November 1, 2024
‘I’m an expert – this is what you need to know about new tax rules’ | Personal Finance | Finance
 #CashNews.co

‘I’m an expert – this is what you need to know about new tax rules’ | Personal Finance | Finance #CashNews.co

Cash News

While the wealthy and well-advised have long been able to use various loopholes and exemptions to reduce their inheritance tax bill, today’s changes have largely focused on closing loopholes connected to farms.

Although it’s important to bear in mind, it is believed fewer than 6% will be pulled into paying inheritance tax (IHT). IHT thresholds have been frozen until 2030, by which time the average house price in the UK could be more than £300,000 if trends continue.

Combined with the inclusion of pension pots from April 2027 – the average pension pot saved by a man in their 60s is more than £220,000 according to ONS data – more of us may have to begin to consider inheritance tax planning in the future.

Before these changes, you could have passed on your pension pot tax-free as a lump sum, or an income, in the event of your death. Although, if a death occurred after the age of 75, the money could be treated as income and the person it was left to may have needed to pay income tax.

As much as none of us like to think about it, planning for what happens to your money and possessions after you die can save you considerable sums in tax and ease the burden on your loved ones.

For example, there is an additional £175,000 tax-free allowance if you leave your house to your children or grandchildren, and spouses can also pool their collective allowances together, potentially protecting as much as £1 million from IHT.

On the flip side, many pensioners will be glad to hear that the triple-lock will be preserved and state pensions will be increased by up to £470, or 4.1%, next April. Additionally, Rachel Reeves’ decision to not extend frozen income tax thresholds beyond 2028 is also welcome news for those pensioners paying on their pension payments above their personal allowance.

However, until then more of them will be paying out an ever-greater proportion of their pension payments in tax and quietly facing a higher tax burden with each passing year.

It is more important than ever to seek out trusted independent financial advice when planning for your retirement to ensure you aren’t needlessly losing money in tax that you could be putting toward enjoying your golden years or passing on to the next generation.

Adam French is the personal finance expert at NerdWallet UK

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