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Following a protracted series of leaks, suggestions, considerations and speculation, the Autumn Budget finally arrived and ushered in some notable changes.
High earners seem set to once again shoulder the burden and pensions are in the firing line again.
It is time for individuals to consider the best way to approach estate planning to ensure that their estate can successfully pass to future generations.
The biggest change to estate planning comes in the form of a reduction in the viability of salary sacrifice schemes.
Once a tax-efficient way of building up a bigger pension pot, a new £2,000 threshold dramatically reduces the effectiveness of salary sacrifice.
Any amount of salary moved into a pension pot above this threshold will be subject to employer and employee National Insurance Contributions (NICs), making it only marginally more tax-efficient than receiving it as income.
Due to come into effect from 6 April 2029, the full effect of this measure will be felt in many years’ time.
Most notably, there are concerns that future pensions will be significantly smaller than they currently are, given that there will be much less scope for growing them.
In a sense, this may work to offset the previously announced changes to Inheritance Tax (IHT) that have hung like the Sword of Damocles above pension pots, given that any unspent funds will be included in tax calculations from 2027.
Given that pensions are becoming increasingly less tax-efficient anyway, the time may have come to rethink the way you bequeath funds to future generations.
By utilising trusts, you can mitigate the impact of IHT on your estate.
Funds left in trust typically are not considered part of your estate for IHT purposes and the trust can be accessed by your beneficiaries at your discretion.
This will need to be carefully arranged during your lifetime.
You can also leave Trusts within your Will and they can be an excellent way of leaving money to those who are not ready to receive it at the point of your death, such as a young child or grandchild. You can establish a trust that can only be accessed when the beneficiary reaches a certain age or any other qualifying criteria you clearly define in your Will.
Estate planning has changed with pensions and IHT being popular picks for successive budgets and it is vital that your plans keep pace.
We can offer you full legal support in ensuring that your wishes are respected and your family’s financial future is secured.
If you have any concerns about preserving your estate or if you want help writing a Will, speak to our team today!
Head of Wills, Probate and Older Client Services
I joined Mander Hadley’s Wills, Probate and Older Client Services Team in 2018.I specialise in the preparation of Wills, Probate and estate administration, trusts and trust administration and Lasting Powers of Attorney. I also have experience of care fee planning and appeals of Continuing Health Care decisions.
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