the value of your estate

It’s no secret that the government’s IHT receipts are rising – and will continue to rise following the extension to the existing freeze on the nil-rate and residence nil-rate bands. The Office for Budget Responsibility (OBR) expects receipts to reach £9.1 billion in 2025/26. Money Marketing confirms that the figure for last year was £8.2 billion (and this marked a £800 million rise compared to 2023/24).

Contributions to a loved one’s pension help to lower the value of your estate for IHT purposes, and they could be IHT-free from the moment you make them.

HMRC’s “normal expenditure out of income” exemption allows you to make regular gifts IHT-free. You’ll just need to prove that the gifts are:

Regular
Paid from income
Not detrimental to your usual standard of living.

Accurate record keeping is key here, as gifts that don’t make use of HMRC exemptions will generally be classed as “potentially exempt transfers (PETs)” and only become tax-free if you survive for a further seven years after the date the gift is made.

Get in touch

While it might not top your child’s Christmas list, a pension investment could be the gift that keeps on giving, both for you and your child. If you’d like help making tax-efficient pension contributions on behalf of a loved one, get in touch. Contact us online or call 020 7400 4700.

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.

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.

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5 legacy planning lessons from Ozzy Osbourne’s estate

Mon, 24 Nov 2025 14:43:14 +0000

When Ozzy Osbourne passed away in July 2025, he left behind a legion of devoted fans, a back-catalogue of heavy metal hits, and (according to Parade) an estate worth an estimated $220 million.

The so-called “Prince of Darkness” also left a blended family, assets split between the UK and the US, and the complicated matter of ongoing royalties.

Managing the legacy and inheritance of a loved one is always hard, but doing so on behalf of a high net worth individual can be even more complicated, especially if potential issues weren’t resolved before death.

Keep reading for a look at the important steps you can take now to ensure your affairs are in order and avoid additional stress for your loved ones at an already difficult time.

1. Understand the potential complications of inheritance within a blended family

Ozzy’s most famous family members are arguably those who appeared on the hit 1990s show, The Osbournes. The pioneering reality programme followed Ozzy, wife Sharon, and children Kelly and Jack as they navigated life in Beverly Hills.

Not only did Ozzy and Sharon’s eldest daughter Aimee not appear in the show, but Ozzy also had two children (Jessica and Louis) with his first wife, Thelma Riley. He also adopted Elliot, Riley’s son from a previous relationship.

Blended families bring unique complications, especially where the deceased is the person who tied the families together. The risk of disputes can increase, and the likelihood of accidental “sideways disinheritance” rises too.

This might occur when a marriage voids a previous will, thereby cutting out children from a previous relationship. Understanding these complications and taking the time to think clearly about exactly who should inherit what should be your first step.

2. Be sure you have an up-to-date will in place and check in with it regularly

Once you know what your wishes are, it’s vital that you have an up-to-date will and that you review it regularly. In practice, this probably means once a year, as well as after any significant life milestones.

This might be a marriage, which generally revokes a previous will, meaning that the laws of intestacy would apply on death. Other important life events include births, deaths, and divorces. Even without a blended family, these could all change your priorities and mean that your estate planning needs revisiting.

Estate planning is an ongoing concern rather than a “one and done”, so once your plans are in place, there’s still work to do. HFMC Wealth work with an extensive network of tax and legal advisers to help our clients with will writing.

3. Communication is key to avoiding disputes and helping loved ones plan tax-efficiently

Ozzy’s relationship with his older children was strained, and neither Jessica nor Elliot attended their father’s funeral. Family relationships can be complicated, which is why communication is so important.

This remains true regardless of the amounts involved or your family set-up, ensuring those with a vested interest know where they stand. Honest and open discussions can help to avoid disputes after you are gone. This is especially important if you don’t intend to distribute assets evenly, or if you have complicated assets, like a family business, and feel it’s important to make your decision-making process clear.

Once your beneficiaries know what they are set to receive (or not receive), they can use this information to inform their own tax-efficient financial planning. Our team can provide guidance to support this process. Inheriting a large sum can be daunting, so intergenerational advice can give your loved ones much-needed support, while giving you peace of mind that your wealth will be in safe hands.

4. Consider the complications of overseas assets and the need for advice you can trust

Ozzy grew up in Aston in Birmingham but had lived in Beverly Hills for nearly three decades at the time of his death.

If you have assets spread across international borders, this could prove an added complication upon death, and it’s wise to address this in your legacy and estate planning as early as possible.

Having separate wills in different jurisdictions is common when assets are spread across countries with varying laws. However, it’s crucial that you ensure the provisions of each will do not contradict one another and that one will does not inadvertently revoke another. This is particularly important as inadvertent revocation can lead to unintended disinheritance or to complications in administrating assets abroad.

To prevent this, each will should include clear wording that identifies its scope and limits its jurisdiction. For example, a UK will may begin with a statement such as: “This will is made in respect of my property situated in the United Kingdom only and is not…”. This ensures that your wills are mutually exclusive and carefully coordinated, reducing the risk of overlapping bequests or inadvertently revoked clauses.

It is also advisable to seek legal advice in each jurisdiction to ensure compliance with local laws and to avoid any potential conflicts.

Working with HFMC Wealth can help here. Our team has extensive experience in global asset management, investment portfolio construction, and cross-border taxation, providing international financial planning to help you manage your long-term needs.

Thanks to our relationships with recognised specialists in the fields of international law and taxation, you’ll know the advice we provide is tax-efficient and fully compliant, helping you to live the life you want now, while knowing that your complicated legacy planning is in hand.

5. It’s never too early to think about estate planning

Where an estate is of significant value, as Ozzy’s was, it’s important to think clearly about how this wealth is split, and when.

You might plan to split assets evenly, but what does this look like in practice? If you have a blended family, there might be a big age gap between your children (there is a 20-year gap between Ozzy’s oldest and youngest child). This means beneficiaries could receive funds at very different times in their lives.

Giving while living might make sense as a strategy for some family members, but how does this affect their overall inheritance and the amount given to their siblings on death?

Starting to make these plans early allows you to be as tax-efficient as possible and gives your loved ones time to make their own equally important plans.

Get in touch

If you’d like help managing your high net worth estate, or if you are looking to better manage your succession planning, then do get in touch. Contact us online or call 020 7400 4700.

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. All details relating to the Osbourne family are from public sources and not endorsements!

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

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5 of the best European Christmas markets to visit this winter

Mon, 24 Nov 2025 14:43:09 +0000

Europe is home to some of the world’s most celebrated Christmas markets, and with the festive season upon us, you might be planning a last-minute winter getaway. If so, why not combine your city break with a visit to the craft stalls and food vendors of these beautiful and historic markets, sure to get you in the festive spirit?

From local delicacies and traditional fare to gift ideas for your loved ones back home, our guide highlights five of the best markets to visit this winter.

1. Berlin, Germany (24 November to 31 December 2025)

At this time of year, Berlin is all but synonymous with its Christmas Market, which in 2025 is moving location due to ongoing construction work.

The Gendarmenmarkt, now at Bebelplatz, will feature everything marketgoers have come to expect.

The scent of roasted almonds and hot apple wine will accompany live music from local bands and choirs, while stallholders will continue to sell their handcrafted goods and local cuisine such as Berlin currywurst and potato pancakes.

Expect a celebratory mood of festive elegance and cheer.

2. Prague Christmas Market, Czechia (29 November 2025 to 6 January 2026)

Prague is a historic and vibrant city, with plenty to offer visitors all year round. But it truly comes alive at Christmas.

The two main markets are situated a short walk apart in the heart of the city, in the Old Town Square (home to the famous astronomical clock) and Wenceslas Square.

Open daily throughout December and into early January (including Christmas Day and New Year’s Day), entry is free.

You’ll find large Christmas trees, open-air stages, and historic architecture as a stunning backdrop to the traditional array of decorated huts selling produce from local artisans. At Wenceslas Square, you’ll also find an enchanting nativity scene and an ice rink.

The city hosts several smaller markets, including at Republic Square, Peace Square, and Na Kampě Square, set in the atmospheric shadow of the Charles Bridge.

3. Salzburg Christmas Market, Austria (20 November 2025 to 1 January 2026)

Salzburg has an impressive Christmas pedigree. Its festive market dates all the way back to the 15th century, and the carol ‘Silent Night’ was written in the city. It was first performed in the church of St Nicholas, close to where the Christmas market occurs today.

Set between the Hohensalzburg fortress and the Cathedral of Salzburg, this historic setting houses a huge array of craft and produce stalls as well as entertainment.

Time your visit for a Thursday or Advent Saturday around 6.30 pm, and your entertainment will consist of Salzburg’s traditional tower blowing (or “Turmblasen”). Christmas carol singing is accompanied by wind instruments from three of the city’s towers, a tradition dating back to when town pipers would use the same method to announce important local events.

4. Zurich, Switzerland (20 November to 24 December 2025)

Switzerland isn’t short on festive cheer or impressive Christmas markets, but with so many of the latter to choose from, picking the right one isn’t easy.

For a grown-up and sophisticated atmosphere, celebrating local artisanship and tradition, try the Münsterhof Market.

With its motto of “From Zurich for Zurich”, you’ll find the Münsterhof Market in the heart of Zurich’s historic Old Town, nestled between the Fraumünster Church and medieval houses from the 15th century.

Close to the Bahnhofstrasse, and its exclusive shops and luxury brands, the Münsterhof Market provides Christmas shoppers with high-end, locally produced goods in elegant surroundings. It’s the perfect spot for celebrating the festive season in style.

5. Budapest, Hungary (14 November 2025 to 1 January 2026)

The historic city of Budapest, split by the River Danube, is of significant cultural interest. Its city centre has been a Unesco world heritage site since 1987. Of its many notable monuments, St. Stephen’s Basilica is arguably one of the most famous, and it’s also the site of the Budapest Basilica Christmas Fair.

Enjoy a warm festive atmosphere, mulled wine, and quality craft stalls alongside traditional food and drink at reasonable prices.

Or opt for the Christmas Market on Vorosmarty Square in the heart of the city. Here, you’ll find mulled wine and a magical market, steeped in history. But be warned, food prices may be higher than at other markets. For authentic local cuisine, you might venture beyond the stalls and explore the neighbouring streets before returning to the market to take in the atmosphere and free entertainment.

Get in touch

Once you’re back from your festive city break, if you need help managing your Christmas or new year finances, get in touch. Contact us online or call 020 7400 4700.

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How “hidden” wealth could play a key role in your high net worth divorce

Mon, 24 Nov 2025 14:43:03 +0000

A recent divorce case, reported by Today’s Family Lawyer, involved a large Bitcoin fortune – an initial £10,000 investment now worth more than £20 million. Further cryptocurrency holdings of £371,000 – previously undisclosed – complicated proceedings even more.

The case, known as Culligan v Culligan, helps to highlight the difficulties of uncovering and valuing relevant assets in a divorce. While digital currency undoubtedly adds a new layer of complication, “traditional” assets – such as those held within a defined benefit (DB) pension scheme – also require specialist knowledge and advice.

Keep reading for a look at the challenges of managing a high net worth (HNW) divorce and how hidden assets – if missed – could impact a settlement.

You’ll also discover how cashflow planning can help you – or someone you know going through a divorce – to successfully navigate to an equitable outcome. When emotions are high, making rational financial decisions can be difficult, and while not a formal requirement in court proceedings, a cashflow model can be very helpful.

Working with a divorce financial planner to create a cashflow model can be an invaluable tool in navigating the financial settlement process.

High net worth divorces and the rise of cryptocurrency

The recent Culligan v Culligan case provides a fascinating example of how HNW divorces can be complicated by complex financial arrangements.

While divorce courts require full and frank disclosure, assets can remain undeclared, whether intentionally or by accident, and identifying where this is the case isn’t easy. Liquid assets, offshore investments, and even pensions can all be forgotten. However, errors and non-disclosure can have significant legal and financial consequences.

What’s more, even when assets are known and disclosed, valuing them often requires specific expertise.

While cryptocurrency is a relatively new area, it has quickly become mainstream, and it will become increasingly common for digital wealth to play a role in HNW divorce cases. Regulation has yet to catch up, and not all areas of cryptocurrency are covered by the FCA, but all assets held in the digital space must be acknowledged and understood in the same way as any other asset.

High net worth divorces can include complex financial structures

Expert financial advice is required from the outset of divorce proceedings, and cryptocurrency isn’t the only area where this guidance can be vital. The right support can help ensure a fair settlement for both parties, which takes into account all relevant assets and considers often-complex financial regulations.

The benefits of cashflow modelling

Using a cashflow model can be key not only to getting a fair settlement, but to securing a practical settlement that allows you to create a post-divorce lifestyle that works for you.

A cashflow model is a financial projection tool that helps you understand how money moves over time. It considers income, expenses, assets, liabilities, and potential future changes. By visualising these elements, a cashflow model provides a clear picture of your financial situation both now and in the future. Cashflow models should be created by a financial planner who can ensure that the inputs and assumptions are accurate.

Here’s how a cashflow model can help:

1. Clarifying financial needs

A cashflow model helps determine how much money you need to maintain a reasonable standard of living after divorce. By analysing expenses and income, it provides an estimate of financial needs, ensuring that you are not left struggling.

2. Assessing asset division

Not all assets are created equal. While one party may want to keep the family home, it’s essential to consider ongoing costs such as mortgage payments, maintenance, and taxes. A cashflow model can project the long-term impact of keeping or selling assets, helping you make informed decisions.

We’ve already mentioned equitable settlements that take your lifestyle into account.

Imagine you are awarded a pension fund as the majority of your settlement at age 40 or 50 – valuable, but not accessible until later in life. Would that meet your needs now? It may be equitable in value, but not in application.

3. Determining spousal and child support

Support payments are a significant part of divorce settlements. A cashflow model can assess whether a proposed support amount is sustainable for both the payer and recipient. It can also model different scenarios, such as changes in employment or unexpected expenses.

4. Planning for the future

Divorce is not just about your immediate financial situation; it’s about long-term financial security. A cashflow model can project financial stability over time, taking into account retirement savings, inflation, and potential career changes. This helps ensure that your financial settlement is fair and sustainable.

5. Reducing Stress and Conflict

Divorce negotiations can become highly contentious when finances are unclear. A cashflow model provides an objective financial analysis, reducing uncertainty and allowing you to negotiate based on facts rather than emotions.

Divorce advice is crucial in other complex areas of your finances

Pensions

One financial area that is often overlooked in divorce settlements is pensions. Pension wealth can be significant, both in terms of accumulated funds and long-term planning.

Back in January, PensionsAge confirmed that a spouse could miss out on financial assets worth nearly £400,000 if a pension is excluded from a divorce settlement. This calculation was based on an initial pension value of just £200,000 at age 40, assumed annual growth at 5%, and retirement at age 68.

The potential loss would, of course, be higher where pension wealth was greater, and yet the same report explains that pensions are often overlooked during a divorce.

While couples consider the value of their family home in half (50%) of divorces, pensions are considered in just 13% of cases. Defined contribution plans hold a fund value based on contributions and are, generally, easy to value. However, Final Salary pensions (Defined Benefit) are more complex, so professional help might be required to ensure the accuracy of any disclosure and avoid potentially costly misrepresentation. Typically, a court-appointed professional – such as a qualified actuary – will work on the valuation of DB schemes and calculate possible splits of a DB pension.

Those looking for a division of pension assets between parties and a clean financial break, often look to pension sharing orders as a solution. HFMC Wealth can help with the implementation of any pension sharing orders awarded by the court.

Property

There are several ways to split property in a divorce. Retaining joint ownership of a main family residence can provide continuity and stability for children. Selling the property and dividing the proceeds according to each party’s stake, meanwhile, provides a clean break. Part buy-outs might prove more complicated but could suit individual circumstances.

In a HNW divorce, multiple properties might need to be considered, adding further layers of complexity.

Where mortgage debt remains, ongoing repayments – and their division between parties – will need to be factored into divorce settlements. Our expert team at HFMC can help you understand the long-term consequences of property decisions during divorce, ensuring you make the right choice based on all the necessary information.

Overseas assets

Assets held overseas must be disclosed as part of a divorce, but everything from exchange rates to non-UK regulations and complicated ownership structures can add to the complexity of accurate valuations. These are key to fulfilling disclosure obligations.

As a high net worth individual (HNWI), you might own an overseas holiday home, hold assets in a foreign bank account, or have an offshore pension plan or trust.

At HFMC, we have valuable experience in dealing with the international interests of our clients. We can use this knowledge to ensure all relevant assets are disclosed during a divorce, helping to provide you with a fair settlement.

Get in touch

Whatever aspect of your HNW divorce you need help with, advice from the outset alongside your lawyer is key to a fair settlement and full disclosure, so get in touch now. Contact us online or call 020 7400 4700.

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.

Cryptoassets are not regulated financial products, so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws and are not suitable for the majority of investors.

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Why your Income Tax bill could be £7k higher by 2030… and what to do about it

Mon, 24 Nov 2025 14:42:57 +0000

In his 2021 Spring Budget, the then chancellor Rishi Sunak announced a freeze on the Personal Allowance – the threshold after which Income Tax becomes payable. Intended to run from April 2022 to April 2026, the freeze was later extended to 2028.

The higher-rate Income Tax band (£50,270) was also frozen, while the additional-rate threshold was reduced (to £125,140).

HMRC confirms that the Treasury’s Income Tax receipts have risen in recent years – by more than £23 billion (8.1%) between 2023 and 2024 alone. While HMRC points to growing employment and average earnings as contributing factors, the report also notes the impact of frozen allowances.

In fact, FTAdviser recently suggested that an extended Personal Allowance freeze to 2030 could increase the Income Tax of high earners by more than £7,000. When the 2025 Autumn Budget arrived, chancellor Rachel Reeves surprised many analysts by not only extending the freeze, but doing so until April 2031.

Keep reading to discover how to mitigate the effect of continued freezes and how expert advice can help.

Threshold and allowance freezes are essentially stealth taxes, and fiscal drag could see your tax bill rise

The £7,000 rise in Income Tax mentioned above was based on someone earning £100,000 in 2022, when the freeze began, compared with their potential liability if thresholds had kept pace with inflation. Even with a salary of £80,000, the additional Income Tax bill could reach more than £5,600 by April 2030.

Frozen allowances increase the government’s tax revenues and drag more people into higher tax bands. The Office for Budget Responsibility (OBR) estimates that 3 million more people will pay higher-rate tax by 2028/29, and a further 400,000 will start paying the additional rate.

As a high earner, you could also fall into the so-called “60% tax trap”. This effective marginal rate might apply if your income is between £100,000 and £125,140. Once your earnings exceed £100,000, your Personal Allowance reduces by £2 for every £1 above this amount and disappears once your adjusted net income reaches £125,140 (the frozen threshold for additional-rate Income Tax).

Unbiased reports that the number of high earners affected by this “trap” has risen by 45% in the last two years.

However, Income Tax thresholds aren’t the only ones that are frozen, and fiscal drag could be affecting all aspects of your wealth and finances.

3 areas where fiscal drag could impact your finances and how to mitigate its effects

1. Income Tax

As we have seen, Income Tax thresholds are currently frozen until at least 2031.

Maximising your pension’s tax efficiency could help to lower your bill.

Consider using personal pension contributions, including those made using salary sacrifice – while accounting for the new £2,000 cap, after which employer and employee National Insurance contributions (NICs) will be payable from 2029 – or making charitable donations (ensuring you select Gift Aid) to reduce your adjusted net income. This could reduce Income Tax (or allow you to reclaim more via self-assessment), especially if you are close to certain thresholds, like the £100,000 taper or the additional-rate band.

We have also seen reductions to dividend allowances, making more dividend income taxable.

2. Capital Gains Tax

Rachel Reeves used her 2024 Autumn Budget to increase the tax rates for Capital Gains Tax (CGT). These changes were effective immediately.

Even before these rate rises, however, the Annual Exempt Amount had been significantly reduced – from £12,300 to £6,000 in 2023/24 and then to £3,000 in 2024/25.

These reductions, a form of fiscal drag, could make investments within tax wrappers like Stocks and Shares ISAs increasingly appealing. Gains in a Stocks and Shares ISA are free from CGT and Income Tax.

As a high earner, you might also consider alternative, potentially higher-risk investments like Venture Capital Trusts (VCTs) and the Enterprise Investment Scheme (EIS).

There is no CGT to pay on gains held in a VCT for at least three years, or via EIS for at least five years. VCTs offer 30% Income Tax relief on up to £200,000 a year, while EIS funds provide 30% relief on up to £1 million.

The EIS also allows you to postpone paying CGT on the sale of an asset (e.g. property, shares, cryptocurrency) by reinvesting the gain into EIS-qualifying shares – provided the reinvestment is made within the period from one year before to three years after the gain was realised. Of course, there is no guarantee that the CGT rate applicable when the deferred gain becomes taxable will not be higher if legislation changes!

You might also manage a potential CGT bill by transferring assets to your spouse or partner, timing disposals either side of a tax year, or offsetting a sale with losses elsewhere.

3. Inheritance Tax

IHT thresholds – the nil-rate and main residence nil-rate bands – have been frozen for some time.

The nil-rate band was set at £325,000 in 2009/10 and remains at that level for 2025/26. The residence nil-rate band was introduced (at £100,000) in 2017 and has been frozen at its current rate of £175,000 since 2020/21. Both thresholds have now been frozen until 2031.

These freezes have contributed to rising IHT receipts for the Treasury. The OBR expects IHT to top £9.1 billion in 2025/26 as more estates are brought into scope for the tax. Receipts are highly likely to rise again in 2027 as unused pension pots fall into the IHT net.

Lifetime gifts, so-called “giving while living”, could help to tax-efficiently lower the value of your estate, while life insurance policies written in trust can also provide the means to pay off a liability without undue stress on those you leave behind.

Get in touch

If you’d like help managing the effects of fiscal drag on your finances, get in touch. Contact us online or call 020 7400 4700.

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.

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