Market update
The UK economy grew 0.3% quarter-on-quarter in Q2, beating the 0.1% forecast Bank of England cut interest rates from 4.25% to 4%, the lowest level in two years. Inflation rose to 3.8% in the year to July, the highest since January 2024. The Bank expect it to rise to 4% by September, and then start to fall US Consumer Price Index (CPI) for July was 2.7%. The market expects the Federal Reserve to cut interest rates in September. This has boosted global equity and bond prices
What taxes will Reeves increase?
With a backdrop of low growth and high government borrowing, Chancellor Rachel Reeves is under increasing pressure to take action. Economists have warned that she must either increase taxes or cut spending to address the enormous budget deficit.
Inevitably, speculation is already starting to build before the date for the Autumn Budget has even been set – anticipated late October or early November.
There have been various press reports around potential changes to inheritance tax (IHT), including lifetime rules on gifting to loved ones. Another potential target is the taper rate, or seven year rule, which reduces IHT on gifts given during your lifetime. If seven years pass after making a gift, no IHT is owed and your family could currently avoid an IHT bill on the gift. Other rumours include a hit on pension tax free cash, or another rise in capital gains tax.
However this is all just speculation, and more rumours are likely in the run up to the Budget. So it’s important that we don’t speculate on what might or might not happen. Having said that, you may wish to check you’re doing all you can now. I’m here to assist if you, or a friend or family member, want to make sure you’re making the most of the current tax advantages.
Are you expecting to leave or receive an inheritance?
New research* from M&G reveals a significant knowledge gap around inheritance tax (IHT). Nearly one in three people (32%) who expect to receive an inheritance of at least £300,000 or who have £150k investable assets, admit they don’t fully understand the laws and tax regimes that govern it. This lack of understanding may be contributing to a reluctance to pass on wealth during their lifetime – even though doing so could offer valuable tax advantages.
The findings come as HMRC reports a sharp rise in inheritance tax receipts, which reached £2.2 billion from April to June 2025, £0.1 billion more than the same period last year. With upcoming changes to include pensions in estates from 2027-28, understanding the rules has never been more critical.
Despite the growing tax burden, only a fifth (20%) of those surveyed plan to pass on most of their wealth before death. The top barriers include uncertainty about future living or care costs (37%) and a lack of understanding of available options (27%). Emotional hurdles also play a role with 22% listing discomfort when it comes to discussing inheritance with loved ones and 18% struggling with thoughts of their own mortality.
Les Cameron, Head of Technical at M&G, said: “Inheritance tax is a complex topic, but it’s not just a concern for the wealthy. Many families could reduce their liability through simple planning, yet inaction – often driven by uncertainty – leads to missed opportunities.”
“As property prices remain high and tax thresholds stay frozen, more families are being drawn into the IHT net, resulting in record amounts of tax receipts for the government. While talking about life expectancy is never easy, the sooner these conversations take place, the easier it is to plan.”
Under current rules, inheritance tax is set at 40% and paid on estates worth over £325,000. Spouses and civil partners can inherit any unused allowance from each other and an extra £175,000 allowance may be available if an estate including residential property is passed to a direct descendant, which means it’s possible for a couple’s estate to be worth £1 million without being liable for IHT.
Remember, tax rules can change and the impact of taxation and any tax relief depends on your circumstances, including where you live.
Please get in touch if you have any questions around this or would like to discuss inheritance tax planning either for yourself or your family – it could make all the difference.
- The research surveyed 1,002 people with £150,000 or more in investable assets or who expect to receive an inheritance of £300,000 or more, between 31 January and 11 February 2025 on behalf of M&G Wealth.
Running your own business or working for yourself?
If you’re running your own business or working for yourself, it’s easy to focus on the day-to-day and delay thinking about retirement. But pension contributions can offer more than just peace of mind for the next 5 to 10 years and beyond – they have many tax advantages:
Tax relief – Contributions to a pension can often be deducted from your taxable income, reducing your income tax liability
Corporate contributions – For those operating through a limited company, employer contributions are typically allowable as a business expense, potentially reducing corporation tax
Tax-deferred growth – Investments within pensions can grow free from capital gains tax and income tax, allowing your funds to compound more efficiently over time
Flexible planning – Pension rules also allow for strategic planning, especially when it comes to timing contributions and managing income across tax years
Pensions aren’t just about retirement – they’re also smart, tax-efficient tools that can help strengthen your business’ financial position today.
If you’re self-employed or a small business owner, it’s worth regularly reviewing your pension strategy. The rules can be complex and tailored advice makes all the difference. Get in touch if you think I could help you, or a family member or friend, take advantage of pension contributions.
If you have any questions about this email, or anything else, please get in touch – I’m here to help. And if you know someone who may be interested in receiving financial advice, please feel free to recommend me to them.