The cost of applying for probate is set to rise by 75% next month, leaving grieving families forking out hundreds of pounds extra.

The Ministry of Justice (MOJ) has confirmed the Grant of Probate fee will increase on 13 July from £300 to £526, subject to parliamentary approval.

Martyn James, consumer expert, said the hike would leave people “absolutely justified in feeling upset and ripped off”.

He added: “Probate is one of the most antiquated, bureaucratic and complex processes we will encounter – precisely at the point where we need simple and clear help the most.”

The MOJ confirmed it is also set to increase a further 170 court and tribunal fees by 2.6% and 27 by an average of 34% on 13 July. Four fees will be reduced to account for a fall in underlying costs.

HM Courts and Tribunals Service said the time taken to resolve a probate case had more than halved since 2023 thanks to its investment in staff as well as system improvements.

A MOJ spokesperson added:  “We know that losing a loved one is already a difficult time. That’s why it’s vital the probate service remains as smooth, swift and simple as possible. 

“The new fee reflects the full cost of an ever-improving service which enables families to resolve disputes in as little as two weeks. Increasing fees is always a last resort, however the new cost accounts for rising inflation as well as investment in delivering an efficient and modern service.

“The worst off will face no fees whatsoever and anyone struggling can still apply to have the fee reduced or removed entirely through our Help with Fees scheme.”

What is probate?

Probate is the legal right granted to someone to deal with and distribute another person’s estate (property, possessions and money) when they die.

You can only apply for probate if you’re the executor of a will or the closest living relative of someone that has died who didn’t have a will in place.

Typically, the next of kin or executors of a will have to apply for probate before they can claim, transfer or distribute a deceased person’s assets.

You don’t always need to apply for probate. You may not need it if the person who died only had savings in their estate. You may also not need probate if they owned shares or money with others, in which case the shares and money go to the surviving owner.

You also don’t need to apply for probate if the deceased person owned land or property as a joint tenant. In this instance, the land or property is automatically passed to the other tenant.

Financial institutions, such as banks and mortgage lenders, have different rules on whether you can access a deceased person’s assets without having been granted probate, so it’s worth contacting them to find out what you need to do.

How do you apply for probate?

You can apply for probate by post or online via gov.uk, which is usually quicker.

If you’re applying by post, the form you need to fill in is different depending on whether the person left a will or not.

If they did, you need to fill in the application form PA1P. If they didn’t have a will, you need to fill in the PA1A form.

The government says the probate is typically granted within 12 weeks of submitting an application.

It’s crucial you do a few things before applying for probate though.

This includes working out an estimate of the value of the dead person’s estate for inheritance tax (IHT) purposes.

Even if no IHT is due, you’ll need the value as part of your probate application.

If IHT is due on the estate, you have to report its value to HMRC within one year via an IHT400 form. You can’t apply for probate until this is done and normally need to start paying any IHT due before you can get probate granted.

If IHT is owed on an estate, you also need to send “full details” of the estate to HMRC within 12 months of the person dying and before applying for probate.

Full details refers to the estate’s assets and debts, any gifts made, and any reliefs and exemptions.

Even if no IHT is owed, you may still need to send full details of an estate to HMRC.

For example, if the person who died gave away over £250,000 in the seven years before they died or if their estate is worth more than £3 million, you will need to contact HMRC.

There is a whole list of reasons on the gov.uk website of why you may still need to send full details of an estate to HMRC despite no IHT being owed.

You don’t have to give full details of an estate’s value to HMRC if all of the following applies:

• The estate counts as an “excepted estate”,
• There’s no IHT to pay, and
• There are no reasons, as per gov.uk, the full details of an estate still need to be sent to HMRC, despite IHT not being due.

An estate is typically classed as excepted if its value is below the nil-rate band (£325,000) or it’s worth £650,000 and any unused nil-rate band was transferred to a surviving spouse or civil partner.

An estate is also classed as excepted if the person who died left everything to a spouse living in the UK or a qualifying charity and the estate is worth less than £3 million.

The last way an estate can be excepted is when the deceased person was living permanently outside the UK when they died and the value of their UK assets is £150,000 or less.

The Caprons, Lewes, East Sussex

This Grade II-listed Georgian house in the centre of Lewes was once home to historian Asa Briggs, who was also a Bletchley Park code breaker. The garden includes a Grade-II listed, octagonal summer house. 5 bedrooms, 4 bathrooms, 3 reception rooms, kitchen, cellars, roof terrace, walled garden.

Price: £2.1m Jackson-Stops 01444-484400

Broomshields Hall, Satley, Bishop Auckland, County Durham

A Grade II-listed Georgian house with gardens that include a one-bedroom cottage, two summer houses and a lake. The house has a carved oak staircase and a large kitchen with an Aga. 4 bedrooms, 4 bathrooms, 3 reception rooms, library, 18 acres.

Price: £1.75m Finest Properties 0330-111 2266

The Manor House, Great Harrowden, Northamptonshire

A Grade II-listed manor house in a popular village, set in south-facing gardens with a kitchen garden with a greenhouse and a circular summer house with sofas and a fridge for wine. The house has beamed ceilings, panelled walls and period fireplaces. 6 bedrooms, 4 bathrooms, 3 reception rooms, breakfast kitchen, attic, pond, 0.8 acres.

Price: £1.15m Fine & Country 01604-309030

The Court, Axbridge, Somerset

A Grade II-listed Georgian house in Axbridge with views towards Glastonbury Tor. The house is set in gardens that include a summer house and an area dedicated to archery. It has flagstone and oak floors, period fireplaces and an indoor swimming pool with a gym. 7 bedrooms, 5 bathrooms, 3 reception rooms, breakfast kitchen, garden room, cinema, courtyard, parking, walled gardens, kitchen garden, 1.15 acres.

Price: £2.395m House & Heritage 01257-441990

Orchard Cottage, Wood End, Ardeley, Hertfordshire

A Grade II-listed, 17th-century house comprising three original cottages, with a summer house with a wood-burning stove and Wi-Fi. The house has exposed wall and ceiling timbers and inglenook fireplaces. 4 bedrooms, 2 bathrooms, reception room, gardens, 0.75 acres.

Price: £1.15m Fine & Country 01920-443898

Polwarth Terrace, Merchiston, Edinburgh

A duplex apartment on the first floor of a period property in the sought-after area of Merchiston. The flat retains its period fireplaces and has a dining room with French doors opening onto a balcony and a spiral staircase leading to a garden with a summer house. 6 bedrooms, 3 bathrooms, reception room, office/bedroom 7, dining kitchen, garage, summer house, parking.

Price: £985,000+ Savills 0131-247 3770

Moreves Manor, Great Waldingfield, Sudbury, Suffolk

A Grade II-listed, 17th-century house set in large gardens that include a wildlife pond and a summer house complete with a shower, sauna and wood-burning stove. The house has exposed wall and ceiling timbers and a breakfast kitchen with an Aga. 6 bedrooms, 2 bathrooms, 2 reception rooms, office, garden room, outdoor swimming pool, 1.58 acres.

Price: £950,000+ Strutt & Parker 01473-220444

Heamoor, Penzance, Cornwall

A renovated, Grade II-listed Cornish long house set in landscaped gardens with a tree house, an orangery overlooking the kitchen garden and a summer house that is used as a pottery studio. The house has Georgian sash windows, open fireplaces and a newly fitted kitchen with French doors leading onto the gardens. 4 bedrooms, 4 bathrooms, 3 reception rooms, study, utility with en-suite shower, workshop, paddock, stable block, 2.5acres.

Price: £1.2m Savills 01872-243 200

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

HMRC is increasingly hitting bereaved families with penalties for filing inheritance tax returns late as they struggle with long, complicated forms, according to data from a Freedom of Information request.

The number of penalties issued by HMRC for filing inheritance tax (IHT) returns late increased 35% from 3,850 to 5,200 over the last five years, data up to the tax year 2024/25 obtained by TWM Solicitors showed.

Fines for late filing rapidly increase over time, from an initial £100 to up to £3,000 after 12 months.

Many families with modest estates have been drawn into paying IHT in recent years, largely because the IHT threshold has remained frozen since 2009. Even an average house can now trigger an IHT bill on its own.

But Duncan Mitchell-Innes, partner and deputy head of private client at TWM, said the increase in late penalties is also being driven by more families attempting to complete IHT returns themselves, without realising the complexity involved.

“People often underestimate the complexity of the UK’s IHT rules. What seems like a straightforward task can quickly become time-consuming and technically challenging, particularly when HMRC requires extensive supporting evidence. This can lead to penalties if deadlines are missed,” he said.

Complex IHT forms

The basic IHT400 form alone has 122 questions, often requiring detailed financial and historical information.

This is the main form families will need to fill in for inheritance tax purposes. But in many cases, it must be supplemented by additional schedules – requests for information – of which there are more than 30, depending on the nature of the estate.

One of the most time-consuming parts of an IHT return, according to lawyers, relates to the valuation of assets. Many assets, such as residential property, need to be valued professionally – market estimates are not enough.

In addition, some assets, such as shares, have specific ways of being valued for IHT purposes. Getting these valuations completed on the correct technical bases can be time consuming without prior technical knowledge.

Delays can also arise where executors struggle to identify all the relevant details needed for the IHT400. This can include tracing all bank accounts, investments and historical gifts, which sometimes go back many years – for instance due to the seven year rule. Many banks only provide this information by post.

Missing out on inheritance tax reliefs

Mitchell-Innes said it can be hard for people handling their loved one’s IHT return on their own to identify all the relevant technical reliefs and exemptions that may apply, together with gathering the evidence to support them.

For example, gifts made out of surplus income or more than seven years before death may be exempt, but finding evidence to support that exemption can take time.

Some families handling their own return even lose out on reliefs and exemptions available to them simply because they do not know they exist.

“Reliefs aren’t applied automatically. People must actively claim reliefs and exemptions and find the evidence to support them where needed, which can be time-consuming. Without proper advice, families risk penalties and leaving valuable reliefs unclaimed,” said Mitchell-Innes.

The number of penalties for late filing of inheritance tax returns is likely to increase further after unused pension pots are brought into the IHT net from April 2027, leading to more families having to submit a return.

The development is expected to increase the demands on personal representatives – those in charge of administering the estate left behind after a death – to get the pension IHT paperwork right, or face potential fines themselves.

The latest government data on business rate appeals contains good news and bad news. On the downside, there has been a surge in the number of businesses launching cases: almost 130,000 business owners began the process during the first three months of the year, five times more than in the fourth quarter of 2025; that will probably lead to delays in processing claims. More positively, the data also shows that 57% of firms challenging their business rates bills eventually secured a reduction; in other words, your chances of winning are pretty good.

The statistics, published by the Valuation Office Agency (VOA) at the end of May, underline the importance of checking your business rates assessment quickly. New assessments of the rateable value of more than two million business properties in England and Wales came into force on 1 April; this rateable value, based on the VOA's estimate of the commercial rent potentially chargeable on each property, is what determines your business rates bill.

It's now too late to appeal business rates set following the previous VOA revaluation, which took place in 2023; the deadline was 31 March, which is part of the reason for the spike in claims in the first quarter. But you can challenge the rateable value that came into force in April. If you can show the VOA is overestimating how much rent your business property could secure – either what you are paying to rent it, or if you own the property how much you could rent it out for – you could get a reduction.

Check, challenge and appeal your business rates

Such cases involve three stages. Step one is known as a “Check”. Effectively, you're just asking the VOA to confirm the factual details it holds about your property, so you can check you're not being overcharged because of inaccurate data. Relatively few Checks result in a reduction, so most businesses then move on to stage two, known as “Challenge”.

Following a Check, you have four months to submit a Challenge. This is your opportunity to present evidence suggesting your rateable value has been wrongly estimated. That could include, for example, details of the open-market rent agreed on the property, or details of other leases on similar properties nearby. Alternatively, there may have been a material change to your property – you're using it for a different purpose, say, or there have been developments in the area that could affect its value.

Cases that don't succeed at the Challenge stage can be appealed at the independent Valuation Tribunal Service. There's a fee of up to £300 to launch an Appeal – stage three of the process – and you must file your claim within four months of receiving the Challenge decision. You'll get your fee back if you win.

In theory, you can handle each stage of a business rates case yourself, but many businesses appoint a professional agent to manage the process on your behalf – particularly if they proceed to Appeal. Agents can give you advice on whether it's worth bringing your case and handle the work for you, using their experience to maximise your chances of success.

Make sure you appoint a reputable agent. The Royal Institution of Chartered Surveyors can provide details of firms that abide by their professional standards and code of best practice.

Finally, it's important to note these processes can result in your business rates bill rising rather than falling. This is relatively unusual, but certainly not unheard of. Make sure you're not presenting evidence that gives the VOA reason to think it has underestimated your rateable value.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

You pay capital gains tax when you make a capital gain over a certain allowance. However, these allowances have changed in the last few years, meaning more people are being brought into the net.

That makes it all the more important to know how the tax works, and when you need to pay it. Test your knowledge in our quiz below.

How well did you do in our capital gains tax quiz? Share your results on social media.

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• 10 ways to cut your capital gains tax bill
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The government is considering plans to hit non-UK resident property owners with an extra "mansion tax" charge in a bid to raise more cash.

A consultation launched by HM Treasury explores the possibility of applying a “non-resident premium” on top of the High Value Council Tax Surcharge (HVCTS), also known as the “mansion tax”.

The consultation says: “In high‑pressure housing markets, particularly in areas such as London, there is interest in understanding whether demand from non‑UK resident owners may be contributing to pressures on housing availability and prices.”

The extra non-resident surcharge is just being considered and will not necessarily come into effect. The government’s consultation closes on 14 July.

An HM Treasury spokesperson said: “The government is inviting views on whether there could be a case for a non-resident premium, as part of a wider consultation which seeks to address a longstanding council tax unfairness in this country.

“We welcome views from all interested parties, including on whether demand from non-resident owners may be contributing to housing pressures.”

What is the mansion tax and how would a non-resident premium be applied?

The HVCTS will take effect from April 2028 and apply to homes in England worth £2 million or more. The charge will be owed once per tax year.

The chancellor has claimed the surcharge will make the council tax system fairer.

The Valuation Office (VO), which is part of HMRC, is set to carry out a valuing exercise to assess which homes the surcharge will apply to.

Homes valued at £2 million or more but less than £2.5 million will be charged £2,500.

Properties worth £2.5 million or more, but less than £3.5 million will need to pay £3,500. Homes worth between £3.5 million and £5 million will need to pay £5,000. Properties worth £5 million or more face a £7,500 surcharge.

These charges are set to be increased each year in line with the Consumer Price Index (CPI) measure of inflation. Revaluations will be conducted by the VO every five years.

When it comes to the non-resident premium, there is no further detail in the government’s consultation on how the extra levy would be applied if it did come into force.

What could the effect of the premium be?

Marc Acheson, global wealth specialist at pensions and life insurance firm Utmost, said: “This latest proposal is likely to raise far less revenue than envisaged as more people will consider selling London properties, putting further downward pressure on valuations at the top end of the housing market.

“More broadly, it risks further damaging the UK’s reputation as a destination for wealth and accelerating the ongoing exodus of wealthy international individuals that began in earnest following the abolition of the non-dom regime at the Autumn 2024 Budget.

“The economy cannot afford to lose these individuals, who are the largest contributors to the tax base, and once this cohort leaves it is very hard to replace them.”

Sian Armitage, tax director at tax advisor Mark Davies and Associates, said the premium could push non-resident property owners weighing up a sale into putting their property on the market.

“For those that are undecided, they may treat this as yet another reason to sell, or consider this as an indication of things to come,” Armitage said.

However, Armitage added that because the levy would be applied to non-residents “it does imply that those individuals are not spending significant time in the UK in any case, so I don’t envisage this policy alone as having a negative impact”.

Meanwhile, Peter Ferrigno, director of tax services at consultancy Henley and Partners, said making the HVCTS slightly higher for non-UK residents would be an “inconvenience”, but it was unlikely the introduction of such a premium on its own would be enough to make wealthy individuals sell up.

But, he said the bigger issue is they could leave when also considering “many other changes, and an indication that there will still be more demands for a bit here, a bit there, a bit more after that, and then...who knows what's next”.

What is a non-UK resident?

Non-UK residents pay tax on their UK income, but not on their foreign income. In contrast, a UK resident would typically pay UK tax on income from both sources.

You are generally classed as a non-UK resident if you spend fewer than 16 days in the UK each tax year or work abroad full-time and spend fewer than 91 days in the UK each tax year and no more than 30 of those days are spent working.

The statutory residence test (SRT) determines whether you are resident in the UK under UK domestic tax law for tax years 2013/14 onwards. You can find out more on gov.uk.

Almost three million people could cut back on pension saving as a result of the impending salary sacrifice clampdown, the government’s own data suggests.

Chancellor Rachel Reeves used her 2025 Autumn Budget to announce a £2,000 cap on the amount workers and their bosses can add into pensions via salary sacrifice before being hit with National Insurance (NI) charges.

The changes will come in from April 2029 and are expected to raise £4.8 billion for the Treasury in 2029/2030 and £2.5 billion in 2030/2031.

But while this may be good for the nation’s finances, it could be a blow for people’s own pension savings.

Research by former pensions minister Steve Webb, now a partner at consultancy LCP, found the government’s own estimates suggest more than 2.8 million workers are expected to cut back on pension saving as a result of the changes.

It comes despite the government-backed Pensions Commission recently warning that people aren’t saving enough for their retirement.

The impact of pension salary sacrifice changes

Salary sacrifice has long-been a popular way for employees to make pension contributions.

Money is added into an employee’s pension pot from their gross pay, adjusting their net income. This also reduces the payroll taxes paid by an employee and employer.

But government guidance shows the cost of the relief has increased markedly, from £2.8 billion in forgone National Insurance contributions in tax year 2016/2017, rising to £5.8 billion in 2023/2024.

Without any change, it is expected that this would almost triple to £8 billion by 2030/2031.

Capping the relief will save the government money.

HMRC has previously disclosed that an estimated 7.7 million employees currently use salary sacrifice to make pension contributions.

Of these, 3.3 million sacrifice more than £2,000 of salary or bonuses.

The Office for Budget Responsibility has already warned that a consequence of the policy could be a reduction in contributions.

A Freedom of Information (FOI) request to HMRC by Webb has revealed the extent of this.

The FOI asked for the government’s assessment of the number of employees that are assumed to cut their contributions in 2029/30.

HMRC said it expects more than 2.8 million workers to reduce their contributions.

This is broken down as 2.2 million earning above the £50,270 upper earnings limit, while 666,000 will generally be basic rate taxpayers.

Webb said: “The government has presented the changes to salary sacrifice for pensions as being a relatively painless way of cracking down on a tax break mostly enjoyed by the well off.

“But these figures show that the effects of the policy will be far more damaging than had previously been admitted.”

He suggests it is hardly ‘joined-up government’ to be stressing the need for more pension saving one day through the Pensions Commission and then implementing a policy that will reduce the pension savings of millions the next.

Webb added: “At a time when the government is running a major Commission to tackle the issue of pension under-saving, it is shocking that a separate government policy will result in more than 2.8 million workers cutting back on pension saving.”

A Treasury spokesperson said: “High earners piled in huge bonuses through salary sacrifice without paying a penny in tax – a taxpayer funded perk largely benefitting the better off.

“Our fair reforms protect 95% of workers earning under £30,000 using salary sacrifice, and as IFS analysis shows, over three quarters of under 30s will be unaffected.”

Inheritance tax is a tricky topic. Taboos around speaking about money and the emotion that comes with thinking about death create a perfect storm for misunderstanding it. But with such complex rules around inheritance, it is a topic well worth talking about – and sooner rather than later.

Lisa Conway-Hughes, a certified financial adviser and founder of LCH Wealth, speaks to Kalpana Fitzpatrick on MoneyWeek Talks about how the inheritance tax regime is changing from April 2027. She reveals her biggest trick to help protect your pension. Tune in now on YouTube or on most podcast platforms.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

The government has laid out its design of the so-called mansion tax, which would see owners of homes in England worth £2 million or more slapped with an extra charge from April 2028.

Chancellor Rachel Reeves announced plans for the High Value Council Tax Surcharge (HVCTS) in her 2025 Autumn Budget, claiming it would make the council tax system fairer.

The Treasury proposals are now being consulted on.

Housing Secretary Steve Reed highlighted that under the current council tax system, residents of a band D property in Darlington or Blackpool worth around £400,000 today pay £2,400 to £2,600 annually.

In comparison, those living in a mansion in Mayfair valued at £10 million in Band H are charged around £2,100 per year.

He said: “Previous governments have known how unjust this is, but failed to act. Through the HVCTS, those who own the most valuable properties in the country will pay their fair share.”

The Treasury estimates that fewer than 1% of residential properties in England will attract the HVCTS, which will be paid alongside council tax bills.

Revenue raised through the HVCTS will be used to support funding for local government services.

How high value homes will be valued for the mansion tax

The Valuation Office (VO) will be conducting a targeted valuation exercise to identify properties in scope by using professional valuers and using industry standard automated valuation models that assess sales data and property attributes.

It will identify homes worth more than £2 million as of April 2026 and adjust for differences between properties include the sale price, property type, size, age, number of rooms and parking.

High value homes will then be placed in four bands.

These start at £2,500 for a property valued in the lowest £2 million to £2.5 million band and go up to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.

Revaluations will be conducted by the VO every five years.

Properties built after implementation of the HVCTS but before the next scheduled revaluation will be valued and banded either on completion or from the day they are occupied.

Homes that have been significantly improved or changed after the implementation date, for example by adding a large extension, will be revalued and banded at the sooner of either the next revaluation or sale of the property, the consultation said.

Who will pay the mansion tax?

It will be the owners of a property rather than the occupiers who pay the HVCTS. This means a landlord rather than a tenant would pay the charge if a home worth more than £2 million was being rented out.

This also means leaseholders will be liable for the mansion tax in a high-value home.

Where a property is held in trust for a child, trustees will be liable.

Mansion tax exemptions

There will be some exemptions to the mansion tax such as for individuals who bought or inherited their home but who now have lower income, or those who experience a temporary change in circumstances such as job loss or ill health.

The government said it will make a deferral scheme available which permits payment of HVCTS to be delayed until a property is sold, where individuals meet specific eligibility criteria.

This will be targeted at those on lower incomes – with an income threshold of £35,000 – and not for second homes or to companies that own property.

Deferral will also be available in certain circumstances where the property is the main home of someone who is disabled or severely mentally impaired.

Mansion tax discounts

The government has proposed offering a discount or exemption to charities and also to properties such as halls of residences, property owned by the Ministry of Defence and by organisations predominantly for the accommodation of those seeking refuge from domestic violence.

There may also be discounts for people who own a property tied to their employment.

The consultation said: “In some sectors, particularly agriculture, business owners may need to live on the site where their business operates for practical reasons. For example, a farmer may need to own and live in a home located on their farm.

“Outside agriculture, it is less common for ownership and occupation to coincide. For example, accommodation used to house members of a religious institution is typically owned by the institution rather than those occupying it.”

When would you need to pay the mansion tax?

The HVCTS will be collected by councils at the same time as council tax.

Once the valuations are ready, local authorities will identify owners and send the first bills in March 2028.

You will be able to contact your local authority for information on deferral and discounts in advance of the first bill or at any time if circumstances change.

Can you challenge the mansion tax?

Homeowners will be able to challenge valuations, similar to how you can appeal council tax charges.

If you think you have been incorrectly billed or banded, you will be able to complain to the VO or the local authority.

Homeowners will be given longer than usual to challenge the new  High Value Council Tax Surcharge (HVCTS).

The government is providing an initial eight month period to challenge banding rather than the typical six month period for mainstream council tax.

As with council tax, where an individual submits a challenge or appeal they will be required to continue paying HVCTS.

Any overpayments will be refunded or liabilities adjusted if necessary.

Sarah Coles, head of personal finance at AJ Bell, said: “There will be plenty of people breaking out the world’s smallest violins for those in expensive homes. However, it could cause problems for people who are asset rich but cash poor. They may decide to bring forward any downsizing plans, and then struggle to sell before the charge kicks in.”

The “vast majority” of pensioners will miss out on the government’s plans for an income tax exemption from next year, new research suggests.

In the 2025 Budget, chancellor Rachel Reeves announced pensioners whose sole income is the basic or new state pension would not need to pay the “small amounts” of tax via simple assessment if the state pension exceeds the tax-free personal allowance from 2027/28.

It was positioned as easing the “administrative burden” but the government has since clarified pensioners in this situation won’t have to pay income tax at all from 2027/28, if their pension exceeds the personal allowance from that point

It came as the chancellor announced the allowance would be frozen at £12,570 until at least April 2031. The threshold last increased in April 2021.

This proposed waiver is intended to stop pensioners solely reliant on the state pension (with no other taxable income or pension ‘increments’) having to pay tax on the payment.

Only around 5.5 million pensioners – or just one in 18 – will be eligible for the concessions, former pensions minister Sir Steve Webb, a partner at pensions consultancy LCP, said.

The full new state pension of £12,548 sits just £22 below the tax threshold and the government expects the rate from next April to rise above the threshold for the first time, given high inflation, wage growth and the triple lock.

The old state pension, by comparison, is much lower than the threshold and even with expected rises looks set to remain so, meaning people solely on the old state pension would not have to pay income tax anyway.

How will the government proposals affect different groups of pensioners?

Webb has called the disparity of treatment between groups of pensioners under the proposed scheme “bizarre”, as LCP’s research flags how few people will actually benefit from the move.

The firm’s new report, ‘The tax treatment of state pensioners’ highlights that anyone who reached pension age before 2016 – when the flat-rate, single tier system replaced the two-tier system of basic plus additional state pension (SERPS or S2P) – will not benefit.

LCP said based on current data for 2025/26, none of the 8.1 million pensioners in the old state pension system will qualify for the exemption. This is either because they are only receiving the old state pension, which at £9,614 a year currently falls below the income tax threshold anyway or – in the case of 6.5 million of them – because they also receive additional state pension (either under SERPS or state second pension) and therefore are receiving a pension “increment” on top of the basic payment.

Similarly, most of the five million people on the new state pension (anyone hitting retirement age after 2016) may also miss out.

The firm calculated that 290,000 are not based in the UK; one million receive pension ‘increments’ or protected payments; 1.1 million have a new state pension rate that will remain below the income tax threshold in the next three years; and 1.8 million have other taxable income, such as private pensions or investment income so they are not solely dependent on the state.

Using the Office for Budget Responsibility (OBR) outlook, LCP calculated the estimated tax levels due over the remaining tax years (under this Parliament), assuming the state pension will rise by 3.7% in April 2027 and then by at least 2.5% in April 2028 and 2029.

Webb said the outlook presents some potential “cliff edges”, pushing people with even £1 of other income into a very different tax position than those without.

He said: “Someone who qualifies for this tax break in 2027/28 does not have to pay tax but someone who just misses out because of £1 of other income… will have to pay income tax not just on the £1 but also on the income tax on their state pension – a further £88. Over time this cliff edge will increase, to £153 in 2028/29 to £220 in 2029/30.”

The table below shows how much income tax would be payable without the proposed concession, for someone solely dependent on the new state pension.

Source: LCP, calculations based on the OBR’s March 2026 Economic and Fiscal Outlook for April 2027/28, then assumes a minimum increase of 2.5%.

Webb gives the example of someone with a small pension pot under auto-enrolment who cashes it out at retirement, therefore taking some taxable income and no longer being classed as solely dependent on the state.

Speaking to MoneyWeek, he said the government’s reference to the old basic state pension might be perceived as an even-handed benefit, whereas it was more of a red herring.

He said: “Freezing tax thresholds for a year or two is manageable. Freezing them for nearly a decade creates more unintended consequences by making a structural shift to the tax system in a ‘back-door’ fashion that isn’t fully thought through.

“Instead, we need a fundamental ‘root-and-branch’ review of the system – why we have tax thresholds in the first place, whether we should have the same rates for pensioners as for working people and so on.”

What are some alternative ideas to the new tax concession for pensioners soley getting the state pension?

He said he appreciates this is being presented as a short-term fix to the end of the current Parliament and is suggesting two potentially ‘cleaner’ solutions.

One option, albeit more expensive than the current proposal, is a broad-brush increase in the tax allowance for all pensioners.

Webb added: “But this would come at a considerable cost because it would also benefit the eight-million-plus pensioners already paying tax. This would not be a targeted solution to the problem.”

He also suggested writing off all small tax bills for pensioners, which would be a cheaper, more targeted option focused on the group of most concern. It would also not discriminate between those on the old and new tax systems.

“But it would still be only a temporary fix and would still leave any future government with a headache as to how to tackle the growing cost of such a measure.”

Webb added that the government already has a line at which it writes off small tax bills but it’s just less well-documented.

“I'm pretty sure HMRC doesn’t send out self assessment demand letters for amounts of £4. It’s taxpayers’ money and why shouldn’t that be paid? We know they clearly have a line already, all I'm saying is just make it bigger.”

LCP also warns the policy presents potential problems for the next government as any write-offs get more expensive over time.

Webb said: “By 2029/30 it looks as though the pensioners who do benefit will have over £200 per year in income tax written off. If the policy continues into the next Parliament it will get more and more expensive with every passing year, but will be hard to switch off – a bit like the triple lock.”

A HM Treasury spokesperson said: “Pensioners whose only income is the basic or new state pension, without any increments, will not have to pay income tax over this Parliament. “

More Londoners have come forward to HMRC to admit they have paid the wrong tax and to correct their records than in any other areas of the UK, new data shows.

A total of 3,296 individuals living in London admitted they had paid the wrong tax in the year to 31 March 2025, according to a Freedom of Information (FOI) request. This is more than the rest of the nine biggest UK cities combined.

The data is related to the number of disclosures made by those "who have not declared the right amount of income tax, capital gains tax, National Insurance contributions, or corporation tax”. They have then sought to make HMRC aware of the error.

Simple mistakes can lead to paying the incorrect amount of tax. But the punishment for paying the wrong tax can still be heavy fines and in cases of deliberate evasion, which is a criminal offence, imprisonment.

Far fewer people made voluntary disclosures to HMRC in Manchester (241 people admitting they had underpaid tax), Birmingham (394) and Leeds (150) compared to London in the year to 31 March 2025.

The lower number of voluntary disclosures in other UK cities highlights the concentration of cases in the capital and its most affluent postcodes.

South West London dominates the table of the top 10 postcodes areas for the number of people approaching HMRC to confess the underpayment of tax, with the number of people coming forward to the HMRC reaching 492.

Graham Caddock, tax director at accountancy firm Lubbock Fine, which submitted the FOI, said anyone who has underpaid tax deliberately or accidently should come forward to the HMRC as soon as possible.

Caddock said: “HMRC’s sophisticated approach to detecting tax errors using systems such as their Connect database, is targeting tax evasion more effectively than ever before.”

Voluntary disclosures submitted to HMRC per postcode for the tax year 2024/2025

Source: HMRC via an FOI request

How to avoid a fine for paying the wrong tax

Disclosing mistakes to HMRC as early as possible is the best way to avoid or reduce hefty fines for paying the wrong amount of tax.

Caddock said: “Taxpayers who have purposely or accidentally avoided their tax obligations are starting to realise it is more likely than ever that they will be caught.

“For anyone who has accidentally or deliberately underpaid their taxes, it is more important than ever to disclose and admit tax errors early rather than wait for them to be discovered.”

Common tax mistakes

Some of the common reasons why people underreport their tax obligations include:

• Undeclared rental income, such as letting out a property or room through platforms like Airbnb
• Income from side businesses, cryptocurrency trading, or offshore accounts, which can be difficult to track and report accurately
• Other self-employed income streams including freelance work, social media influencing, and brand collaborations, which may also go unreported

Caddock said: “With income from side businesses, property or offshore investments becoming more common and visible to HMRC, the risk of discovery is highly likely.

“Voluntary disclosures to HMRC are the best way to correct these errors before they become bigger problems leading to hefty tax penalties. In many cases HMRC can go back up to 20 years to collect unpaid taxes.”

How much are HMRC tax penalties?

Deliberate income tax evasion can lead to six months in prison or a fine of up to £5,000. In serious cases, penalties may be seven years’ imprisonment or more and unlimited fines.

When it comes to self-assessment, you’ll get a penalty if you need to complete a tax return and you send your return late, or pay your tax bill late.

If you register for self-assessment late – after 5 October and do not pay all of your tax bill by 31 January – you may get a ‘failure to notify’ penalty. This penalty is based on the amount still left to pay and you’ll receive it within 12 months after HMRC receives your self-assessment tax return.

If you send your tax return late you’ll get the following late filing penalties:

• an initial £100 penalty
• after three months, additional daily penalties of £10 per day, up to a maximum of £900
• after six months, a further penalty of 5% of the tax due or £300, whichever is greater
• after 12 months, another 5% or £300 charge, whichever is greater

If you pay your tax late you’ll get penalties of 5% of the tax unpaid at:

• 30 days
• six months
• 12 months

You’ll also be charged interest on the amount owed.

MoneyWeek has approached HMRC for comment.

Inheritance tax (IHT) is often described as the “most hated” tax out there, but a significant number of people know very little about how it works.

Around 71% of UK adults do not understand inheritance tax, a survey by investment manager Schroders found, and it’s not hard to see why.

The tax has a number of different allowances, caveats, and thresholds that can make it an incredibly complex topic – but sooner or later most of us will have to contend with it.

As tax-free thresholds remain frozen and house prices rise, plus new rules about inheritance tax on unused pensions loom, more people face being affected by the levy.

How much do you know about inheritance tax? Test yourself in our quiz.

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• Six IHT myths debunked
• How you could cut your inheritance tax bill by £37,000
• What is the 7 year inheritance tax rule and how does it help cut your bill?

The £1 million inheritance tax-free allowance figure is one of those numbers that has taken on a life of its own. Most people know about it, but very few have checked whether it applies to them.

At first glance, it seems straightforward. A couple has two nil-rate bands – also known as inheritance tax-free thresholds – at £325,000 each and two main residence nil rate bands at £175,000 each. Add the allowances together and you get £1 million you can pass on free of inheritance tax, which is otherwise charged at up to 40%.

But in reality, it is more complicated.

For example, if you’re married or in a civil partnership, any unused inheritance tax-free threshold can be added to your partner's threshold when you die. This tax perk does not apply to unmarried couples.

Sue Allen, chartered financial planner at Chester Rose Financial Planning, warns. “Care needs to be taken to ensure you qualify or know where you stand,” she says.

The issue usually lies with the £175,000 residence nil-rate band, which you could get if you give your home to your children or grandchildren. This extra allowance is often treated as part of the standard allowance. But it isn’t – and certain rules mean you may not get it.

When does the £1 million inheritance tax-free allowance not apply?

In practice, there are a few common scenarios where the main residence nil rate band is assumed to apply but doesn’t.

1. Couples without children

Couples without children are a straightforward example of where the £1 million inheritance tax-free allowance doesn’t apply.

“It is common for them to assume they are comfortably within the £1 million threshold, only to find that, without direct descendants, the main residence nil rate band doesn’t apply to them,” said Allen.

“At that point, the IHT allowance drops to £650,000 between them, which can come as quite a shock.”

2. Estates worth more than £2 million

The £2 million inheritance tax threshold acts as a tapering point for the residence nil-rate band. If your estate – total assets minus debts – is worth more than £2 million, the residence nil-rate band is reduced by £1 for every £2 that the estate exceeds this threshold.

If an estate's net value exceeds £2.35 million, the residence nil rate band is completely lost for a single individual. For a surviving spouse, the threshold for complete loss is £2.7 million.

“There is a growing number of people, particularly in London and the Southeast, who find themselves over the £2 million threshold without really thinking of themselves as having large estates. A property and a reasonable level of investments can get you there,” said Allen.

“We often find that, as a result, these clients don’t qualify at all for the main residence nil-rate band.”

Inheritance tax on pensions is due to change in April 2027, with most pensions being treated as part of the estate by HMRC for IHT purposes from then. This will increase the value of estates, potentially pushing them over the £2 million threshold when the residence nil rate band starts to taper.

3. Downsizers

Later-life decisions can create further complications when it comes to inheritance tax thresholds. Downsizing, for example.

There are rules that allow you to preserve a percentage of the main residence nil rate band when you sell a property – known as the downsizing addition or downsizing relief. However, these rules are not straightforward and require careful planning.

The amount of the downsizing addition will usually be the same as the residence nil rate band lost when the former home is no longer in the estate. Again, the amount of the preserved main residence nil rate band needs to be left to direct descendants to qualify.

It will also depend on the value of the other assets left to direct descendants. The downsizing addition cannot be more than the maximum amount of residence nil rate band available if the sale or downsizing had not happened.

The estate’s personal representative must make a claim for the downsizing addition within two years of the end of the month that the person dies. HMRC can extend this time limit in some circumstances.

You do not have to tell HMRC when the downsizing move, sale or gift of the former home happens. The estate’s personal representative makes a claim for residence nil rate band and any downsizing addition when filling in the inheritance tax returns.

You should keep the details of the move, gift or sale so that the estate’s personal representative can get that information when they make the claim.

You can only take one move, sale or other disposal of a former home into account for the downsizing addition. If the person that died downsized more than once, or sold or gave away more than one home between 8 July 2015 and the date they died, the estate’s personal representative can choose which to use to calculate the downsizing addition.

4. Blended families

Blended families are another area where things don’t always align when it comes to inheritances. They are increasingly common, but the inheritance rules haven’t kept pace. This can often lead to disputes over inheritances.

“It’s easy for assets to be passed in a way that makes perfect sense from a family perspective but doesn’t meet the technical requirements for the main residence nil-rate band,” said Allen.

For residence nil rate band purposes the direct descendant is:

• a child, grandchild or other lineal descendant
• a spouse or civil partner of a lineal descendant (including their widow, widower or surviving civil partner)

This also includes:

• a child who is, or was at any time, their step-child
• their adopted child
• a child fostered at any time by them
• a child where they’re appointed as a guardian or special guardian when the child is under 18

The person who inherits the home does not have to be under 18. But a person’s step-child is only someone whose parent is, or was, the spouse or civil partner of that person – cohabiting doesn’t count.

Direct descendants also do not include nephews, nieces, siblings and other relatives.

How to avoid the £1 million inheritance tax trap

The key thing to do is forget the £1 million inheritance tax-free threshold – unless it actually applies to your specific situation. If you’re able to, using gift allowances and giving gifts early on could reduce a potential inheritance tax bill, as inheritance tax is not charged on gifts made more than seven years before death.

“Plan around the actual position,” said Allen, from Chester Rose. “In many cases, that means starting to gift earlier rather than later, as the seven-year rule is only useful if there is enough time for it to work.”

Regular gifting out of surplus income is also often overlooked, despite being one of the more practical options available.

“However, careful record-keeping and a clear understanding of the rules are essential, as not all assumed income qualifies. It is also important to have a cash flow plan in place that identifies how much you can afford to gift and when. You do not want to leave yourself short in later life,” said Allen.

Wills might need to be revisited to ensure the structure doesn’t prevent the claiming of the main residence nil rate band, or that planning can be undertaken after death to ensure this can be claimed. “This is particularly important when trusts are incorporated into wills,” said Allen.

For those close to the £2 million threshold, even small adjustments can help preserve part of the main residence nil-rate band. Without such planning, it can disappear entirely.

“The £1 million figure isn’t wrong, but it is conditional,” Allen said. “The difficulty is that most people don’t realise how conditional it is until they look more closely at their own situation. By then, the number they have relied on for years isn’t quite right.”

Inheritance tax planning can be complicated and is highly individual to specific circumstances. It’s always a good idea to get specialist legal and financial advice before acting.

Millions more people have been dragged into paying income tax in recent years as official data highlights the impact of fiscal drag.

Income tax thresholds have been frozen since 2021 and will remain so until 2031.

This is causing fiscal drag, where taxpayers are pushed into higher tax bands and face increased bills without even getting a pay rise.

The government’s latest income tax tax data shows an additional 2.17 million people were dragged into paying income tax in 2023/24.

Meanwhile, the total income before tax received by taxpayers in the tax year 2023/24 was £1.53 trillion – up by 9.8% annually.

This has pushed income tax liabilities up by around 11.9% (£29.1 billion) to £274 billion.

David Little, partner in financial planning at wealth management firm Evelyn Partners, said: “This data reveals how the powerful tide of fiscal drag is increasing the UK tax burden by sweeping millions into higher tax brackets, and into paying tax for the first time.

“Both the number of taxpayers in each band and the amount of income tax being paid to the Treasury are surging every year – exactly as chancellors past and present have intended.”

The data reflects the period when the Conservative Party was in government but chancellor Rachel Reeves has continued the freeze since Labour came to power, meaning more people could be hit with higher taxes.

The impact of fiscal drag

Income tax rates may not have increased but frozen thresholds mean people are quickly hit by fiscal drag as they move faster into higher tax brackets when they get a pay rise.

The figures show there was an increase in the number of basic rate taxpayers of 1.15 million or 4.1%.

The number of higher rate taxpayers increased by 654,000 (12.8%) to 5.76 million, while the number of additional rate taxpayers increased by 324,000 (56.8%)to 893,000.

Earning £67,400 before tax now puts you in the top 10% of earners, the data shows, while £93,600 puts you in the top 5% and £207,000 in the top 1% of earners.

Rachael Griffin, tax and financial planning expert at Quilter, said: “While this period did see fairly large increases in pay, much of this was simply to keep pace with high inflation. When combined with frozen thresholds, it has left many taxpayers facing materially higher tax bills with little to no improvement in their standard of living.

She said this shift is no longer confined to traditionally high‑paid professions, adding: “Experienced teachers, senior nurses and police officers are increasingly being pulled into higher rate tax through incremental pay rises, overtime or progression, rather than genuinely high earnings. What was once a marginal issue is now becoming a mainstream experience across large parts of the workforce.”

Who pays the most tax?

Despite talk of the need for wealth taxes, government data actually shows that high earners are already paying the largest share of tax.

In 2023/24, the figures show additional rate taxpayers paid 37.7% or £103 billion of tax despite making up just 2.4% of people.

Higher rate taxpayers paid 32% at £87.6 billion, making up 15.7% of people.

Meanwhile, at 29.4 million, most taxpayers pay the basic rate, accounting for just 29.9% of tax, and making up 80.1% of people.

There are other sources of income that are getting caught though, which can hit all types of taxpayers.

The number of taxpayers of pension age increased by 1.02 million or 14.4% since the previous tax year, as the triple lock continues to push retirement incomes up.

This means people of state pension age account for 22.2% of all taxpayers and 16.2% of total income.

There were almost 8.2 million people of state pension age paying tax and 7.8 million people paying tax whose main source of income was their pension, the research shows.

Griffin added: “While part of this increase reflects demographic change as the pension‑age population grows, rising retirement incomes combined with frozen allowances are clearly playing a major role.

"The triple lock has been vital in protecting pensioner incomes during a period of high inflation, but its interaction with frozen personal allowances is creating unintended consequences. In practice, state pension increases designed to preserve living standards are increasingly being clawed back through tax, particularly where even modest private pension income is involved.”

The frozen personal savings allowance and lower dividend allowances are also hitting savers and investors.

Total tax income from property, banks and building societies, dividends and other income increased by 17.2% from £107 billion to £125 billion.

Interest received from banks and building societies was the main driver of growth.

The number of taxpayers with savings interest increased by 28.4% from 15.3 million to 19.6 million, whilst the total amount of savings interest increased by 219%, from £5.75 billion to £18.3 billion.

Griffin said: “Taxable savings interest more than tripled as rates rose, catching millions of savers off guard. While rates have edged down and are unlikely to return to their recent peaks, the episode has reinforced the importance of using ISAs to shelter savings from income tax.

“For those with a longer‑term horizon, it may also prompt a rethink about relying too heavily on cash returns that may already be past their high point.”

How to reduce your tax bill

There are ways to hold on to more of your cash rather than giving it to the taxman.

Savers and investors can make use of their £20,000 ISA allowance to avoid dividend or savings tax. However, the cash ISA allowance for under 65s is being cut to £12,000 from April 2027 so it may be worth putting as much in as possible beforehand.

Another option is to use salary sacrifice to reduce your gross earnings.

One of the most popular routes is by increasing your pension contributions.

However, the benefits of this are being slightly reduced from April 2029 when only the first £2,000 will benefit from National Insurance relief.

Older taxpayers may also want to consider how and when they take pension income to reduce the tax burden.

But bear in mind that unused pension savings will form part of a person’s estate for inheritance tax from April 2027.

Little added: “Beyond making pension contributions, more esoteric schemes to reduce income tax include subscribing to Venture Capital Trusts and Enterprise Investment Schemes, but these are not going to be suitable for most people due to the higher risks involved.

“Finally, drifting into a higher tax band will raise the rate of tax you pay on capital gains and savings interest, and also reduce your personal savings allowance, so those looking to minimise their tax burden must ensure they are sheltering savings and investments where possible in ISAs and using their annual tax exemptions. Couples can use their combined allowances strategically, especially where one is in a lower tax band for earnings.”

From acorns grow oak trees: that's the sales pitch from fans of the Seed Enterprise Investment Scheme (SEIS), though the scheme's offer of more generous tax incentives than any other similar investment initiative is also part of the appeal. And with other opportunities to shelter from rising taxes now diminishing, many experts think the SEIS is set to become more popular than ever in the current tax year, which began earlier this month. Introduced in 2012, the SEIS aims to help very small and very young companies raise money to fund their growth. These are businesses that may lack the trading record necessary to borrow money from the bank, or to raise capital from other sources. Without access to finance, their growth may be stunted, preventing them from fulfilling their potential.

We really are talking about acorns. Raising money through the SEIS is only an option for businesses that have been trading for less than three years, which have assets of no more than £350,000 and fewer than 25 employees. There are also several more technical qualifying rules that limit SEIS eligibility to start-ups and very early-stage businesses. Inevitably, many of these businesses fail, taking investors' money with them. A recent study from Warwick Business School put the three-year survival rate for start-ups in the UK at 47% – falling to just 10% after ten years. Even businesses that show some early success – those that might therefore catch investors' eyes – often don't progress. Just 7% of businesses making it to £1 million of turnover go on to surpass £3 million, the Warwick study found.

That said, some start-ups do turn into scale-ups. New investors come in at higher valuations; SEIS investors who took the early risks may be able to exit at a handsome profit. It's even possible for SEIS-backed firms to make it all the way to a stock market listing.

SEIS can offer some extraordinary tax breaks

One example of a successful SEIS investment is Cognism, now regarded as one of Europe's leading data technology companies. The business raised SEIS funding in 2017, two years after its launch, with investors then able to exit when the business secured new backers in 2022; their returns were estimated to be worth around 40-times their initial stake. Only a handful of such winners can be rocket fuel for a SEIS portfolio, says Alex Davies, founder and CEO of investment platform Wealth Club. “The SEIS offers the chance to back very early-stage businesses with genuine high-growth potential, while recognising that most won't succeed,” Davies says. “The key is that you don't need many winners to generate significant returns.”

In part, that's because a few very large gains will compensate you for losses elsewhere. But the tax incentives offered on the SEIS – the government recognises that investors need some encouragement to risk their money – also provide plenty of insulation. Those tax breaks genuinely are quite something. You can invest up to £200,000 each tax year through the scheme, but you get 50% income-tax relief on this subscription, reducing its cost by half as long as you're earning enough to claim relief in full. In addition, you can claim capital-gains-tax reinvestment relief – if you've got taxable profits on other investments, you can reduce the bill by 50% by reinvesting these gains through the SEIS.

There's also support later on. Once you've held shares in a SEIS company for three years or more, any profits you make on the investment are free from capital-gains tax. Alternatively, if the business goes bust, you can claim loss relief, setting your losses against other taxable income you may have. SEIS investments also get preferential treatment on inheritance tax. The first £2.5 million worth of qualifying investments don't count towards the value of your estate for inheritance tax (IHT) purposes; on investments above this threshold, IHT is charged at only 20%, half the usual rate.

The combined effect of all these reliefs is significant. “SEIS tax reliefs turbocharge returns when things go well and cushion the impact when they don't,” explains Davies. “In today's high-tax environment, it's increasingly difficult for non-tax-advantaged investments to compete.” If you invest £100,000, say, in a portfolio of SEIS investments that returns 50%, your effective gain after income tax and capital-gains reinvestment relief will be 112%. But even if there's no growth and you only get your starting capital back, you would still be making a 62% gain.

Alternatively, the tax reliefs limit downside risk. If your £100,000 investment halves in value, you'll still be making a positive return of 12% after the income-and capital-gains tax breaks. Or, in the worst case scenario, where your investment ends up worthless, the actual loss on your initial £100,000 stake would only be £15,500.

Such perks look even more attractive given that the tax reliefs available on similar schemes are being reduced. The upfront income-tax relief on offer to investors in venture capital trusts (VCTs) – which also invest in early-stage businesses – fell from 30% to 20% on 6 April. At the same time, the tax burden that investors in these schemes are often looking to mitigate is increasing. Most notably, the IHT net will shortly be extended to include unused pension savings, while exemptions for business and agricultural assets are being eroded. Together with an ongoing freeze on the thresholds at which IHT becomes payable on estates, this has the potential to drive up bills for many families.

In fact, the SEIS is one of the few tax-efficient investment schemes to offer relief on IHT – along with its big brother, the Enterprise Investment Scheme (EIS). Cash and assets held within an individual savings account (ISA), for example, will count towards the value of your estate for IHT purposes. The same is true of VCTs. No wonder that the SEIS is attracting more interest, with investment in qualifying businesses already on an upward trend. “The SEIS is a key part of the UK's dynamic start-up environment, and recent changes with the reduction of tax relief for VCT investors make it even more attractive by comparison,” says Matt Cooper, co-CEO of the private market investment platform Crowdcube.

Pause and think about the risk

In the 2023-2024 tax year, the most recent period for which data is available, 2,290 companies raised £242 million through the SEIS, up more than 50% on the previous year, partly thanks to a tweak to the rules that enabled more companies to participate and to raise more money. Almost 10,150 investors put money into companies qualifying for the scheme, a 23% increase compared to the 2022-2023 tax year. The early indications are that the SEIS saw further growth in 2024-2025, with HM Revenue & Customs receiving 3,195 applications for “advanced assurance” – essentially requests from companies for guidance that they qualify for the SEIS scheme before they seek investment. That was 18% more than in the previous year.

Nevertheless, investing in the SEIS simply for tax reasons would not be sensible. Given the elevated risk profile of SEIS companies, this is an investment only suitable for wealthy and sophisticated investors who feel comfortable with the possibility of losing some or even all of their money. You will almost certainly have made good use of ISA and pension allowances before thinking about the SEIS; you may well have invested in VCTs and the EIS too. Also, remember that the scheme is most tax-efficient for investors who have other capital gains to roll over into it.

Still, the good news from an investment perspective, argues Joseph Zipfel, the chief investment officer of early-stage investment specialist SFC Capital, is that the SEIS has matured since its launch more than a decade ago. “The risk profile has changed materially,” he says. “While early-stage investing will always carry risk, the underlying quality, maturity and resilience of SEIS-backed companies has improved over the last ten years.”

The explanation, Zipfel believes, is that the UK's start-up ecosystem has improved markedly in terms of the amount of support available to entrepreneurs, with help on offer from universities, incubators, accelerators and government-backed organisations such as the British Business Bank and Innovate UK. Business founders are more sophisticated as a result – and the backing available has encouraged a broader range of people to launch their own enterprises.

Moreover, many SEIS-eligible businesses are now run by more experienced founders. “The SEIS has funded more than 2,000 companies every year for more than a decade; one of the most important consequences of this scale is the recent emergence of a second wave of entrepreneurs building their second or third venture,” Zipfel adds. “These founders bring hard-earned lessons from their first businesses, whether successful or not. They are typically more disciplined in capital allocation, clearer on go-to-market strategy, and faster at identifying what does not work.”

Add in the changes to the SEIS rules made in 2023, which saw slightly larger businesses become potentially eligible, and the overall picture is of a more resilient set of opportunities. “This evolution does not eliminate risk,” says Zipfel, “but it does mean that the starting point is much stronger and the overall risk-adjusted opportunity has improved materially.”

How to invest in the SEIS

There are two ways to take advantage of the investment opportunities and tax incentives that the SEIS offers. Your first option is to invest directly in a qualifying company that is currently raising money. The firm will need to have checked its SEIS eligibility with HMRC and should be able to tell you that it has received assurance that investments are likely to qualify.

The easiest way to find such opportunities is via a crowdfunding site – an online platform where early-stage companies appeal directly to retail investors. Platforms including Crowdcube, Crowd for Angels, Republic Europe (until recently known as Seedrs) and SyndicateRoom all feature SEIS-eligible businesses making pitches to investors.

The advantage of investing directly is that you have total control over which firms you decide to back. The downside is that it may be harder to spread your bets – you'll need to invest in multiple qualifying companies to avoid the danger of being exposed to a single high-risk business, or even a small handful. You'll also need to do your own due diligence.

Option two, therefore, tends to be more popular. Many investors opt for a SEIS fund – essentially a portfolio of ten to 25 or so qualifying companies chosen by a professional investment manager who specialises in investing in early-stage companies. Specialists in this area include Fuel Ventures, Guinness, Haatch and SFC. Wealth Club is one central point of access to a choice of SEIS funds.

With a fund, you get diversification and the benefit of the manager's expertise and experience. Funds may also have access to a wider range of opportunities, including attractive companies not on your radar. Investing in SEIS funds can also be a useful way of spreading risk, “although this needs to be balanced against the likelihood of higher returns from a direct individual investment if it goes well”, says Crowdcube's Matt Cooper.

There are downsides to the fund approach, too. Expect to pay much higher charges than on other types of collective investment funds, which will dilute your returns. You'll also be surrendering control of investment decisions and losing the direct relationship with individual firms, which many investors enjoy.

Finally, note that once you've made your investment, the business or fund will send you a form so that you can claim the various tax reliefs through your self-assessment tax return. This paperwork – known as the SEIS3 form – is critical; you won't be able to apply for relief from HMRC without it.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Another week, another FTSE 250 company disappears. On Monday, William Hill's owner, Evoke, said it was in talks with Bally's over an offer for the company that would value it at more than £200 million. It may not seem like much for such a well-known brand, but Evoke is weighed down by debts that have depressed the value of the shares. The bigger problem, however, is that it is grappling with the huge rises in gambling taxes imposed by chancellor Rachel Reeves in the last Budget. She pushed up remote gaming duty, which applies to online casino and roulette games, from 21% to 40%, and online betting duty from 15% to 25%. The rate for betting at old-fashioned bookmakers on the high street was left at 15%, but that was little consolation for the major chains, which these days make most of their money from their apps, and mainly use the shops as a form of advertising.

It is not just Evoke that has been hit by that tax rise, although it has suffered more than most as its operations are concentrated in Britain. Paddy Power said late last year that it was closing 57 of its British shops with the loss of more than 250 jobs, while Entain, the company that owns Ladbrokes and Coral, has also started to close branches. Ahead of the tax rise, Betfred warned it might close all of its more than 1,200 physical stores if the new levies went ahead, and while that has yet to happen, it might well over the next year or two. Add it all up, and the outcome is clear. The tax rise has led to a big wave of closures across what has always been a huge industry.

There are three big problems with gambling tax rises. First, they will deal another big blow to the high street at a time when it is already facing a wave of closures of retailers, cafes and restaurants. There are more than 5,500 betting shops across Britain, at least before the latest round of closures. That is more than triple the number of bookshops and double the number of newsagents. Sure, that branch of Coral or William Hill, with its tatty biros and slightly dodgy-looking punters, was never exactly the most cheerful place in the typical town centre. But even so, it paid business rates, employed people and, in a small way, helped keep the high street alive. If they all start to close down, nothing will replace them. There will just be a few more dismal boarded-up shopfronts.

Raising gambling taxes will crush a British success story

Next, it does not look as if gambling tax rises will raise anything like as much money as expected. The £1.1 billion in extra cash forecast to roll into the Treasury assumes that there will only be very minor changes to behaviour (it would be £1.8 billion with no change). But that hardly seems plausible. If there are fewer physical shops, if the odds are less attractive and less money is spent on online marketing, the casual punter who puts the occasional fiver on the Cup Final or the Grand National will drift away. The hardcore gamblers will use a “virtual private network” that disguises which country you are visiting the internet from, to bet offshore, or else to gamble on the fast-growing prediction markets. Either way, the tax will raise far less than forecast.

Finally, raising gambling taxes will damage a major British industry. Companies such as Bet365 and Entain are among the global leaders of an industry that is worth well over $250 billion worldwide and growing all the time as legal restrictions are relaxed. A robust domestic market is vital if entrepreneurs are to flourish and established businesses are to succeed on the global stage. You might think the Treasury would want to back such success stories. After all, there are not that many of them any longer. Instead, it seems determined to tax them into extinction.

It seems extraordinary that the Treasury hasn't worked out by now that when you increase the taxes on an industry, it gets a lot smaller very quickly. But it looks as if it hasn't and will have to relearn that lesson all over again, and in the most expensive way possible. Even if the Treasury gets its extra billion, it will, in the process, have crippled a major British industry, worsened the crisis on the high street and pointlessly destroyed thousands of jobs. Even for the most hopeless chancellor of the last 50 years, that seems like a losing bet.

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HM Revenue and Customs (HMRC) is cracking down on property valuations in inheritance tax (IHT) returns as rising house prices see more families dragged into the taxman’s net.

The number of cases HMRC referred to the Valuation Office Agency (VOA) rose by 23.5% from 11,845 in the 12 months to September 2024 to 14,631 in the year to September 2025, according to new Freedom of Information (FOI) figures obtained by private wealth and law firm TWM Solicitors.

Executors of estates have to include property valuations in inheritance tax returns which HMRC then uses to determine how much an estate should be taxed.

However, HMRC can refer cases to the VOA if it believes a property has been incorrectly valued, with TWM finding HMRC is ramping up its scrutiny of property valuations.

The solicitors said its lawyers would usually be contacted about incorrectly valued homes “once or twice every few years”, but this was now happening more frequently.

It comes as frozen inheritance tax thresholds and rising house prices push more people into handing over money to the taxman.

Laura Walkley, head of the private client team at TWM, said: “HMRC is clearly focusing on property valuations as a significant potential source of revenue. There has been a noticeable shift towards questioning figures submitted in inheritance tax returns, rather than accepting them at face value.”

An HMRC spokesperson said: “The majority of people pay the correct amount of inheritance tax. As has always been the case, where it is suspected an individual has not, investigations can be opened.”

Why it’s important to value a property correctly

Executors need to value a property correctly so HMRC has an accurate view of how much inheritance tax should be paid.

If the property within an estate sells for significantly more than its date of death value – the value of the home on the date the person died – HMRC may ask the VOA to examine the valuation, Walkley explains.

If it is found that the date of death value was higher than the one included in the inheritance tax return, the estate is charged additional inheritance tax on the difference between the two values.

HMRC will also apply interest (of 7.75% per year) on the extra tax due from six months after the end of the month of the death. So, if the person died in January, the interest would begin accruing from 1 August that same year.

If HMRC finds the executor intentionally undervalued the property [in order to pay less inheritance tax for example], or did not take reasonable care in obtaining a valuation, it may apply a penalty in addition to the interest.

“Broadly speaking, HMRC could deem a failure by the executors to value property in accordance with established best practice as careless,” Walkley explains.

How to value a property correctly

According to Walkley, executors are considered to have taken reasonable care if they either get a survey carried out on the property by the Royal Institution of Chartered Surveyors (RICS) or have three estate agents carry out valuations and take the average of the three.

In any case, the key to valuing a property for inheritance tax purposes is that the value is the open market value of the property at the date of death, she says.

She adds: “There is a perception that there is such a thing as a ‘probate value’, which is lower than the open market value, but this is incorrect.”

How you can pay less inheritance tax on property

There’s not much you can do about rising house prices, but there are steps you can take to ensure your beneficiaries pay less inheritance tax on an estate including property.

Leave your property to a child or grandchild and transfer bands to a spouse or civil partner

Inheritance tax is usually payable on estates worth £325,000 or more but this increases by £175,000, known as the residence nil-rate band, if you are leaving your home to a child or grandchild. You can pass this £175,000 allowance to a partner if you die.

This means couples who are married or in a civil partnership could leave up to £1 million to loved ones and they wouldn’t owe any inheritance tax.

Do note, for every £2 your estate is worth more than £2 million, you lose £1 of this residence nil-rate band until it disappears. This means estates left by a single person worth £2.35 million receive no residence nil-rate band, while for couples it’s £2.7 million.

Charlene Young, senior pensions and savings expert at investment platform AJ Bell, says the gradual loss of the residence nil-rate band for estates worth more than £2 million is “potentially storing up another tax trap for wealthy pensioners with high value properties”.

Sell your home

Gifts of any size are free from inheritance tax if made seven years or more before your death, so you could, in theory, sell your home and its value would end up outside your estate if you live long enough, Young points out.

However, if you want to carry on living in the property, you will have to pay the new owner rent at market value.

“If you don’t, the value of the property simply gets added back to your estate, no matter how long has passed under the gifts with reservation rules,” Young says.

We look at how to claim money back if asset prices fall in a separate guide.

Inheritance tax bills are on the rise and there are some parts of the UK where the liability is set to hit six figures.

Despite a £325,000 threshold and a £175,000 main residence allowance, frozen thresholds, high house price growth and rising asset values have pushed increasing numbers of estates into the inheritance tax trap.

Research by The Private Office reveals that homes in 136 local authorities are already exposed to inheritance tax in 2026, with estimated average liabilities ranging from just over £150 to more than £340,000 per estate.

The wealth manager analysed average property prices by local authority and estimated inheritance tax liabilities even with the nil-rate band and main residence allowance.

The Private Office’s analysis found that Kensington and Chelsea ranks as the UK’s most expensive inheritance tax hotspot, with most liability in London and the South East of England.

More regions could be hit from 2027 as well when unused pension savings are included in inheritance tax calculations.

Here are the regions facing the highest inheritance tax bills.

The regional inheritance tax divide

The data suggests a regional imbalance in inheritance tax exposure across the UK in 2026, with liabilities heavily concentrated in London and the South East.

This is compounded by higher house prices in these regions meaning an estate could easily surpass the current frozen thresholds.

Kensington and Chelsea tops the list, where the average property value is £1.18 million.

The estimated IHT liability reaches £343,924 per estate and the total average estate values exceed £1.3 million, according to the research.

Other London boroughs, including Camden, Richmond upon Thames and Hammersmith and Fulham, also show projected tax bills well into six figures. Beyond the capital, affluent southern areas such as Elmbridge, St Albans and Windsor and Maidenhead remain within taxable territory, reflecting sustained house price growth across commuter-belt locations.

In contrast, northern England features very limited exposure at higher levels, with only a small number of areas approaching the tax threshold.

Trafford is the only northern authority appearing in the dataset, with an estimated average inheritance tax liability of around £20,814.

The impact of pension changes on inheritance tax

More estates could be caught as a result of pension changes coming next year.

From 6 April 2027, unused pension funds will be included within an individual’s estate for inheritance tax purposes.

By combining average property values across 372 local authorities with estimated pension wealth, the research indicates that 152 areas previously below the threshold could become liable, bringing the total number of exposed local authorities to 288.

New regions that could face inheritance tax bills for the first time after the pension changes include Stevenage in Hertfordshire as well as the City of Edinburgh in Scotland and Cardiff in Wales.

Pippa Vick, financial adviser at The Private Office, said: “Inheritance tax is increasingly becoming a property tax by default.

"Many families don’t consider themselves wealthy, yet long-term house price growth – particularly in London and the South East – means their estates can face substantial tax bills. Without proper planning, beneficiaries may be forced to sell assets simply to settle the liability. Early advice and structured estate planning can significantly reduce the eventual tax burden.

“Pensions have long sat outside inheritance tax calculations, so bringing them into scope has a major regional impact. In high-property-value areas, the effect is dramatic, but even in more affordable regions, families who previously expected no inheritance tax may now face a bill. Planning early will be crucial.”

Business owners and farmers must play by strict new rules when it comes to passing on assets, after changes went live at the start of the new tax year on 6 April. But some families will be left much worse off than others under the switch.

The beneficiaries of unmarried couples, divorcees and single farmers and business owners could face paying potentially hundreds of thousands of pounds more in inheritance tax compared to if they had been married, following the implementation of the controversial changes to some IHT reliefs this month.

Sean McCann, chartered financial planner at NFU Mutual, said: “While married couples can potentially leave up to £6.3 million of qualifying agricultural and business assets free of inheritance tax, the same is not true for single farmers or divorcees who haven’t subsequently remarried who are limited to a maximum of £3.15 million.”

What are the new APR and BPR rules?

Businesses and farms are entitled to what’s known as business property relief (BPR) and agricultural property relief (APR) – these reliefs limit the amount of inheritance tax due.

In the 2024 Autumn Budget, the government announced plans to cap the value of agricultural properties and businesses that could be passed on free of inheritance tax to £1 million – anything above that level would only get 50% tax relief.

Inheritance tax is charged at 40%, so the change would effectively introduce a 20% tax rate on the value of inherited farms or businesses over £1 million.

Following pressure from farming and business groups, the government amended the policy in December 2025, announcing it would raise the cap to £2.5 million.

It also permitted the allowance to be inherited by a spouse or civil partner – on top of existing allowances of £325,000 IHT-free per person, plus the nil rate residential allowance of £175,000 per person – boosting the amount that could be passed on IHT-free to £5.65 million.

But certain groups are set to miss out on the more relaxed rules, leaving their families with much bigger inheritance tax bills.

Hardest hit by new inheritance tax rules

Married couples and civil partners have significant advantages when it comes to inheritance tax planning. Anything left to the surviving partners after the first death is normally free of IHT.

The survivor can also benefit from any unused part of their late spouse’s £2.5 million inheritance tax-free APR and BPR allowance as well as the £325,000 inheritance tax-free allowance.

Unmarried couples do not benefit from the spousal exemption, meaning that leaving assets to a surviving partner could trigger a bigger IHT bill. In this case, while the deceased’s £2.5 million APR and BPR allowance and £325,000 tax-free allowance would cut the amount of IHT payable, only the survivor’s allowances would be available on the second death when passing assets to the younger generation – not the combined allowances as would be the case of a married couple.

Divorcees also miss out – while widows and widowers can benefit from their late spouse’s unused £2.5 million 100% APR/BPR allowance, regardless of whether they owned agricultural or business assets, the same is not true of divorcees who have not remarried. Beneficiaries of divorcees can only benefit from the person who has died’s allowances.

Bigger inheritance tax bill

McCann from NFU Mutual has highlighted one example which shows the significant difference in the IHT bill depending on whether the deceased is a widower or a divorcee.

Take Steve, who owns a farm and business assets worth £6.5 million. He has:

• 300 acres worth £3.5 million
• machinery and stock worth £1 million
• farmhouse and buildings worth £2 million

The table shows the difference in how Steve would be treated for inheritance tax purposes depending on whether he is a widow or a divorcee.

Ways to avoid inheritance tax

There are some strategies those affected by the changes to agricultural property relief and business property relief can use to help avoid inheritance tax or reduce their inheritance tax bill.

Couples who are not married face additional complexities as they don’t benefit from the tax-free exemption available to spouses. This means leaving assets to a common law partner could trigger an inheritance tax liability, followed by a second charge on their subsequent death.

“Unmarried couples who want to maximise the amount passed on to younger generations could consider using the £2.5 million 100% APR and BPR allowance and £325,000 tax-free allowance to leave assets to the younger generation on first death, leaving the survivor free to do the same,” said McCann.

For those unmarried couples who don’t wish to get married, it’s important to take advice on the advantages and disadvantages of this approach before taking any action, he said.

McCann added: ‘’Before the inheritance tax proposals were announced, the approach of many farmers was to gradually hand over more of the day-to-day management to the younger generation while holding onto the ownership of the assets until a later date.

“The new rules will prompt many to pass on the assets at an earlier stage, because if they live seven years [after giving the gift], they would normally be free of inheritance tax.

‘’For that to work it’s important that the farmer doesn’t continue to benefit from the assets they give away. If they intend to continue in the business, they’ll need to pay a market rent to the new owner or if in partnership with them, reduce their profit share to reflect the new ownership.’’

The number of probate cases taking almost two years to be finalised has more than doubled since 2020/21, according to Freedom of Information data from the Ministry of Justice.

In a significant worsening of delays, the share of probate cases taking between 21 and 23 months to be granted has risen by 131% (from 88 to 203) in the past five years.

The biggest increase in the length of time taken to grant probate was in the category of people waiting ‘over a year’ for the process to be completed, which was up by 171% since 2020/21. There were 737 cases waiting this long at the time, compared to 2,040 in 2024/25.

Financial experts are warning the situation is likely to worsen further when pensions are brought into the scope of inheritance tax (IHT) from April 2027. They are urging people to take action now to reduce complexity for those left behind and avoid probate disputes and delays.

Ian Futcher, financial planner at wealth manager Quilter, which obtained the FOI data, said: “A growing number of families are now waiting well over a year, and in some cases nearly two years, for probate to be granted. That creates real stress for executors and beneficiaries alike.”

With pensions set to become part of the taxable estate, there is a real risk that these delays become even more entrenched, he added. “Executors may need to track down information across multiple pension schemes, confirm valuations and deal with additional tax reporting, all while the clock is ticking on inheritance tax.”

We look at how to navigate the maze of inheritance tax paperwork in a separate article.

What is probate?

Probate is the legal right to deal with someone's estate (such as their property, money and possessions) when they die and to distribute it according to their will, or the law if there is no will.

Typically, before the next of kin or executor named in the will can claim, transfer, sell or distribute any of the deceased's assets, they have to apply for a grant of probate.

However, Freedom of Information data, obtained from the Ministry of Justice by wealth manager Quilter, showed a significant increase in delays with the process – leaving families waiting months or even years to access estates.

Without access to the money in the estate, it is often not possible to fully pay inheritance tax bills, which are due within six months of the deceased person dying, though in a catch-22 situation probate won’t typically be granted until HMRC has been sent at least partial payment for IHT.

In 2024/25 alone, around one in eight estates took longer than six months to clear probate, increasing the risk of interest accruing on inheritance tax where it was due.

How long should probate take?

According to government guidance, a grant of probate should typically be issued within 16 weeks of submitting an application.

However, the data showed a growing proportion of estates waiting well beyond this timeframe, with a sharp rise in cases taking more than a year and a notable increase in those waiting nearly two years.

Delays in probate can prevent executors from accessing bank accounts, selling property or managing investments, leaving estates frozen at a time when families may already be under financial and emotional strain.

Where inheritance tax is due, HMRC can charge interest on unpaid tax from six months after death, meaning prolonged probate can translate into higher tax bills even where delays are outside the family’s control.

How to reduce risk of probate delays

Futcher, from Quilter, said one of the most effective ways to reduce the burden on executors is to treat the start of the new tax year as a time to do a financial MOT – spring‑cleaning your finances while you’re alive can significantly ease delays later on.

“That might include consolidating old pensions or ISAs, keeping a clear record of accounts and providers, ensuring beneficiary nominations are up to date, and putting powers of attorney in place,” he said.

“Given how stretched the probate system already is, anything people can do now to reduce complexity will help their executors navigate the process more quickly, avoid unnecessary costs and reduce stress at an already difficult time,” he added.

A Ministry of Justice spokesperson said the department has worked hard to reduce waiting times for probate applicants, including through staff training and improving how applications are processed, which has resulted in record numbers of grants being issued over the last year.

They added: “Most probate applications are now granted within five weeks, down two weeks on a year earlier – but we understand how distressing delays can be in some cases.

“Applicants who feel their cases are not progressing can request an appointment with the probate team.”

A new tax year may have only just started but it is already worth getting ready for April 2027 as savers and investors will be hit with even more tax grabs.

Several new tax changes have been brought in since the start of the 2026/27 tax year including higher dividend rates, and while the focus may be on making use of reliefs and allowances over the next 12 months, a bigger shake-up is coming in April 2027.

From the start of the next tax year, pensions will be included as part of estate calculations for inheritance tax, the cash ISA allowance will be restricted to £12,000 per year for under 65s and tax rates on savings interest and property income will be hiked.

April 2027 may seem a long way away but there are benefits to preparing now.

Antonia Medlicott, founder of Investing Insiders, said: “The next wave of tax changes risks catching many people off guard, particularly around pensions and ISAs.

"Overall, the key is to review plans now rather than react later, checking balances across pensions, ISAs and taxable accounts, and making full use of allowances while they last.”

1. Pension inheritance tax changes

Currently, pensions fall outside a person’s estate when making inheritance tax calculations.

This makes it easier to pass on wealth but from April 2027, unused retirement savings will be counted in the value of an estate, which could tip the total above the £325,000 inheritance tax threshold.

Jason Hollands, managing director of Evelyn Partners, said: “Historically, pensions have been highly attractive from an estate planning perspective. Individuals with sufficient alternative resources have often chosen to preserve pension wealth for as long as possible, using it as a tax-efficient vehicle for passing assets to the next generation.

"From April 2027, this long-standing approach may need to be reconsidered.

“Anyone whose estate is likely to fall within the scope of IHT should review their position carefully and seek professional advice. Importantly, pensions should no longer be viewed in isolation, but as part of a broader, integrated estate planning strategy.”

Options include taking more from your pension while you can and making use of gifting allowances to ensure more money goes towards you and your loved ones rather than the taxman.

Hollands suggested the changes also underline the importance of diversification across different tax wrappers.

He said: “While pensions remain valuable, it may be increasingly important not to rely on them exclusively. ISAs continue to play a central role, and for some investors, offshore bonds may offer additional flexibility.

“These can be reassigned – to a spouse, adult children or into trust – without triggering an immediate tax charge, although tax may arise on eventual encashment. When combined with trust planning, they can help move future growth outside the estate, subject to the usual rules.”

Shaun Moore, tax and financial planning expert at Quilter, warned there are also practical consequences.

He said: “As pensions become part of the estate, probate is likely to become more complex and time‑consuming.

"Many households may want to respond by consolidating accounts, updating wills and putting lasting powers of attorney in place. These are not tax strategies, but they can make a meaningful difference for families later on, when simplicity and clarity matter most.”

2. Reduced cash ISA allowance

In an effort to encourage more people to invest, the cash ISA allowance will be restricted to £12,000 from April 2027 for people under the age of 65.

That means this is the last tax year where those affected can use the full £20,000 ISA allowance entirely on cash ISAs.

From next April, only up to £12,000 of the £20,000 can be put in a cash ISA but the full amount can still be put to work on the stock market via a stocks and shares ISA.

This will fundamentally change how many people use cash ISAs, Moore suggested.

He added: “With only £12,000 available, younger savers who want to make full use of the £20,000 allowance will be pushed towards stocks and shares ISAs. That raises the importance of understanding risk and time horizons, particularly for those who have relied on cash as a default rather than a choice.”

Medlicott added that using current allowances while they remain available has become more important.

She said: “Savers should also reassess whether cash ISAs are still suitable for longer-term money, or whether a mix with stocks and shares ISAs offers better flexibility."

3. Higher property and savings tax rates

Income tax rates for savings and property income are set to rise from 6 April 2027 by two percentage points.

This means the basic rate will increase from 20% to 22%, the higher rate will increase from 40% to 42% and the additional rate will increase from 45% to 47%.

That means savers need to monitor the amount of interest they are earning and consider using ISAs.

Hollands said the changes create another headache for landlords who will pay more tax on rental income after already being hit with the Renters’ Rights Act reforms and higher stamp duty costs.

Hollands said: “Planning options in this area are more limited but may still be worth exploring. One approach is to transfer ownership between spouses so that rental income is taxed at a lower marginal rate. Another is to consider holding property within a corporate structure, where profits are subject to corporation tax (currently up to 25%) rather than income tax.

“However, incorporation is not straightforward and can trigger both capital gains tax and stamp duty, so it is generally only suitable in specific circumstances – typically for those with larger portfolios and a long-term investment horizon.”

The number of people taking their tax-free pension lump sums as early as they can has hit a five year high, according to a Freedom of Information (FOI) request to HMRC.

Currently the earliest you can take your pension tax-free lump sum is age 55 (rising to 57 in April 2028). As many as 116,000 Brits aged 55 years old opted to do this in 2024/25, the FOI data, as they rushed to beat incoming inheritance tax (IHT) rule changes.

This is up from 110,000 in 2023/24, and marks a five year high for the earliest possible withdrawals of the pension tax-free lump sum.

The total value withdrawn by those aged 55 also reached a five-year high of £2.3bn in 2024/25, up from £2.1bn the previous year.

Inheritance tax pension rule change

More people have been taking lump sum withdrawals from their pensions following the announcement in the 2024 Autumn Budget that unused pensions will face inheritance tax of up to 40% from April 2027, said Andrew Tricker, chartered financial planner at Lubbock Fine Wealth Management, which submitted the FOI.

Tricker said: “As pensions will be dragged into the inheritance tax net, many are rushing to take money out as soon as they can to help mitigate what they see as excessive tax bills for their dependents.”

“What is surprising is that this trend has spread to people who have decades left based on average life expectancy.

Based on 2022 to 2024 Office for National Statistics data, life expectancy at birth in the UK is around 83 years for women and 79.1 years for men. Life expectancy at age 65 is around 21.2 years for women and 18.7 years for men.

But despite the risks of outliving their pensions, the number of people withdrawing money from their pot early is likely to rise further as the new IHT changes draw closer, said Nicholas Clark, chartered financial planner at Lubbock Fine.

Clark said: “As we get closer to the deadline, more people will tap into their pension pots – particularly those who can do so without creating a big tax liability.

“Pensions were widely seen as highly ‘tax-efficient’, so many people built and preserved very large pots to pass on wealth to their loved ones free of IHT. Some of them have now started to change course, often without fully thinking it through.”

Some are choosing to pass these funds on to their families during their lifetime to reduce IHT bills, added Clark.

Gifts made more than seven years before death generally fall outside inheritance tax, known as the seven year inheritance tax rule.

Pension withdrawal warning

But over-55s are being warned to avoid making decisions to transfer funds elsewhere without proper planning, as money withdrawn from a pension is difficult to put back.

Tricker said: “It is worrying that more people are tapping their pension pots so long before the usual retirement age. Some are taking too much, too soon. Without careful planning, they could find themselves short of money in retirement.”

“People are living longer, and health and care costs are very unpredictable in retirement. That is why retirees need a financial buffer. Income is much harder to increase once you stop working.”

In many cases, it can make sense to keep money within the pension, shop around for the best draw down provider, and draw it down gradually. Being able to review retirement income over time and adjust as needed is one of the main benefits of the pension freedoms introduced in 2015.

“Keeping funds within the pension also allows people to make greater use of the ‘gifts out of surplus income’ exemption. Income drawn from a pension can qualify as surplus income, meaning it can be passed on to loved ones without triggering an inheritance tax bill,” Clark pointed out.

A spokesperson for HM Treasury said: “We continue to incentivise pension savings for their intended purpose of funding retirement instead of being openly used as a vehicle to transfer wealth – more than 90% of estates each year will continue to pay no inheritance tax after these and other changes.”

The introduction of a scheme to protect the National Insurance records of people, mainly mothers, who might otherwise lose out when it comes to their state pension has been delayed, the government has announced today (30 March).

The delay has been condemned as “deeply frustrating” by Steve Webb, a former pension minister and now partner at pension consultancy LCP.

The issue relates to the impact of the introduction of the High Income Child Benefit Charge (HICBC) in 2013, which aims to claw back Child Benefit from higher earners. Parents – mostly mothers – can still claim Child Benefit, regardless of the charge, but if they or a partner has an individual income above the threshold, they face a tax bill which may wipe out the value of the Child Benefit.

After HICBC was introduced, hundreds of thousands of parents reacted by simply not claiming the benefit.

However this created a new problem – not claiming Child Benefit also meant not getting a valuable ‘National Insurance credit’ for anyone with a child under 12. These credits help to protect the state pension record of those who are at home raising children.

Another problem was that although parents who later realised they might miss out could make a Child Benefit claim (but ask for the National Insurance credits and not the cash benefit), such claims could only be backdated for three months. This meant they could still have years missing on their National Insurance record.

To sort out the issue, in April 2023 the Conservative government under then prime minister Rishi Sunak promised to create a system where parents in this position could be awarded ‘replacement credits’. This system was due to come into force from April 2026.

However the government has announced a delay of one year in the introduction of this scheme, which is now due to open in April 2027.

Who will be affected by the delay to the “replacement credits” system?

Those who won’t reach state pension age until after April 2027 should not be affected – provided they had not inadvertently paid voluntary National Insurance contributions for the ‘missing’ years.

But, Webb pointed out, the delay will be especially frustrating for those who have already reached state pension age or will do so shortly, and may get less in state pension than they are due. In response, HMRC has said people who have lost out, in terms of reduced state pension, may be able to claim financial assistance.

Webb from LCP said: “It is deeply frustrating to see a delay in a scheme designed to unpick a mess in the pension system. When the High Income Child Benefit Charge was introduced in 2013, some parents – mostly mothers – decided it wasn’t worth bothering to claim Child Benefit, only for them or a partner to get a tax bill for the same amount. But by not claiming Child Benefit they also threw away valuable National Insurance credits towards the state pension.

“The government promised several years ago to fix this problem by creating ‘replacement credits’, but now we hear – just a few weeks before the new system was about to be introduced – that it has been delayed by a year. The whole thing has been a mess from the start.”

An HMRC spokesperson told MoneyWeek: “We can reassure parents and carers that when the service launches in April 2027, they will still be able to claim credits going back to January 2013, meaning no one will miss out on them.

“Because those who benefit from the service will be families with children under the age of 12 since 2013, we expect very few to have reached state pension age by this April.”

What are the current High Income Child Benefit Charge rules?

Since 2024/25, if you or your partner earn more than £60,000 per year, you will be affected by the High Income Child Benefit Charge. You’ll pay 1% of the Child Benefit back for every £200 you earn over the threshold.

This means if you or your partner earns £80,000 or more, you’ll repay all of the Child Benefit through the tax. Affected parents can opt out of Child Benefit payments. This means you are still registered for Child Benefit but don't get paid the money – letting you avoid having to pay the tax charge but still receive National Insurance credits.

Previously, if you or your partner earned more than £50,000 per year, you'd have to pay some of your Child Benefit back. It would be lost entirely to the tax if you or your partner's income was £60,000 or more.

Could taking out life insurance help ease the worsening headache of inheritance tax (IHT) facing hundreds of thousands of families in the UK?

It could certainly help, say financial advisers, but that advice comes with a string of caveats – including a warning that you could end up paying out more in total premiums than the tax bill your family eventually ends up with.

Certainly, sales of whole-of-life insurance policies – the type of cover best-suited to inheritance-tax planning – are booming. Britons spent 18% more on premiums on such policies last year than the previous year, reflecting a growing concern that a tax once paid only by a wealthy minority is rapidly becoming an issue for middle-class families who don't regard themselves as especially affluent.

The government says very few families currently pay inheritance tax. That's true – in 2022-2023, the most recent tax year for which figures are available, fewer than 5% of deaths resulted in an inheritance-tax charge. Just 31,500 families faced a bill. But the numbers are set to rise quickly. The government's own projections suggest 10% of deaths will trigger an inheritance-tax liability by the 2029-2030 tax year; in other words, the number of families paying the tax is expected to more than double within just seven years. The official forecast is that inheritance tax receipts will rise to £14.5 billion by 2030-2031, 67% more than the Treasury expects to net in the current financial year.

This trend is well under way, says Shaun Moore, a tax and financial planning expert at wealth management firm Quilter. “IHT receipts for the 2025-2026 tax year reached £7.7 billion by the end of February, surpassing the 2023-2024 total of just under £7.5 billion with a month still to go,” he says. “IHT is certainly no longer a tax aimed only at the mega wealthy.”

There are a couple of reasons for this. First, the inheritance-tax threshold – the size of estate at which the tax becomes payable – has now been frozen since April 2009. The then Conservative government did introduce an additional “residence nil-rate band” in 2017, providing extra headroom against the value of the family home, but this has also been frozen at £175,000 ever since. The current government has said these freezes will remain in place until at least April 2031. This inevitably drags more people into the inheritance-tax net as household incomes and asset prices rise. The average value of a house, for example, has risen by more than 70% since April 2009.

In addition, the current government has added to the list of assets that count towards the value of your estate for inheritance tax purposes. Most significantly, from April 2027, any private pension savings you hold in defined-contribution schemes that are remaining at the time of your death will count towards your estate. Currently, most pension assets are exempt from inheritance tax.

The government is cutting some of the inheritance-tax reliefs available to families. Its plans include a cap on the 100% business or agricultural relief applied when bequeathing businesses or farms – from 6 April, you will only be able to pass on assets worth up £2.5 million free from tax per person; above this threshold, inheritance tax will apply at 50%. However a couple will still be able to pass on £5 million assets between them.

Taking out life insurance is becoming increasingly popular

Against this backdrop, many more families are rightly concerned they will one day face an inheritance-tax bill – and potentially a significant charge. That is prompting more families to plan ahead, with strategies such as taking out life insurance becoming increasingly popular. “As the screw is being turned on reliefs and exemptions, more families and their advisers are now reaching for the security of insuring against the IHT liability,” says Ian Dyall, head of estate planning at wealth-management firm Evelyn Partners.

It's a relatively simple concept. The idea is to work out how much inheritance tax your family is eventually likely to be liable for, and then to take out a life-insurance policy that will pay out enough to meet this bill. The most common – and simplest – type of life cover is term assurance, which pays out a fixed sum if you die during the term of the policy. However, this won't work for an inheritance-tax liability, since you can't be sure when you will die – if you live beyond the term of the policy, there won't be a pay-out. Instead, you typically need whole-of-life cover: as long as you continue to pay the premiums, these policies will pay out whenever you die.

It's also important that the policy is written inside a trust, a legal structure that ensures the proceeds of the insurance fall outside your estate. Otherwise, your family may face an additional inheritance-tax liability courtesy of the insurance pay-out. Most advisers and insurers will be able to help you structure the cover in this way, though there may be fees to pay for this service.

So far, so good, but there are issues with whole-of-life cover. First, it's important to understand what the cover will cost you – both today and in the future. Insurers calculate premiums according to factors such as your age, health and the size of the policy, and you may have to undergo a medical examination. The cover comes in two forms: reviewable, where the insurer has the right to increase your premiums over time, and guaranteed, where the premium you start with will never change. The latter tends to be more expensive at the outset, but gives you certainty that premiums will remain affordable for as long as you need the cover.

Whole-of-life premiums can be costly. Evelyn Partners says that for a healthy 50-year-old client seeking guaranteed cover of £1.4 million, the monthly premium would be roughly £1,250. Such a client would have to live until the age of 143 to have paid out more in premiums than the value of the insurance pay-out, but these are still sizeable monthly payments. Moreover, for older policyholders, the cost will be higher, particularly as health deteriorates, and some people may even struggle to secure cover. In some cases, total premiums paid will exceed the payout insured much sooner. For this reason, advisers often suggest taking out life insurance when you're younger – in your 50s or 60s, say.

“We'd look at whole-of-life insurance as a young person's game, comparatively,” says Tom Mullard, business director for tax services at TIME Investments. “If you get guaranteed premiums, you know what you're paying, and you may even have investments generating returns from which you can pay the premiums so that you're not really seeing a decrease in your capital.” This does mean it's likely you'll be paying the premiums for longer, but the good news, adds Dyall, is that costs could fall. “Prices appear stable and, in some instances, are even coming down as providers compete for market share in the growing market.”

Is it better to save the money instead?

Still, some question whether whole-of-life insurance offers good value, particularly for policyholders in good health with many decades of life ahead of them. And once you've signed up for a policy, changing course by cancelling the cover will mean you've wasted the money spent so far. James Baxter, founder of financial planning firm Tideway Wealth, says it makes sense to think of a such policies as more like a savings plan than an insurance contract. You're effectively putting money aside each month so that eventually there is enough to pay a bill. “People should ensure that they understand these policies before signing as it could cost them more than they realise,” Baxter argues. “If a couple take out a policy aged 64 and one of them lives beyond 90, the effective return drops below risk-free rates, making the policy a less attractive savings vehicle.”

What he means is that by the time you get into your 90s, you'll have paid so much out in premiums that the sum your beneficiaries will get back represents a negligible – or even negative – return on the money. You'd have been better off putting the same amount of money into a risk-free bank or building society savings account each month. The counter to this argument is that funding an IHT liability through regular savings would not provide the certainty that many families want and need. You can't be sure you'll live long enough to put enough money by to settle the bill. Nevertheless, if you are going to go down the insurance route, it's vital to keep costs down. Shopping around will help –an independent broker can provide valuable help here – but it's also important not to think of insurance as a silver bullet for IHT planning.

Importantly, the more you can do to reduce your family's IHT liability, the less insurance you'll need to take out. That means ensuring you take full advantage of other IHT planning opportunities. “Life cover does not replace good planning – it supports it by dealing with the elements that planning cannot fully remove and by creating certainty,” adds Lyall. “The better the underlying planning, the smaller the amount of life cover required and the more manageable the premiums become.”

Make full use of gifts to reduce inheritance tax

Certainly, it's important to make full use of your gifting allowances to reduce the size of your estate. You can make gifts of up to £3,000 each year with no liability for tax, as well as many smaller gifts worth no more than £250 per person. Gifts of any size to charity are also exempt from tax and there are additional allowances for gifts for a family member's wedding or civil partnership. Gifts from income can also work well. If you can show that your regular monthly income exceeds what you need, you can give away as much of the excess as you like with no tax consequences.

In addition, consider making potentially exempt transfers – these are gifts that will fall out of the value of your estate for tax-planning purposes as long as you live for at least seven years after making them. You can even insure for the possibility of not living that long (see below).

Beyond gifting, professional advisers can help you with other IHT planning strategies, from the use of investment vehicles such as the enterprise investment scheme (EIS) to maximising business relief. “The bigger point is that planning has to start earlier,” adds Mullard. “It can be hard to justify thinking about these issues when you may have 40 years of life left ahead of you, but it will make it easier to come up with a holistic solution.”

Some nuances to consider

While whole-of-life cover may be ideal for insuring against your family's eventual inheritance tax (IHT) liability, term assurance could help you address a more immediate issue. Giving away large sums or valuable assets will reduce the value of your estate for IHT purposes – and therefore cut your family's bill – but these potentially exempt transfers only drop out of the IHT net seven years after you make them. In which case, a term assurance policy could provide cover against you dying sooner than expected and triggering a tax liability. The idea is to take out the insurance you need only for a set period – until your gift becomes fully exempt from IHT. This will usually be much more affordable than whole-of-life cover.

One nuance to consider here is whether your gift is eligible for taper relief, which could apply if you die with seven years of making it. After three years, many gifts qualify for this, with the rate of IHT payable falling from 32% at three to four years, to 8% at six to seven years. If so, you can take out a “decreasing term assurance” policy, which pays out a reducing amount over the term of the policy, and therefore costs less. Taper relief only applies if the total value of the gifts you make before you die exceeds the £325,000 tax-free IHT threshold.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

The end of the 2025/26 tax year is nearly here, with just weeks left before annual tax-free allowances reset. Some of these tax breaks will be lost forever if you don’t use them this tax year.

With countless allowances and deadlines to keep track of, MoneyWeek’s tax year end checklist could help you to save you money before the end of the financial year.

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HMRC is dramatically increasing enforcement on digital assets, including on those who may not realise they owe any tax at all.

Crypto’s pseudo-anonymous and complex nature means many people do not pay the right tax on holdings. UK government estimates suggest non-compliance with the tax rules could range from 55% to as high as 95% among crypto asset investors.

Many investors are likely to be unintentionally underpaying taxes on their crypto assets, especially capital gains tax (CGT), but nevertheless risk penalties and surprise tax bills.

We look at ways to reduce your capital gains tax bill in a separate article.

HMRC crypto crackdown

HMRC is increasingly intervening to claw back the tax it is owed. It sent as many as 101,024 CGT warning or ‘nudge’ letters to investors in crypto assets between 2020 and 2025, according to new Freedom of Information (FOI) data obtained from HMRC by comparison platform BrokerChooser.

This is more than 40 times the amount issued for shares and securities (2,358), suggesting crypto investors are now HMRC’s largest capital gains tax compliance target, far overtaking traditional assets such as stocks and property.

The number of crypto-related nudge letters HMRC sent more than tripled between 2021/22 (8,329) and 2023/24 (27,712), before soaring to 64,982 letters in 2024/25, an increase of 680% in just three to four years.

Over 560 times more letters were sent regarding crypto than traditional share disposals in the financial year 2023/24, with just 49 letters issued for shares and securities compared to 27,713 crypto letters.

Adam Nasli, head broker analyst at BrokerChooser, said: “To ensure you stay tax-compliant in 2026, we urge investors to keep detailed records of all purchases, sales, swaps, transfers and payments made using cryptocurrency.

“Many investors assume small trades don’t count, but even simple swaps can trigger tax liabilities. Investors must review official guidance or seek professional advice to ensure gains are reported correctly.

“If you think you may have underreported crypto gains, we recommend using HMRC’s voluntary disclosure service to reduce penalties. By proactively disclosing errors, you can reduce penalties for careless mistakes to as low as 0% and for deliberate actions to between 20% and 70%.”

Confusion on crypto asset tax rules

While crypto enforcement has soared in 2024/25, it remains likely that many letters may have been issued for unintentional non-compliance.

Confusion around crypto tax rules is widespread. When HMRC published its research report on the uptake and understanding of crypto assets in the UK in 2022, only 50% were aware tax liabilities can arise when converting crypto assets into fiat currency like pounds sterling.

Only 28% had seen HMRC's guidance on the tax treatment of crypto assets, and only 16% had sought tax advice in respect of their crypto assets. Capital gains tax is the principal tax that will likely apply to individual investments in crypto assets, but 59% of crypto asset owners said they know little or nothing about CGT.

But while there may be honest mistakes, HMRC can still impose penalties if you did not take “reasonable care” to check your tax liability.

How crypto investors can reduce their tax penalty risk in 2026

To avoid a surprise tax penalty for non-compliance with the rules, crypto investors are being urged to ‘TRACK’ their investments in 2026:

1. Track every crypto transaction

2. Remember that token swaps can trigger tax

3. Account for everyday crypto use

4. Check HMRC guidance

5. Keep mistakes transparent

MoneyWeek has contacted HMRC asking for comment.

Wealthy expats who moved to Dubai to escape the UK’s rising taxes are being warned about the fiscal implications of returning amid the Iran war.

Location such as Dubai have attracted wealthy households in recent years amid frozen thresholds and tax allowances in the UK, which have caused fiscal drag.

Many expats who moved to Dubai are now reported to be returning to the UK amid the escalating tensions in the Gulf region.

But they could land themselves with an unexpected tax bill.

Accountancy firm Price Bailey has warned people who recently moved to Dubai may inadvertently fall foul of the UK’s five‑year temporary non‑residency rule.

This is an anti‑avoidance measure designed to stop individuals leaving the UK briefly to dispose of assets tax‑free in low‑tax jurisdictions such as the United Arab Emirates (UAE) before returning soon after.

Nikita Cooper, director at Price Bailey, said: “The immediate focus is usually on income, which is taxed as it’s earned, but the far bigger issue is capital gains tax (CGT), which is often overlooked.

“Someone returning to the UK from Dubai for a short period may face some income tax, but that is manageable, unlike a large one‑off CGT bill.”

The tax risks of returning to the UK

The big risk for those returning to the UK from Dubai after a short period is CGT.

Under HMRC’s temporary non-residences rules, if an individual becomes UK‑resident again within five full tax years, capital gains realised while abroad are effectively “brought back” into the UK tax net and taxed in the year of return in certain circumstances.

Price Bailey adds that the same CGT trap affects individuals in the UK who were preparing to emigrate to Dubai and are in the advanced stages of selling businesses or second non-UK homes, but who are now hesitant to leave due to safety concerns.

Price Bailey said returning to the UK increases an individual’s “day count” under the Statutory Residence Test (SRT).

If this results in UK residency being triggered before five full tax years have elapsed, the temporary non‑residence rules can apply.

Cooper added: “What catches people out is that if they return within five years, gains on assets held before departure and sold while in Dubai are effectively ‘revived’ and taxed in the year of return. It’s the retrospective nature of the rules that tends to surprise people.”

This means people who may have sold UK businesses or second non-UK homes while tax‑resident in Dubai could now face paying CGT at 24%. For many, that could amount to tens or even hundreds of thousands of pounds.”

Price Bailey said it is aware of clients who were planning to emigrate to Dubai but have now paused the sale of businesses and second homes while they reassess their options.

Another risk is the UK’s Statutory Residence Test (SRT), which determines whether someone is classed as a UK tax resident. This may be an issue if flights are unable to return to Dubai or other parts of the United Arab Emirates.

Anyone who spends 183 days or more in the UK during a tax year automatically becomes a UK tax resident. But there are key caveats.

Below the 183-day threshold, residency depends on both the number of days spent in the UK and an individual’s ”ties” to the country.

Wealth manager Evelyn Partners has warned that someone who has previously lived in the UK, tax residency can potentially be triggered with as few as 90 to 120 days in the country if they maintain multiple ties, which is common.

How expats can minimise their tax bill when returning to the UK

The bad news for returning expats is that there isn’t much they can do about reducing their tax bill if they only recently left the UK.

However, HMRC is reportedly examining whether tax concessions could be introduced for Britons forced to return due to instability in the Middle East.

HMRC can disregard up to 60 days spent in the UK due to “exceptional circumstances,” but accountants have warned that this relief is unlikely to apply for those coming back from Dubai because individuals can travel to alternative destinations.

A key uncertainty is official travel advice.

David Little, financial planning partner at Evelyn Partners said the exceptional circumstances rule has historically been applied when the Foreign, Commonwealth and Development Office advises citizens to “avoid all travel”.

He said: "The UAE currently sits at the lower warning level of “all but essential travel”. Crucially, these are not equivalent.

"This distinction leaves significant ambiguity over whether evacuations or safety-related returns from the UAE would qualify for relief under the exceptional circumstances provision."

When it comes to the UK statutory residence test, Amal Shah, tax partner at accountancy and advisory firm Gerald Edelman, said the biggest risk for individuals is slipping up on their day count.

Shah said: “If you breach the limits you can very easily end up being treated as UK‑resident for the whole tax year, even if that wasn’t your intention.

“Once you fall back into UK residence, you also need to be mindful of the Temporary Non‑Residence (TNR) rules. These rules are deliberately tough.

“If you return to the UK within the relevant timeframe, any income or gains you realised while you were non‑resident, can be pulled back into charge.

“That can cover a wide range of things, from asset disposals to certain distributions or pension withdrawals, so the impact can be significant.

“A common misconception is around exceptional circumstances. HMRC takes an extremely narrow view of what counts. Simply leaving another country because of a situation there and returning to the UK won’t normally qualify.

“In HMRC’s eyes, exceptional circumstances only really apply when you are already in the UK, and something genuinely outside your control prevents you from leaving. That’s a very high bar, and HMRC sticks to it.”

Little adds that expats returning to the UK may qualify for split-year treatment. Normally, a person is either resident or non-resident for a full tax year.

But if someone leaves or returns partway through the year, the tax year can be divided into a “UK resident portion” and an “overseas portion”, potentially keeping foreign income outside the UK tax net.

Split-year treatment is not automatic though and must be claimed through self assessment.

Little added: "Until HMRC issues any clarification, expats considering temporary returns should carefully monitor their UK days and ties, plan travel around thresholds, and file appropriate forms to claim split-year treatment where relevant. As always, seek professional advice.

"Small changes in travel behaviour can be the difference between remaining outside the UK tax net and falling fully within it, a situation often reduced to a ‘health versus wealth’ dilemma, with no easy outcome."

A spokesperson for HMRC said: “The existing rules already take into account exceptional circumstance, such as people being affected by war, while following the basic principle that those living in the UK should pay tax in the UK.”

Increasing numbers of homes are pushing families into paying inheritance tax.

A combination of rising house prices and tax thresholds pushing more estates into the inheritance tax trap – an issue affecting all parts of the UK.

Research by law firms Shakespeare Martineau, Mayo Wynne Baxter and Lime Solicitors found that a home purchased in 2025 is now three times more likely to expose a family to inheritance tax than in 2009.

Analysis of Land Registry data reveals that in 2009, just 13% of all property purchases in England and Wales or 83,266 of 625,205 were at or above the £325,000 inheritance tax threshold. By 2025, that proportion had surged to 41% or 281,734 of 681,054.

It comes as the £325,000 nil-rate band has remained frozen since 2009 and is set to stay at that level until at least 2031.

Even the main residence nil-rate band threshold £175,000, which technically pushes the inheritance tax allowance to £500,000, is of little help to many homeowners.

The number of homes purchased for £500,000 or more has also more than trebled over the same period from 5% in 2009 to 18% in 2025.

The regions with the highest proportion of homes in the inheritance tax net

Perhaps unsurprisingly, London has the highest proportion of homes that could be liable for inheritance tax. The majority (84%) sold for more than £325,000 in 2025, while 52% sold for more than £500,000. The proportion is up from 35% and 15% in 2009 respectively.

But it is not just London and the South East where high value homes could push up inheritance tax bills.

Wales has seen the proportion of homes sales above £325,000 soar from 4% to 20% between 2009 and 2025, while the East of England has seen £500,000 home sales rise from 4% to 22%.

Fiona Dodd, private client partner at Mayo Wynne Baxter, said: “When modern inheritance tax – originally introduced as estate duty in the late-1800s – was created, it was designed to apply only to the very wealthy.

“However, with the tax-free allowance frozen for almost two decades, rising property prices have steadily drawn more families into the scope.

“Many people assume inheritance tax will never affect them. But as our analysis shows, a growing proportion of homes now approach or exceed the £325,000 threshold – before savings, investments or personal possessions are even considered.

“With inheritance tax charged at 40% above the threshold, families can be left facing a substantial and unexpected bill at an already difficult time.”

This is even before homeowners consider the value of their pension, which will be included in inheritance tax calculations from April 2027.

How to reduce your inheritance tax bill

There are steps you can take to reduce your inheritance tax bill such as gifting while still alive and leaving assets to your spouse, which would be tax-free.

Andrew Wilkinson, head of inheritance disputes at Lime Solicitors, said: “With estates growing in value, pensions becoming subject to inheritance tax and the threshold remaining static, there is simply more at stake – financially and emotionally.

“Tax-efficient decisions, such as leaving larger proportions to charity or to a spouse or civil partner, can unintentionally create tension in blended families or among dependants who expected a different outcome.

“We are likely to see more disputes as families grapple with the competing pressures of tax efficiency and fairness.

“The best protection against future disputes is careful, professional advice and open, honest communication within families. Many of the cases we see stem from a lack of clarity and unexpected provisions in a will.”

Growing evidence is suggesting pensioners with larger defined contribution pension pots are starting to run them down much faster – or use them up in full – in a bid to reduce potential inheritance tax (IHT) liabilities.

From April 2027, unspent defined contribution pension pots will be added to the value of the estate when inheritance tax is worked out. Likewise certain defined benefit death benefits such as ‘death in deferment’ lump sums. The changes were announced in the 2024 Budget.

The government estimates the move will bring around 10,000 estates each year into paying inheritance tax for the first time as well as increasing IHT bills for a further 40,000 estates.

But the long gap between the announcement of the change and it being implemented has given wealthy pension savers and their financial advisers time to put in place a range of strategies to offset the impact of the move.

This impact is most likely to be seen with larger pot sizes where the inheritance tax risk is greatest.

Steve Webb, partner at pension consultants LCP and a former pensions minister, said: “For many years, one of the attractions of defined contribution pensions has been their favourable treatment under inheritance tax rules, especially for those with larger pots.

“But the 2024 Budget announcement has changed things, and people with larger pots are now exploring a range of strategies to reduce any potential IHT bill for their heirs.”

What are pension savers doing to avoid inheritance tax?

Pension savers are increasingly turning to two financial products – annuities and whole of life insurance policies – to help them overcome the fact pensions will be subject to inheritance tax from April 2027, Webb says.

Annuities

Annuities allow savers to convert some or all of their defined contribution pot into a lifetime income stream. This income can be potentially gifted using the “normal expenditure from income” exemption.

Provided the rules are followed, these gifts can immediately be exempt from IHT.

If a joint life annuity is bought, then this carries on after the death of the first person. This is free from inheritance tax for the second life, even if the couple aren’t married or in a civil partnership.

There has recently been a surge in annuity purchases bought with larger pension pots. Sales of annuities over £250,000 rose by 31% year-on-year in 2025, and sales of annuities valued at over £500,000 rose by 54%, according to data from the Association of British Insurers (ABI).

In the case of an annuity, those in poorer health will generally get a better rate, as the annuity will pay out for a shorter period.

Whole of life policies

With ‘whole of life’ insurance policies, savers can pay for regular premiums for a policy which pays out a guaranteed lump sum when the saver dies. These payouts are free of inheritance tax, provided the policy is set up under a trust.

Alternatively, this lump sum could pay for any inheritance tax bill.

In the case of a couple, the policy can be set up to pay out on the ‘second’ death, meaning that it pays out only at the point the estate passes between generations. This reduces the cost of the policy. Doing it this way is known as a ‘joint life, second death’ policy, and typically applies for deaths up to age 90.

Industry sources suggest a surge in demand for whole of life policies, with an increase of 92% year on year reported in Spring 2025.

The terms for whole of life policies will generally be better for those in good health, because the premiums will run for longer and the expected payout date will be later.

Webb said: “Defined contribution pension providers can expect to see changing behaviour amongst savers with the largest pots, with more interest in drawing down more rapidly for gifting or purchase of a whole-of-life policy, or even using the whole pot for annuity purchase. Providers may find that the largest pots disappear the quickest post-retirement.”

Annuity or whole of life policy – which is best to avoid inheritance tax?

Financial advisers will be able to recommend the right strategy for each individual, but according to Webb, factors which pension savers are likely to consider if deciding between an annuity or a whole of life policy include:

Timing: With the annuity option, the pension saver is ‘giving while living’ – passing on regular income immediately to heirs. By comparison, a ‘whole of life’ policy delivers a lump sum on death.

Health: Those in poor health could potentially get favourable annuity terms, though risk giving up their capital for a relatively limited payout period. Meanwhile those in good health could get favourable terms from a whole of life policy, especially one which only paid out on the ‘second death’ in a couple.

Adjusting for inflation: Whole of life premiums can be fixed in cash terms, providing assurance the policyholder can keep up the payments for life, or can be set to increase, thereby helping to maintain the real value of the eventual payout.

With both a whole of life policy and an annuity, the policyholder will need to keep records so their heirs can demonstrate ‘where the money went’ while the saver was alive, to ensure HMRC do not attempt to add the money gifted (or spent on premiums) back into the estate after death.

Clare Moffat, pensions and tax expert at Royal London, said: “It is clear that there is growing interest for clients who might be affected by IHT in financial products such as annuities or whole of life policies. But the options are complex and it may be worth an inheritance tax bill if that makes family members better off.

“Most people would benefit from taking professional financial advice so they can work out the best course of action for their specific circumstances.”

We look at how to navigate the inheritance tax paperwork maze in nine clear steps in a separate article.

It was better news on tax receipts than we are used to. After several months of the borrowing figures rising higher and higher, and with the gilts market turning more and more nervous, January's data suddenly looked a lot better than had been expected.

The first month of the year is always a bumper four weeks for HMRC, as self-assessed tax falls due, as so does capital gains tax (CGT). Even so, January 2026 was better than usual.

The government racked up a surplus of slightly over £30 billion last month, more than double the £15 billion in January 2025.

That doesn’t mean Britain is suddenly in the black. We will still end the year borrowing more than £100 billion to keep the country afloat.

Still, it does mean that chancellor Rachel Reeves has a little more money to play with and the gilts market will be reassured. The IMF won’t be flying into Heathrow any time soon.

And yet it is indicative of the way this government thinks that influential figures such as pensions minister Torsten Bell believe that simply squeezing more and more tax revenue out of a stagnant economy is a measure of success.

Tax receipts are not growing because the economy is growing, because earnings and profits are surging, or because retail sales are growing. It is simply that the state is taking more and more of the pie, leaving less for everyone else.

That becomes painfully clear as soon as you start to drill down into the figures. The biggest increase was in receipts from CGT, with £17 billion collected from the sale of assets, a 69% year-on-year increase, and £1.1 billion more than the Office for Budget Responsibility forecast.

Employers’ national insurance contributed a lot more than last year, as did the self-employed through self-assessment, and frozen thresholds mean the yield from income tax has been heading up. Add them all up, and it is not hard to see why revenues are increasing.

Labour backbenchers will no doubt be thinking of ways they can spend the money. Train drivers and junior doctors could be awarded another pay rise. Welfare benefits can be made more generous. The government can give away more free stuff. Ed Miliband can buy some state-of-the-art windmills.

When it comes to spending money, Labour politicians need little encouragement. It is the one thing they are good at and it will be harder for Reeves to tell them the cash is not available.

There are two big problems, however. To start with, the huge rise in CGT receipts is unlikely to be sustained. With all the speculation about an increase in the rate in the last Budget, investors rushed to sell assets, landlords to get rid of their properties, and entrepreneurs to offload their companies. But you can only sell assets once and the total is certain to fall sharply next year.

It is hardly encouraging for growth that investors are ditching British shares and companies at a record rate, even if it does generate a bit more tax revenue.

The state is taking too much in tax receipts

More importantly, it shows the state is taking too much tax.

The huge tax rises Reeves has imposed are crushing the life out of the economy. The big rise in employers’ NI might raise cash, but it has also destroyed jobs, sending unemployment above 5%, and vacancies to record lows.

Frozen income tax thresholds are destroying incentives, with marginal rates of 60% or more, once student loans and tapered reliefs are taken into account.

It’s hardly surprising if people choose to work less and turn down promotions rather than pay that much.

Likewise, the self-employed are stumping up more tax for now. But there are already worrying signs that many of them are working less or taking early retirement instead of paying punitive rates of tax – the number of people working for themselves has already fallen from a peak of more than five million at the start of the decade to 4.3 million now.

The tax haul tells us the chancellor has pushed taxes too high and she should use the Spring Statement to hand some of the cash back.

A £30 billion round of tax cuts paid for with the January surplus would give the economy a massive boost – and repair some of the damage of the past 18 months.

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Thousands more estates will be hit with a double inheritance tax (IHT) blow within two years – but there are ways you can lower the bill for your loved ones.

The number of estates worth more than £2 million which will start to lose their residence nil-rate band is set to rise by 76% from 3,620 in 2023 to 6,400 by 2028, according to new research by wealth management firm Quilter.

This figure will increase to over 16,000 by 2031 due to frozen IHT thresholds and pensions being subject to IHT from April 2027. Rising house prices will also increase the value of peoples' estates.

IHT is usually payable on estates worth £325,000 or more but this is topped up by an additional £175,000, known as the residence nil-rate band, if you are leaving your home to a child or grandchild. You can pass this £175,000 allowance to a partner if you die.

This means couples who are married or in a civil partnership could leave up to £1 million to loved ones and they wouldn’t owe any IHT.

However, for every £2 your estate is worth more than £2 million, you lose £1 of this residence nil-rate band until it disappears. This means estates left by a single person worth £2.35 million receive no residence nil-rate band, while for couples it’s £2.7 million.

With IHT tax bands frozen at their current levels until 2031 and pensions falling into the scope of IHT from April 2027, more estates will start losing this allowance, Quilter said.

Shaun Moore, tax and financial planning expert at Quilter, said: “Many estates are likely to be hit by the double whammy of pensions being brought into scope for IHT and frozen tax allowances.

“IHT is already a devilishly complicated tax to navigate, and given the rise of asset prices in the past decade or so, many more are having to adapt their strategies in real time to help mitigate it and pass on wealth efficiently to future generations.”

How to reduce your estate to less than £2 million

If you believe you could be set to lose some or all of your residence nil-rate band, because your estate is likely worth more than £2 million, you might want to plan ahead now to protect your wealth.

1. Gifting

You can give up to £3,000 away each tax year without it being added to the value of your estate as well as up to £5,000 to someone getting married or entering into a civil partnership.

Gifts worth up to £250 can be given to as many people as you like each tax year, so if you have eight grandchildren, you could give them £250 each and remove £2,000 from your estate.

However, you can’t use this allowance if you’ve used another allowance on that person. So, you wouldn’t be able to pay someone a £250 gift and another £3,000 gift in one tax year and benefit from both the small gift and annual allowances.

You can also give an unlimited amount of money away and your estate won’t be subject to IHT if you live for seven years after giving it.

Moore said: “Lifetime gifting remains one of the most reliable ways to bring an estate back below the threshold.”

Do note, it’s important to keep records of when and how much you’ve gifted as this will make it easier for your executors to disclose any to HMRC.

2. Charitable giving

Donations to charity left in your will are taken off the value of your estate before IHT is calculated.

If 10% or more of your estate is donated to charity, your overall IHT rate will fall to 36% rather than the standard 40%.

3. Downsizing

You can move to a less valuable home and release some of the equity tied up in your current property to lower the value of your estate.

You will have to give away or spend this equity to actually reduce the size of your estate though and note the seven year rule may apply if you’re giving away money outside of your allowances.

There are also the costs associated with moving home such as estate agent fees, surveys and paying removal firms to factor in.

Rebecca William, financial planning divisional lead at wealth manager Rathbones, said: “Options such as downsizing later in life can help, provided people understand what they can afford to give away and when.”

4. Remove pension wealth earlier

With pensions subject to IHT from April 2027, you may want to start drawing down on your pension or take your tax-free lump sum earlier than planned to release funds from your estate.

Just make sure you’ve got a plan in place so it doesn’t leave you out of pocket down the line in retirement.

Tax-free lump sums can’t be added back into your pension once they’ve been taken out as well, so bear that in mind if you’re planning on withdrawing yours early.

5. Onshore bonds

Onshore bonds written in trust can be an effective way of reducing your future IHT liability if gifted to a family member.

As long as the giver survives seven years, there will be no IHT to pay.

Inheritance disputes within families have jumped in recent years due to changes in how and where we live, according to lawyers, who warned of the urgent need for people to get their affairs in order to avoid a fight later on.

Approximately 10,000 individuals contest wills annually in England and Wales.

This figure could rise further with new complexities around inheritance tax rules, which will see pensions included in the estate for IHT purposes from 2027. On the other hand, a well drafted will can help reduce the inheritance tax bill your loved ones pay.

Emma Bryson, board director at the Association of Lifetime Lawyers and a senior associate in law firm Michelmores disputed wills, trusts and estates team, said: "Modern families are changing fast, but the legal documents meant to protect them aren’t always kept up to date.

“People often assume everything will be obvious to their loved ones, but that’s rarely true. The reality is, without a will, or – even with one that’s out of date - confusion and uncertainty about someone’s wishes can quickly turn into painful inheritance disputes."

Ahead of Free Wills Month in March, we look at why you should write a will and what happens when inheritances are fought over.

3 key reasons why wills contested

Estates and wills are being contested more often in recent years due to three main factors, according to lawyers; the rise in cohabitation, older children still living at home with parents, and a rise in age-related mental health conditions like dementia.

1. Increased cohabitation

More people are choosing to cohabit rather than marry, preferring to spend money on getting on the housing ladder rather than having a wedding. The problem is, sharing assets without being legally wed doesn’t give you a strong claim to the estate of a deceased loved one.

Bryson said: “Rightly or wrongly, the current law provides protection for spouses of a deceased's estate. The same protection does not exist for unmarried couples.

“This rise in co-habiting couples has led to an increase in situations where a partner dies without a will, and the surviving partner has no automatic legal entitlement to their estate (which may include the whole or a share of the property).”

This gives rise to a claim by the cohabitee under the Inheritance (Provision for Family and Dependants) Act 1975.

2. More adult children living at home

Another reason for an increase in disputed estates is the current economic situation, with millions of adults still living at home with their parents.

“With the cost-of-living crisis continuing to bite, people are increasingly reliant on their parents' estates for housing or financial provision, meaning an increase in claim by adult children under the Inheritance (Provision for Family and Dependants) Act 1975,” said Bryson.

3. Age-related illness

An increase in will disputes is also due to an ageing population with increasing care needs, on the basis the person whose will it is lacked mental capacity when they wrote their will.

This is an increasing problem – by 2030, the amount of people in the UK with dementia is expected to increase to over 1 million people, according to NHS England.

“People are living longer, but many will experience dementia and other illnesses which affect the capacity to make a will. People making wills late in life whilst unwell, or without professional assistance, gives rise to probate claims,” said Bryson.

Tips on how to prevent an estate being contested

Making a will is incredibly important, however each set of circumstances is unique – and there is no golden bullet which ensures that an estate cannot be contested.

“There are, however, a number of things which can strengthen a will and provide more protection in the event that someone wishes to challenge a will or bring a claim against an estate,” said Bryson.

1. ‘No contest’ clauses

If a person anticipates that inclusions or omissions in their will might be controversial, they might wish to consider including a 'no contest' clause in the will.

“A no-contest clause is a provision designed to deter beneficiaries from challenging the will's validity or bringing a claim against the estate by stipulating that any challenger forfeits their inheritance if they do. It can act as a financial deterrent to prevent costly litigation and enforce the testator's wishes,” said Bryson.

2. Capacity assessments

If someone has suffered with mental illness or is elderly, it is wise to ensure that their will is witnessed by a medical practitioner who can attest to their capacity to execute a will at the relevant time.

Bryson said: “In this scenario a formal capacity assessment should also be carried out on the person making the will to confirm that they have capacity to do so. This capacity assessment can then be used as evidence should anyone seek to contest the will after the person making the will has died.”

3. Use a solicitor

It is possible to write and prepare a will yourself, but it can be wise to consult a professional to avoid errors and omissions.

“Not only does the will appear more professional, but the solicitor who has prepared it should also prepare and keep a corresponding file which evidences what the deceased person wanted the will to include, the decisions they made and their reasons for making a will through attendance notes and correspondence,” said Bryson.

“If correctly prepared, this evidence is a strong shield to someone who wishes to attack the validity of a will,” she added.

How to successfully contest an estate

If someone has died and you wish to contest their estate, the first step is to contact a specialist contentious probate solicitor.

After obtaining information from you they will then be able to assess whether there are any questions to be answered or if a challenge to a will or claim against estate would have good prospects of success.

Bryson said: “The success of a will challenge will depend on the merits, any evidence from the time the will was made, and how well the claim and pre action correspondence is prepared.”

The success of a claim under the Inheritance (Provision for Family and Dependants) Act 1975 depends on a variety of factors, including, but not limited to:

• financial needs/resources of the claimant and beneficiaries
• the estate's size
• the deceased's obligations

“It will also likely depend on how well the claim and pre action correspondence is prepared, which is why legal advice early on is crucial,” Bryson said.

Finally, alternative dispute resolution mechanisms such as a formal mediation are common in practice and Bryson said “are a useful tool” for formally resolving disputed estates without court action being necessary.

High net worth and experienced investors looking for tax breaks and keen to do more than just add to their ISA or pension will want to have a keen eye on weeks leading up to the end of the 2025/26 tax year.

Certain government-backed initiatives – namely Enterprise Investment Schemes (EIS), Seed Enterprise Investment Schemes (SEIS), and venture capital trusts (VCTs) – have use-it-or-lose-it allowances interested investors will need to act fast to take advantage of, well in advance of the official end of the current tax year on 5 April.

EIS, SEIS and VCTs are designed to encourage investment in early stage companies using the carrot of income tax savings. These are also much riskier products, suitable only for high net worth individuals who can afford to lose out if the companies fold (as young companies are more likely to do) and experienced investors who understand those risks.

With that in mind, for interested investors the deadline for submitting applications to invest in EIS, SEIS and VCTs is much sooner than 5 April. Also changes to the tax incentives for VCTs from April mean that investors need to act now to benefit.

Susannah Streeter, chief investment strategist at Wealth Club said: "High net worth investors with multiple sources of income, or complex tax arrangements, often find that planning for the end of tax year deadlines is a headache – and this year it risks becoming a migraine.

“There were yet more tweaks to taxes at the 2025 Budget, making affairs even more complicated at a time when tax rates remain at the highest levels in peacetime. So, investors wanting to reduce their tax bills should act now rather than leaving everything to the last minute.”

End of tax year checklist for experienced investors

Up to six weeks before end of tax year

VCT investors will find that, while the deadlines to invest span the last two weeks of the tax year – with some VCTs using the earliest deadline to invest on 23 March and with the last to close its books at noon on 2 April – the real deadlines will be earlier.

This is down to offer capacity, meaning the maximum amount of money a specific VCT is looking to raise from investors during a new share offer. The most popular VCT offers are likely to be fully subscribed before their deadlines are met and are already nearing capacity, according to Streeter. For example:

• Albion VCTs (87% full)
• Northern VCTs (94% full)
• Molten Ventures VCT (93% full)

“With VCT income tax relief due to drop to 20% from 2026/27, investors whose shares are allotted in the current tax year can still benefit from 30% income tax relief. This means there is a real incentive to do a VCT now rather than waiting till the next tax year,” said Streeter.

You can invest up to £200,000 per tax year into a VCT.

Five weeks before end of tax year

Investors seeking to invest in SEIS funds have only have until 27 February to invest in funds deploying capital in the 2025/26 tax year, including, for example:

• Fuel Ventures SEIS Fund (27 Feb)
• SFC Angel Fund SEIS (27 Feb)

“That said, investors whose funds are deployed in 2026/27 may still use the ‘carry back’ option to apply their SEIS income tax relief to 2025/26,” Streeter pointed out.

Carry back allows investors to treat shares acquired in the current tax year as if they were bought in the previous tax year. This enables you to claim income tax relief against the previous year’s tax bill.

When you invest via SEIS you receive up to 50% income tax relief. You can invest up to £200,000 into SEIS each tax year.

Two weeks before end of tax year

“Investors in EIS funds will find some have already closed for the 2025/26 tax year, but there are a few remaining open with the latest deadline on 27 March,” said Streeter. These include:

• Fuel Ventures Follow-on EIS Fund (27 Mar)
• Guinness EIS (6 Mar)
• Haatch EIS Fund (6 Mar)

Like SEIS investors, EIS investors whose funds are deployed in 2026/27 may still use the ‘carry back’ option to apply their EIS income tax relief to 2025/26.

When you invest in EIS you receive income tax relief of up to 30%. You can invest up to £1 million a year or £2 million if the company is “knowledge intensive”.

One week before end of tax year

Investors in Knowledge Intensive EIS funds will find that the deadlines range from 30 March up to 3 April at noon. These funds, from managers including Parkwalk and Molten Ventures, provide investors with a single EIS certificate dated in 2025/26 once they have deployed 90% of their capital.

Deadlines in the last week

ISAs

If the higher risk EIS, SEIS and VCTs are not for you, you can still put up to £20,000 in ISAs this tax year right up until a minute before midnight and all income, interest or capital gains are tax-free. “You can also add up to £9,000 into a Junior ISA up to 11.30pm with providers by debit card, but if completing a bank transfer this needs to be done by 11.59pm on 4th April,” said Streeter.

Pensions

The annual allowance for adding money in your self-invested personal pension (SIPP) is £60,000 although that amount is restricted to as little as £10,000 for high earners. Investors can add up to this amount, or the up to their annual income each year, whichever is the lower. “Some providers will take payments by debit cards into pensions up to 30 minutes before midnight on 5 April but bank transfers may be limited to before 12pm (noon) on that day,” Streeter said.

Frozen tax thresholds have increased the number of Brits paying income tax at the same time as squeezing the tax-free allowances that let people make an income without paying a penny to HMRC. But the tax system can still be made to work to your advantage, if you know how to play it.

An estimated 39.1 million people now pay income tax, according to HMRC data. This is an increase of 6.1 million from when income tax thresholds were frozen in the 2021/22 tax year, almost four years ago – an effect known as fiscal drag.

Basic rate taxpayers account for the vast majority, an estimated 30.4 million people, which is a rise of around 3 million since the freeze.

Higher rate taxpayers are up by 2.65 million to 7.08 million, and additional rate taxpayers make up 1.23 million of the total, an increase of 710,000.

Thanks to the state pension triple lock – which has seen the state pension increase every year since 2011 by inflation, average earnings or 2.5%, whichever is higher – 8.7m taxpayers are over state pension age, up 29% since the freeze.

Income tax thresholds will remain frozen until April 2031. Originally set to end in 2028, the freeze was extended by the government in the 2025 Autumn Budget to raise funds. Good news for the Treasury, not so good for personal incomes.

Yet there are still a few ways to legally generate an income free of tax, if you are willing to be flexible about where that income comes from.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Between us, we’re paying billions more in tax than we did this time last year, and it’s only going to get worse, because those tax thresholds have been frozen until April 2031.

“It means the idea of generating a tax-free income has become even more attractive. Fortunately, there are a number of allowances and rules which mean you can take steps to protect yourself from a horrible tax bill.”

How to generate tax-free income every year

1. Keep up to £12,570

The personal allowance – the first £12,570 of taxable income per person per year – is tax-free. If you earn less than this, you won’t pay a penny of income tax.

The personal allowance is reduced by £1 for every £2 of taxable income above £100,000, which is why earnings between £100,000 and £125,140 are taxed at an effective 60% tax rate.

That’s one reason why people who make more than £100,000 may consider making additional pension contributions to cut their taxable income and so keep more of their personal allowance.

2. Rent a room to a lodger and keep up to £7,500

If you rent a furnished room in your home to a lodger, the first £7,500 of rent each year is tax-free under the rent-a-room scheme. This limit hasn’t risen for a decade, however, and if you go over it you’ll need to file a self-assessment tax return.

3. Rent out land or property for up to £1,000

This could be from a property business, but it doesn’t count for renting out a room in your own property that falls under the rent-a-room scheme.

4. Side hustle earnings are tax-free up to £1,000

If you make a modest income from a side hustle or hobby, such as selling items you have made on Ebay, Etsy or Vinted, you can keep what you make without paying income tax up to £1,000. This is known as the ‘trading allowance’. Cash from getting rid of your old belongings isn’t likely to be taxable unless any individual item is worth more than £6,000. You can check if your additional income is taxable using HMRC’s tool.

5. Make your savings work hard and keep up to £1,000

Stick your cash in some of the best regular savings accounts or accounts with the best savings rates for lump sums and don’t worry about paying tax on the interest up to £1,000 if you’re a basic rate taxpayer and up to £500 for higher rate taxpayers. Additional rate taxpayers don’t have a personal savings allowance.

6. Low earners get an extra savings boost

If you don’t earn much but have a healthy amount in savings you could be entitled to an extra tax-free income. Earn less than the personal allowance of £12,570 from wages and pensions, and you get the starting rate for savings. This means the first £5,000 of interest on your savings is tax-free. You also get the full £1,000 personal savings allowance on top of that.

So in total you can make up to £12,570 from wages, and £6,000 in savings interest without paying any tax. However, for every £1 of non-savings income over your personal allowance, you lose £1 of your starting savings allowance, so if you earn £17,570 you lose the entire allowance altogether.

7. Premium Bond prizes are tax-free

Whether it’s £25 or £1 million, Premium Bond prizes are tax-free.

8. Keep all the interest on savings in a cash ISA

Savers can put up to £20,000 into a cash ISA in the current tax year and interest is completely tax-free. The allowance remains the same in the coming tax year, before dropping to £12,000 for people under the age of 65. And all withdrawals are tax-free. Be sure to shop around to get the best cash ISA for you.

9. Income from stocks and shares ISAs yours to keep

All income your investments make inside a stocks and shares ISA – bond income or dividend income, for example – is free of any tax. You can also withdraw all the money without paying tax on it. When you reach the life stage where you want to draw an income from your assets, having ISAs in the mix alongside taxed income, like pensions, can really keep your tax bill down.

10. Income withdrawn from a Lifetime ISA at age 60 or over is tax-free

Any money withdrawn from a Lifetime ISA (LISA) is tax-free – as long as you stick to the rules. The LISA is dual purpose; it can be used to build a deposit to buy a first home (in which case the cash will go straight into that at the point of purchase) or save for retirement, with access from age 60. With the retirement option, all withdrawals are tax-free, giving you another tax-friendly income stream. But take the money out under any other circumstances and you’ll pay a penalty.

11. Enjoy your £500 dividend allowance

If you have investments outside an ISA, the first £500 of dividend income is free of tax in the current tax year. This allowance has dropped dramatically since being introduced in 2016 and dividend tax rates have increased during that time too, making ISAs even more valuable for those using dividends to boost their income.

12. Make use of double couple allowances

There are financial benefits to being married. You can share assets between you and double the amount of money you can make before the taxman takes a slice. For example, you can share income-producing assets with your spouse, so you can both take advantage of your personal allowance, dividend allowance and ISA allowance. Or in the case of capital gains tax, if you sell an asset that you hold jointly, you can effectively double the potential tax-free gain you make on it.

13. Purchased life annuities can generate a tax-free income too

These are designed to provide a guaranteed income for life or over a fixed term, in exchange for a lump sum that’s not from a pension. Part of the income paid is deemed to be a return of your original investment and therefore is tax-free. The interest element of the income is taxable, but no tax will have to be paid if it falls within the personal allowance or personal savings allowance.

Businesses could face paying between 5% and 10% more for an accountant as a result of a surge in demand due to the government’s Making Tax Digital (MTD) rules, which will begin being rolled out from this April, according to a survey.

More than 860,000 sole traders and landlords – those earning more than £50,000 from self-employment and property – need to start using digital income tax reporting from 6 April and are being urged to act now with less than two months left to prepare.

Of these, around 212,500 UK businesses currently operate without an accountant for filing their self-assessment tax return, according to HMRC figures.

These ‘unrepresented’ businesses risk being hit with sharply higher costs as Making Tax Digital rolls out, analysis by tax software company TaxCalc suggested.

A capacity crunch could leave businesses that are seeking to hire an accountant at the last-minute paying 5%-10% higher fees in the lead up to April, according to the findings of TaxCalc’s latest survey of 215 accountancy professionals.

Estimates suggested these unrepresented businesses could collectively face tens of millions in additional annual accountancy fees if they engage late – driven not by the Making Tax Digital rules themselves, but by a rush of demand across the accountancy industry.

“Scaled across the UK’s 212,500 unrepresented businesses, this could equate to tens of millions in additional accountancy costs annually.”

How much could Making Tax Digital cost me?

Nearly half (47%) of accountants say they plan to increase prices for MTD clients, according to the TaxCalc survey.

For a typical small business currently paying around £1,500 per year in accountancy fees, a relatively modest 10% increase would add around £150 annually.

“However, for unrepresented businesses that currently pay nothing for accountancy support, engaging an accountant late to meet MTD deadlines could mean jumping from £0 to a much higher-priced service based on our survey findings,” said Andy North, chief customer officer at TaxCalc, “as firms pass on the extra time, capacity and onboarding costs associated with last-minute MTD preparation”.

“Scaled across the UK’s 212,500 unrepresented businesses, this could equate to tens of millions in additional accountancy costs annually.”

Some parts of the accountancy sector are already reporting being stretched. The TaxCalc survey found almost half (48%) of accountancy professionals say they have more clients than they can manage, while ‘too much work’ is cited as the number one cause of stress by 36% of firms.

“Businesses that leave MTD preparation until the last minute may struggle to find an accountant willing or available to take them on and, as a result, are far more likely to face higher fees, particularly when firms are asked to onboard them at short notice,” said North.

What are the penalties for Making Tax Digital?

Penalties for failing to meet the requirements of Making Tax Digital are paused during the first year, but any missed quarterly submission deadlines from April 2027 onwards will result in businesses accruing penalty points.

Once the penalty threshold is reached, a £200 fine is issued, with a further £200 charge for each subsequent missed deadline until sustained compliance is achieved.

More demand for accountants from April 2027

Making Tax Digital is being rolled out in stages. Looking ahead, when the Making Tax Digital business income threshold falls from £50,000 to £30,000 in April 2027, the current proportion of unrepresented businesses (25%) is likely to rise, as more landlords, smaller businesses and sole traders enter the mix.

North said: “This is expected to trigger a much larger wave of last-minute demand for accountancy services throughout 2026 and into 2027, placing sustained pressure on firms and driving costs even higher for businesses that delay engagement.”

Top tips for businesses ahead of Making Tax Digital

1. Treat April as the start – not the deadline

While Making Tax Digital officially begins in April, the first deadline for submissions isn’t until the end of June. But it makes sense for businesses to start keeping digital records from day one. Doing so helps avoid a last-minute rush, reduces stress, and makes that first quarter far easier to manage.

And although HMRC fines won’t be issued until April 2027, disorganised records in the lead-up significantly increase the risk of avoidable penalties.

2. Build habits, not spreadsheets

“MTD is really about behaviour change – updating records little and often, weekly or monthly, is far easier than trying to catch up once a quarter,” said North. “Businesses that build good habits early will find MTD far less disruptive.”

3. Penalties and fines will add up faster than businesses realise

While fines shouldn’t be issued until April 2027, building the habit of meeting all quarterly deadlines now is crucial. Missing four updates would take you straight to a fine once penalties are switched on.

4. Don’t assume quarterly figures can be ‘fudged’

While there’s no requirement for quarterly figures to be perfectly accurate, they are expected to be a reasonable reflection of what’s happening in the business.

“Deliberately filing zeros or clearly wrong numbers just to meet a deadline goes against the spirit of Making Tax Digital, which is designed to encourage regular, up-to-date record-keeping,” said North.

Quarterly updates are later compared with the final tax return, so obvious discrepancies can raise questions and lead to additional scrutiny. It effectively raises a flag to HMRC that you're probably not maintaining digital records, and could well trigger an investigation.

In practice, filing something broadly accurate will be far safer than submitting figures that don’t reflect reality.

5. Expect your accountancy firm pricing to change

Quarterly reporting means more work, whether you manage it yourself or use an accountant. Businesses should expect accountancy fees to change and budget accordingly, rather than being surprised later in the year.

6. Remember this is only the first wave

North said: “The current £50,000 income threshold is relatively high. From next year, Making Tax Digital will extend to businesses earning £30,000 or more, likely including more landlords with one property, or sole traders. Even if you’re not affected now, it’s worth preparing early.”

7. You can still file yourself – with compliant software

Some businesses entering Making Tax Digital have never used an accountant and may want to continue filing themselves. That’s fine – but you will still need MTD-compatible software to submit your data digitally.

More than 14,000 investigations into families suspected of underpaying inheritance tax have been launched by HMRC since April 2022, a Freedom of Information (FOI) request found.

The FOI data also shows a sharp rise in the number of new inheritance tax investigations  launched by the tax authority during the first nine months of this tax year.  

In the current 2025/26 tax year alone, 3,636 probes have been opened, according to the figures obtained from HMRC by financial adviser NFU Mutual.

These investigations – launched between April 2025 and December 2025 – account for  almost a quarter of all IHT investigations opened since April 2022. 

The number of new inheritance tax investigations into estates where the tax is suspected to have been underpaid jumped by 33% in the three years to April 2025 – from 3,163 in 2022/2023 to 4,200 in 2024/2025.

More families are set to be dragged into the inheritance tax net in the coming years which could lead to greater numbers of HMRC investigations into suspected underpaid IHT.  

Inheritance tax is payable at 40% on anything inherited over the £325,000 tax-free threshold (also known as the nil rate band). If a home is being passed to children or grandchildren, then an additional £175,000 allowance is applied. Couples can combine their allowances to pass on a total of £1 million tax-free.

Sean McCann, chartered financial planner at NFU Mutual, said: “IHT remains one of the most feared and least understood taxes, with unspent pensions falling within the inheritance tax net from 2027 and many farms and businesses from April 2026, more and more families will find themselves dragged into paying inheritance tax.”   

The Office for Budget Responsibility (OBR) has forecast that 9.5% of deaths could trigger inheritance tax bills by 2029/30 up from 5.1% in 2022-23.  

Fresh figures from HMRC show IHT receipts collected between April 2025 and January 2026 jumped by £130 million compared to the same period in the 2024/25 financial year, rising to a total of £7.1 billion in the first 10 months of the current 2025/26 tax year, as more families part with some of their inheritance.

An HMRC spokesperson said: “Most people pay the correct amount of Inheritance Tax. In cases where it is suspected someone has not, investigations can be opened to address issues and ensure the system remains fair.”

How does HMRC investigate inheritance tax?

HMRC has substantial investigatory powers and will check a range of sources to build a picture of the deceased individual’s financial affairs where there is a suspicion inheritance tax has been underpaid through error, omission, or undervaluing assets, said McCann.

This can include analysing bank statements to identify income which may suggest the existence of undisclosed assets such as investments or property or significant foreign currency transactions.

McCann added: “HMRC leaves no stone unturned in these investigations.”

For example, they will look at outgoings such as gifts made in the seven years before death, or premiums for life insurance policies which if not written in trust will form part of the taxable estate.

“The revenue recovered through these investigations is significant and the rising value of assets and the potential sums at stake would appear to justify HMRC increasing the number of cases they look at. The increased level of information available to HMRC also allows them to be more forensic and targeted in nature,” McCann said. 

Furthermore, the interest rate you pay on overdue inheritance tax stands at 7.75 % which can add a significant amount to the bill. This can compound what for many is already a challenging and distressing situation. 

 “With the £325,000 nil-rate band and the £175,000 residence nil-rate band frozen until 2031, more families will be caught in the inheritance tax net with ever increasing bills for those affected,” McCann added.   

Inheritance tax is the gift that keeps on giving to the chancellor but for families mourning loved ones it can be a complicated minefield to get right at an already difficult time, with an avalanche of paperwork to manage in a very tight deadline.

Record inheritance tax receipts are expected to rise even further, as frozen IHT thresholds and rising property prices bring more people into scope of paying inheritance tax.

Furthermore, new rules introduced by the government in the October 2024 Budget will see more farms and small businesses paying inheritance tax for the first time from this April. Plus, from April 2027, unused pensions will also be subject to inheritance tax.

Both these new developments increase the demands on personal representatives – those in charge of administering the estate left behind after a death – to get the IHT paperwork right, or face potential fines.

Rebecca Minto, board director at the Association of Lifetime Lawyers, which specialises in later life and estate planning, said: “Inheritance tax paperwork is rarely straightforward, and the window for getting it wrong is surprisingly small: miss the six-month payment deadline and interest starts clocking up immediately.

“What we're seeing now is families who thought they had everything planned suddenly facing new questions,” she added. “Our advice is always the same; don't wait for a death to start thinking about this. The families who cope best are those where someone sat down with specialist professionals well in advance.”

Inheritance tax planning: what paperwork you need

Dealing with a loved one's estate is stressful enough without being caught off guard by the paperwork demands of inheritance tax. Whether a bill is due or not, families need to know what's required and with significant changes on the horizon for business assets and pensions, the stakes are rising.

Here's what you need to have in order:

1. Find out whether a full tax return is needed

Not every estate triggers a mountain of forms. If the estate qualifies as ‘excepted’, meaning no inheritance tax is due, the family simply completes the probate application and a short online declaration. This is common when the estate is modest or when everything is left to a spouse or charity.

An estate is usually excepted if:

• the gross value is £325,000 or less;
• it's worth up to £650,000 and a nil rate band is being transferred from a late spouse or civil partner;
• everything passes to a UK-domiciled spouse or UK charity and the estate is under £3 million;
• the deceased was permanently resident outside the UK with UK assets below £150,000.

“It’s worth checking before assuming the worst,” said Minto. HMRC has an inheritance tax checker tool you can use.

2. If inheritance tax is due, expect detailed paperwork

Where the estate doesn't qualify as ‘excepted’, personal representatives must complete HMRC's full Inheritance Tax Account (the IHT400). This is a comprehensive document covering:

• the deceased's family circumstances
• a full breakdown of assets and liabilities
• any lifetime gifts and settlements
• tax exemptions and tax reliefs claimed
• supporting valuations

Minto said: “Getting organised early – gathering bank statements, property valuations, and share certificates – will save considerable time and stress.”

3. What if no inheritance tax is due?

If no tax is due you still need to fill in form IHT205 at least. But even if no inheritance tax is due you could still be required to send full details of the value of the estate – within 12 months of the person dying – if the person who died:

• gave away over £250,000 in the seven years before they died
• gave gifts then continued to benefit from them in the seven years before they died
• left an estate worth more than £3 million
• was ‘deemed domiciled’ in the UK
• had foreign assets worth more than £100,000
• was living permanently outside the UK when they died but had previously lived in the UK
• had a life insurance policy that paid out to someone other than their spouse or civil partner and also had an annuity
• had increased the value of a lump sum from a personal pension to be paid after their death, while they were terminally ill or in poor health
• had agreed that property they’d given away during their lifetime would be part of their estate rather than pay a pre-owned asset charge.

4. Other forms you might need

Other forms you may need to complete as part of the inheritance tax process, according to solicitors at DLA Law are:

IHT402 – this should be submitted in conjunction with form IHT400 to claim the unused nil rate band from a late spouse or civil partner (to extend the inheritance tax threshold to £650,000).

IHT403 – to report gifts made during the deceased’s lifetime where they kept some benefit (e.g. continuing to live in a gifted property) or if the deceased made regular gifts out of income, to determine whether any extra inheritance tax is due

5. Don't miss the inheritance tax payment deadline

IHT is normally due six months after the end of the month in which the death occurred. Miss this and interest starts accruing automatically.

“The problem families can face is that the Grant of Probate, which unlocks the estate's assets, hasn't been issued yet. This is where planning ahead in terms of paperwork-gathering really pays off,” said Minto.

With a window of only a few months after the person’s death, try to locate as much documentation about pensions, property and insurance while your loved ones are still around to ask for details. Pension provider Royal London has a helpful ‘When I’m Gone’ document anyone can download and use to share helpful details with family and friends.

6. Sort paperwork for paying the inheritance tax bill

There are multiple potential options for paying an inheritance tax bill. Banks and financial institutions can pay HMRC directly before the Grant of Probate is issued using a form called the IHT423 – this Direct Payment Scheme is often the most straightforward route.

If the estate includes property, land, or qualifying business assets, the IHT on those assets can generally be spread across up to 10 annual instalments, though selling the asset usually makes the balance fall due immediately.

Where funds simply can't be accessed in time, HMRC can sometimes postpone payment via a ‘Grant on Credit’ arrangement, though interest continues to run up.

Personal representatives or beneficiaries can also advance funds personally and be reimbursed later, or a specialist probate bridging loan could be used to cover the liability while the estate is administered.

“It's also worth taking legal advice on whether a post-death variation of the estate could reduce the bill in whole or in part,” Minto said. This ‘deed of variation’ allows beneficiaries to legally alter a will or the rules of intestacy within two years of a death, often to reduce IHT.

7. Consider life insurance written in trust

Business owners and farmers in particular, may wish to consider this bit of paperwork sooner rather than later, said Minto.

A life insurance policy written in trust sits outside the estate, meaning the proceeds are accessible quickly and without probate – providing ready cash to meet a tax bill without having to sell or borrow against illiquid assets.

“For those in reasonable health where premiums aren't prohibitive, it's one of the most practical tools available,” Minto said.

8. Understand changes to business and agricultural relief from April 2026

From 6 April 2026, the 100% business property relief (BPR) and agricultural property relief (APR) will only apply up to a cumulative £2.5 million allowance per person. Business owners and farmers whose estates currently pass IHT-free may find a significant inheritance tax bill emerging overnight.

Where the estate includes company shares, a farm, or other qualifying assets all this paperwork will need to be gathered and valuations obtained. Where it is valued above the £2.5 million threshold, “families will need to think carefully about how to fund the excess – whether through dividends from the company, a share buy-back, borrowing, or an insurance policy”, said Minto.

“Each option has its own tax implications and commercial consequences, so specialist advice well in advance of April 2026 is essential,” she added.

The government’s guidance is that the majority of personal representatives claiming the BPR and APR will not face additional ongoing administrative burdens. For the estates which only hold shares that are not listed, there are no new obligations as the only change will be an update to the rate of the relief and there will be no change to how they interact with HMRC.

Where the estate now seeks to claim relief for assets in excess of £2.5 million, personal representatives will need to undertake an additional calculation at the reduced 50% rate. This will be reflected on updated IHT400 forms and guidance.

9. Remember pensions will be subject to inheritance tax from April 2027

Currently, pension funds sit outside the inheritance tax net. From April 2027, that changes. This will require pension schemes and personal representatives to share detailed information with one another. The exact processes for doing this are still under consultation. However it is expected to follow this pattern:

• personal representatives will have to inform pension schemes of a member’s death
• the pension scheme will then need to share details of unused pension funds and death benefits
• personal representatives will have to calculate and share how much inheritance tax nil-rate band is apportioned to the relevant pension
• pension schemes will be required to use this information to calculate the amount of inheritance tax due on the unused pension funds and death benefits, and to report and pay this to HMRC

Other variations of this are under consideration. The practical reality, though, is that this is a genuinely complex area.

Minto said: “Personal representatives and pension scheme administrators will need to share information and coordinate carefully, and delays in doing so could lead to late payment interest. Families with substantial pension pots should be reviewing their planning now.”

Taxpayers in the London borough of Wandsworth paid more income tax than those in Leeds and Birmingham combined in 2022/23, according to new HMRC figures that lay bare the stark differences in tax take across the UK.

Residents of Wandsworth paid £4.26 billion in income tax that year. This was more than both Leeds and Birmingham, which together paid £4.23 billion.

Taxpayers in the London borough of Hackney, who paid £1.54 billion in income tax in 2022/23, contributed more income tax than the whole of Scotland’s second city Glasgow, where residents paid £1.35 billion.

Overall, London and the South East contributed 45% of the UK’s total income tax bill of £240.7 billion in 2022/23, according to analysis of HMRC figures by accountancy firm UHY Hacker Young.

The capital on its own accounted for a quarter of all income tax paid (26.5%).

According to UHY Hacker Young’s research, all top 20 areas in the UK for the highest tax per capita are in London or the South East, in part due to frozen tax thresholds and fiscal drag.

Neela Chuahan, partner at UHY Hacker Young, said: “London and the South East now account for almost half of the UK’s entire income tax take. Obviously, that reflects the sheer concentration of high earners in the South East but it also reflects years of tax policy geared towards shifting more of the tax burden onto higher earners.”

Source: UHY Hacker Young based on HMRC data

A decade of income tax rises

Over the past ten years since April 2016, London’s income tax contributions have jumped 80.7% from £35.3 billion to £63.8 billion. This compares with a 48.4% increase for the rest of the UK, the analysis showed.

Because London and the South East are home to a disproportionate number of high earners paying tax at the 45% rate, the areas consistently contribute a larger share of income tax than other parts of the country.

Increasing numbers of taxpayers in the capital and the South East have seen their tax bills rise as the threshold for the 45% additional rate tax was lowered from £150,000 to £125,140 in April 2023.

Around 232,000 would pay the additional rate of tax who would not have done so had this threshold been maintained at £150,000, according to government estimates at the time.

For those with income between £125,140 and £150,000, the average cash loss was £621 in 2023 to 2024. For those with income above £150,000 the average cash loss was £1,256.

At the same time, personal allowances and higher-rate thresholds have been frozen since April 2021, dragging more and more people into higher tax bands as incomes increase, a process known as fiscal drag.

Chauhan added: “Freezing allowances and lowering the additional-rate threshold has pulled ever more taxpayers into higher bands, driving a sharp rise in revenues from London in particular – up more than 80% over the past decade.”

“While this underlines how dependent the Exchequer has become on London and the South East, it also raises concerns about the long-term competitiveness of the UK tax system and the risk that persistently higher tax burdens could push some high earners to relocate abroad or reduce their economic activity,” she said.

Source: UHY Hacker Young based on HMRC data

More families were put under scrutiny by HMRC last year over what the taxman believed to be outstanding inheritance tax bills, and it successfully clawed back almost £250 million in unpaid inheritance tax.

The number of investigations into underpaid inheritance tax (IHT) rose from 3,793 to 3,977 over the course of the year ending 5 April 2025, a new Freedom of Information request to HMRC by TWM Solicitors found.

HMRC netted an additional £246 million as a result of these inheritance tax investigations, the FOI showed.

The rise in the number of investigations reflects HMRC’s increased efforts to recover revenue from underreported and misvalued estates, TWM Solicitors said.

With the annual inheritance tax take rising more than 61% to £8.3 billion since 2020, the law firm said it believes HMRC is alert to the risk that more families may be tempted to underpay and avoid inheritance tax, a tax that some consider to be unfair.

David Lunn, partner in the private client team at TWM Solicitors, said: “HMRC’s investigations are becoming increasingly complex, particularly when it comes to residential property.

“With tax rules growing ever more complicated, and the IHT net widening with each Budget, people need to ensure they obtain proper advice. Penalties can run into tens of thousands of pounds.”

Why is the number of IHT investigations rising?

HMRC is now using artificial intelligence, data-matching and other advanced big data tools to detect unpaid tax, TWM Solicitors has found. As a result it is getting increasingly adept at identifying inconsistencies and errors in IHT returns, prompting a growing number of investigations.

Rising house prices and asset prices, combined with frozen tax thresholds, have resulted in more people having to pay inheritance tax, and also increases the potential for evasion.

Since April 2009, the IHT nil-rate band has been frozen at £325,000. This is a marked difference to the not so distant past – since 1986 the tax threshold has risen every year until 2009 (except in 1993 and 1994). That is 21 rises in 23 years followed by no rises in 17 years with no increases predicted in the near future either.

Lawyers have said a sharp increase in the burden of any tax can lead to a rise in tax evasion and avoidance.

The government’s decisions to bring unspent pension pots into the scope of IHT and cut agricultural and business property reliefs will likely drag more estates into the tax net, TWM said. The firm expects this could trigger further HMRC scrutiny of families’ inheritance tax filings.

“Inheritance tax investigations have risen because HMRC knows that, as the extent of IHT widens, irregularities become more common, and so the amount of tax, interest and penalties they can recover is likely to rise,” said Lunn.

“Recent Budgets are a good example, as they have drawn even more assets into the scope of IHT. That inevitably leads to more challenges and investigations.”

Why does HMRC investigate inheritance tax returns?

HMRC investigates what it believes are errors in inheritance tax returns. These errors commonly include failing to declare personal items such as jewellery and furniture – assets many people do not realise must be included.

“Not declaring goods has prompted countless IHT investigations in the past,” Lunn said.

“HMRC is very strict about what must be included in an IHT return, so items such as jewellery or even a valuable set of dining chairs must be declared at their full market value,” he added.

However, some of the biggest – and most complex – disputes between families and HMRC revolve around residential property valuations, Lunn said, which remain a “significant area of friction between HMRC and estates that have to pay IHT”.

The freeze in IHT thresholds has been particularly painful for homeowners, as property prices have risen sharply in recent years.

HMRC has become increasingly sophisticated in identifying underpayments. To challenge undervalued properties, for example, the taxman is reportedly drawing on data from the Land Registry, the Trust Registration Service and even Google Maps.

Lunn said: “The IHT threshold was originally set so that only families with significant assets would pay the tax. But after years of being frozen, even families with a relatively modest home are now finding they owe IHT.”

An HMRC spokesperson said: “The majority of people pay the correct amount of inheritance tax. In cases where it is suspected someone has not, investigations can be opened to address issues and ensure the system remains fair.”

Junior ISAs (JISAs) are emerging as an effective inheritance planning tool amid impending pension inheritance tax changes.

The inheritance tax system is facing an overhaul in the coming years, with pensions forming part of taxable estates from April 2027.

The House of Lords last week criticised the pension changes but many people are now looking to find ways to pass on wealth to their loved ones in a more tax-efficient way to avoid giving too much unnecessarily to the taxman.

One option is for parents or grandparents to put money into a JISA - savings accounts for children under age 18.

Increasing numbers of people are making use of the full £9,000 JISA allowance, a Freedom of Information request by Murphy Wealth to HMRC found. The research showed 78,330 accounts maximised their allowance in 2023/2024, the most since 2019/2020’s 80,060.

It also marks a 9% increase on the previous tax year (71,910) and a 41% rise since 2020/2021 (55,570).

Adrian Murphy, chief executive of Murphy Wealth, said: “A lot of families are exploring different ways of passing down wealth to their loved ones earlier in life.

JISAs are a great way of doing that, providing tax-free growth and income that can compound over a significant period of time.

“With pensions becoming part of people’s estates from next year – the decision about which wouldn’t be reflected in these figures, as it was announced in the Autumn 2024 Budget – we would expect to see a further acceleration in the number of JISAs being maximised.”

The benefits of a JISA for inheritance planning

There are lots of ways to pass on money to your grandchildren or children.

Pension wealth is set to form part of an estate for inheritance tax purposes from April 2027, which may affect how much can be passed on.

You could give financial gifts during your lifetime but, if they exceed inheritance tax gift allowances, there are risks of a tax bill if you pass away within seven years of the transfer.

JISAs provide another tax-efficient way that parents and grandparents can give their loved ones a financial boost.

You can gift up to £3,000 a year, either to one person or several people, without the money being liable for inheritance tax. If you don’t use all your allowance, anything left carries over into the next year, but only for one year. So you could technically put £6,000 into a JISA.

Murphy added: "Children can't access the accounts until they are 18, which also provides a level of assurance that the money will be used for some of the big life events that take place around that age – whether it's buying a first car, help with university costs, or taking that first step into a career or onto the property ladder.

“And the people making the contributions will likely get to see their child or grandchild enjoy that money, which may not be the case with other ways of tax-efficiently passing wealth down.”

Alice Haine, personal finance analyst at Bestinvest, highlights that the tax benefits mirror those of an adult ISA – with no capital gains or income tax.

But there are other advantages. She said: “JISAs sidestep the parental tax rules.

“If a child earns more than £100 in interest on money gifted by a parent and held in a regular savings account, that income is taxed as if it were the parent’s – an issue that does not apply to JISAs. Parents should tread carefully, however. There’s no point topping up a JISA if they might require the money for their own needs, because they can’t get it back.”

However you plan to pass wealth onto family members, Murphy said it’s important you have a plan and don’t leave yourself short.

He added: “Speak to a financial adviser who can provide guidance on how to sustainably gift money to children and grandchildren, while ensuring your financial requirements are taken care of in retirement.”

Even by the standards of the Treasury, it has turned into a spectacular own goal. Over the past few years, Britain has pushed capital gains tax (CGT) significantly higher. The whole thing started, shamefully, with the last Conservative government, which reduced the tax-free allowance from £12,000 a year to just £3,000.

The system has become punitive under Labour, with the chancellor, Rachel Reeves, in her first Budget, raising the standard rate of CGT from 10% to 18% and the higher rate from 20% to 24% while also increasing the rate paid by entrepreneurs when they sell their business. The left of the Labour party is pushing for an even bigger increase, pressing for CGT rates to be equalised with income tax, which would take the top rate to 45%.

The results are now clear. According to the latest update from HMRC, in 2025 the amount collected from the tax actually fell by 8%, or by £1.3billion. The amount raised by CGT varies more than most taxes, depending on how well the stock market and property prices are doing. You only owe tax when you make a gain, and that doesn’t happen much when the markets have collapsed. Still, the evidence is striking. The higher tax brought in less revenue.

It’s not hard to work out why. With the allowance at £12,000 it typically made sense to sell an asset when you felt the time was right and most private investors would not end up owing too much tax. With an allowance of just £3,000, many will decide to hold on and avoid triggering extra tax liabilities.

It’s going to get worse this year. The latest revenue figures only reflect the first increase, not the Labour one from October 2024. At rates of 10% and 20% the tax was fairly affordable. If you made a 50% or 100% profit on an investment it is irritating if you have to pay a tenth of that to HMRC, but it is hardly the end of the world – you are still showing a handsome return. Most investors would pay the tax and move on. At 24% plenty are going to decide to hold instead. The result? The revenue raised from the tax will go down even further.

Rachel Reeves’s tax rises are likely to backfire

It is not going to stop there. There are a whole series of tax rises that are about to backfire spectacularly. It looks certain that Britain will raise significantly less from wealthy foreigners with non-dom status now that their tax breaks have ended. Not many of them want to pay punishingly high British taxes on their global assets given that they made their money elsewhere. They are already fleeing in droves to Dubai, Milan or the Caribbean. Far from bringing in an extra £33billion over the next five years, as the Office for Budgetary Responsibility forecast when the change was announced, it is likely to bring in less than ever, especially when all the VAT and council tax those people would have paid is taken into account.

Likewise, it’s starting to look as if the imposition of VAT on school fees will raise less money than forecast, as schools close down and as the government has to pay for the education of those children instead. The huge rises in business rates imposed in the 2025 Budget, a tax that collects £26billion a year for the Treasury, will almost certainly raise less than forecast as pubs and restaurants close down because they can’t afford their tax bills.

Stamp-duty revenue may drop if the fall in house prices in central London, hit by all the non-doms fleeing, spreads to the rest of the country. The rise in national insurance for employers is likely to backfire as companies cut back on staff. Even frozen income-tax thresholds may eventually backfire as people decide it is not worth the hassle working extra hours or taking a promotion if most of the money they might earn is taken from them in tax.

Britain has clearly hit the point on the Laffer curve beyond which higher taxes mean lower revenues. The government already takes 39% of GDP in taxes, one of the highest levels ever. It may well prove impossible to squeeze any more out of the economy. Instead, each rise will backfire, less revenue will be raised, and the government will have to borrow yet more to make up the difference. Capital gains taxis a warning sign of what lies ahead.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Property buyers are being urged to ensure they declare and pay the correct stamp duty or face potentially thousands of pounds in fines as HMRC almost doubles its investigations into property transactions.

Stamp duty land tax (SDLT) investigations rose 88% in the 12 months to 5 April 2025, jumping to 3,035 up from 1,617 in the same period in 2024, a Freedom of Information request to HMRC by accountants and business advisors Lubbock Fine shows.

The crackdown led to an extra £200 million in tax being recovered, up from £85 million in 2023/2024, an increase of 135%.

An HMRC spokesperson told MoneyWeek the increase is due mainly to increased scrutiny of “rogue repayment agents offering to make SDLT repayment claims” for homebuyers.

“If a claim is inaccurate, people could end up paying more than the amount they were trying to recover,” they said.

Why are stamp duty investigations rising?

HMRC has seemingly intensified its scrutiny of property deals following the increase in additional SDLT rate for second properties from 3% to 5% in the October 2024 Budget.

The increase has created a greater financial incentive for purchasers of a second property to mislead HMRC and to claim that they do not own another home, something HMRC is believed to be mindful of, that could also lead to more investigations.

The increased complexity of the SDLT regime is another factor causing more people to make mistakes when declaring their taxes, upping the risk of being investigated by HMRC as a result, according to Lubbock Fine.

Lubbock Fine warns that as the penalties can reach tens of thousands of pounds, people should seek professional advice to avoid making costly mistakes.

Graham Caddock, director at Lubbock Fine, said: “With SDLT rules becoming increasingly complex and constantly changing, people are far more likely to make mistakes. Errors can be very expensive."

The public attention around Angela Rayner’s underpayment of SDLT is also expected to increase the number of investigations carried out by HMRC.

Caddock said: “After the recent public attention around the Angela Rayner case, HMRC is likely to step up its scrutiny on second property acquisitions.”

Rayner, the now-former deputy prime minister and housing secretary, was caught underpaying stamp duty on her £800,000 seaside flat, and was forced to step down.

Why would HMRC investigate stamp duty claims?

HMRC would investigate stamp duty transactions if it was suspicious the property buying and selling activities didn’t match up and so the correct tax hadn’t been paid.

According to Lubbock Fine, some HMRC investigations have involved:

• Buyers falsely claiming they are replacing their main residence to avoid the SDLT surcharge on purchasing additional properties.
• Buyers transferring their home into a trust or to their partner before buying another property, which HMRC does not treat as valid grounds for avoiding the surcharge.

Caddock said: “HMRC looks at many different factors to decide what counts as your main residence. Whether a property has been transferred into a trust or a partner doesn’t necessarily carry much weight with HMRC.”

Many stamp duty investigations involve buyers wrongly assuming a property with some commercial use, such as self-contained rental flats, qualifies for a lower stamp duty charge, according to Lubbock Fine. However, that is only true in very limited circumstances.

To qualify, the commercial parts must be clearly separate, unsuitable for normal living, and the commercial activity ongoing when the property is bought.

Caddock said: “Many people wrongly assume that if a house has some commercial use, they can claim a lower SDLT. But if the property is still clearly suitable to live in, or if the commercial part isn’t properly separated, HMRC is likely to challenge that status.

“Similarly, if the commercial element of the property has only been added recently, HMRC is likely to claim it isn’t genuine and has been set up purely to obtain a tax advantage. That can end up costing people large penalties.”

‘Bogus’ claims for stamp duty refunds

The taxman has also been cracking down on what it describes as ‘bogus’ claims for stamp duty refunds. This where the buyer claims a property is not a residential home because it needs repairs and is not inhabitable.

HMRC is warning people purchasing properties to be vigilant of tax agents offering to secure stamp duty repayments on their behalf where a property they have bought needs repairs.

The taxman said it is “taking decisive action on spurious SDLT repayment claims”, using civil and criminal powers to deal with the minority who undermine the tax system.

Some tax agents have suggested that, for a fee, they can reclaim SDLT the buyer has already paid by saying that the property is non-residential because it’s uninhabitable, according to HMRC.

But making claims of this kind often leave the homeowner liable for the full amount of stamp duty, plus penalties and interest.

A recent Court of Appeal judgment in the case of Mudan & Anor v HMRC has confirmed that housing (“dwellings”) in need of repair are chargeable at the residential rates of SDLT, and that repayment claims based solely on a property’s condition are not valid.

This decision confirms HMRC’s long-standing view that if a property requires repairs but retains the fundamental characteristics of a dwelling, it is still suitable for use as a dwelling and attracts residential rates of SDLT. A key factor in determining suitability is whether a property had been previously used as a dwelling.

Anthony Burke, HMRC’s deputy director of compliance assets, said: “The Court of Appeal’s decision is a major win, protecting public funds. Homebuyers should be cautious of allowing someone to make a stamp duty land tax repayment claim on their behalf.

“If the claim is inaccurate, you could end up paying more than the amount you were trying to recover.”

Ahead of the self-assessment tax return deadline, taxpayers are being urged to double check their paperwork after more than two million Brits overpaid an estimated £8.9 billion in income tax in 2024/25.

The self-assessment tax return deadline is 31 January each year. That is also the date taxpayers who pay their tax via self-assessment have to make their first payment.

However, HMRC also operates a ‘payment on account’ system when it comes to filing self-assessment returns. Payments on account are payments towards your next tax bill (including Class 4 National Insurance if you’re self-employed).

They help spread the cost of your tax by making payments in two instalments. Each payment is half of the tax you owed last year. The payments are due by midnight on 31 January and 31 July.

But the payment on account system used for self-assessment returns causes millions of people to overpay, according to accountants UHY Hacker Young.

This is because it requires advance instalments based on your previous year’s tax bill – any dip in current earnings leads to a significant overpayment of tax, as this tax was based on last year’s earnings.

For example, if your 2024/25 tax bill was £4,000, you'd pay £4,000 (for 2024/25) plus £2,000 (first payment on account for 2025/26) by 31 Jan 2026. Then £2,000 (second payment on account for 2025/26) by 31 July 2026. And then your next year's bill. This January’s tax return deadline is for the 2024/25 tax year.

Neela Chauhan, partner at UHY Hacker Young, said: “Self-assessment is supposed to ensure people pay the right amount of tax, but for millions it means they are being overtaxed by billions of pounds.”

Am I overpaying tax?

Around 2.6 million people are estimated to have overpaid income tax through the self-assessment system, according to data provided by HMRC to UHY Hacker Young under the Freedom of Information Act. Many are likely unaware they are owed money, the accountancy firm said.

Overpayments made through self-assessment forms are not automatically corrected by HMRC. Taxpayers must identify the error themselves and formally request a refund.

Another reason for income tax overpayments can simply be mistakes made by people filling out the forms, UHY Hacker Young said. Mistakes could be as simple as filling in the wrong salary or not claiming all valid business deductions, like travel or supplies, meaning you pay tax on profits that aren't yours.

UHY Hacker Young is urging people to ensure they take extra care when filling out self-assessment forms and seek professional advice if they are unsure how to do it correctly.

Chauhan said: "Self-assessment taxpayers must check whether they have paid the correct amount. Refunds are not automatic and HMRC will not proactively tell you that you’ve paid too much."

How to claim a tax refund

You may be able to claim a tax refund (rebate) if you’ve paid too much tax. However, you may not get a refund if you have tax due in the next 45 days (for example for a payment on account). Instead, the money will be deducted from the tax you owe.

If you submitted your self-assessment return online, sign in to your online account and check if you completed the section: ‘if you have paid too much tax’. Check the same section if you sent a paper return.

If you completed the section, you’ll usually get a refund automatically. If not, you’ll need to claim a refund through your online account. If you don’t have one, either set up an online account or contact HMRC.

If you’re due a refund, HMRC’s official guidance is you’ll usually get it within two weeks of when you sent your return online or the date on your tax calculation letter (SA302), if you sent a paper return.

However HMRC backlogs mean reclaiming overpaid tax can be slow and frustrating. In some cases taxpayers can wait as long as 18 to 24 months to receive their money, said UHY Hacker Young.

The firm urges anyone completing a self-assessment return to review income assumptions carefully and act quickly, where overpayments are identified.

“If you don’t check your return carefully and follow up, you may never see that money again,” said Chauhan. “Any overpaid tax is essentially a low interest loan to HMRC so should be chased up as quickly as possible.”

Remember, however, HMRC does not send details of tax refunds by email. You can report suspicious emails to them.

Managing the fallout from a loss of income is a real problem for increasing numbers of Brits, according to new figures. Preparing as much as possible ahead of time – and knowing what to expect – can keep your finances on track despite the shock.

Payroll employment was down 135,000 in the three months to November, latest Office for National Statistics data shows, 0.5% lower than a year earlier. The redundancy rate was up 1.1 percentage point at 4.9%.

Provisional figures showed a further fall of 43,000 or 0.1% in payroll employment in December, following chancellor Rachel Reeves’ tax-raising Budget. That would be the fastest fall in five years, but the data could be revised.

The latest bleak employment data follows a leading indicator of future job cuts from the Insolvency Service this month. The jump in potential redundancies to 33,392 in the four weeks ending 14 December took the reading to the second-highest level in the post-pandemic period.

David Little, partner in financial planning at wealth management firm Evelyn Partners, said: “Earners at all levels of seniority and across many sectors in the UK face a great deal of uncertainty, and if the worst predictions are correct we could be on the cusp of a jobs market downturn.”

Much of the roughly £66 billion in tax rises announced in the chancellor’s two Budgets is yet to feed through, he said, adding reform of business rates and a rapidly rising minimum wage are expected to hit many businesses hard.

“Combine this with the growing effects of artificial intelligence which are now feeding into firms’ hiring and firing decisions, and even though the economy is not in recession, the threat of job loss looms,” Little said.

Redundancy or a drop in income will often come out of the blue. But there are some steps people can take to help protect against losing their job or suffering a drop-off in freelance work or business revenues, and there are also strategies to cope with the financial fallout if it happens.

How to manage a sudden drop in income

1. You may need a bigger safety net

Cash in an easy access savings account is going to provide your best bet at an emergency safety net in event of a sudden drop in income – but you may need more than you think. While the typical advice is three to six months of outgoings, in this job market that may not be enough.

“I recommend my clients aim to save six to twelve months of basic expenditure as a minimum in their cash reserve for peace of mind,” said Little.

Paying the mortgage is often the main concern for those who face losing their income and this could eat into any redundancy payment if other provisions haven't been made.

“If someone has a war-chest for this key outgoing alongside other fixed monthly bills they should have more flexibility if they do face redundancy – which can in turn give them more freedom when it comes to choosing their next move work-wise,” said Little.

Aside from savings, income protection insurance policies can be very valuable in times of financial stress. Many employers include a form of income protection as a standard or optional employee benefit, but while this should cover illness and disability, it will very rarely protect against unemployment.

To protect yourself against the possibility of redundancy you can get personal stand-alone income or mortgage protection policies that are available from insurance providers and brokers.

2. What to do if you’re made redundant

Redundancy often comes as a shock. But there are a number of points you will need to address sooner rather than later. Understanding them ahead of time puts you in a stronger position. For example:

• You should receive payment in lieu of notice, so it’s important to know what your notice period is. If you don’t and can’t locate your contract, speak to your HR department.
• At this stage, if it hasn’t been offered already, you may be able to ask for gardening leave. Having this time off is a great opportunity to take a well-earned break, assess your redundancy package and make some plans.
• Next, make sure you know exactly what your redundancy pay entitlement is. There are rules around the amount of statutory redundancy pay but many companies go above this figure.
• It’s always worth considering if you can negotiate a better redundancy package. This is where it is beneficial to speak to an employment solicitor or possibly a union representative to discuss your options.
• It’s important to identify the employee benefits that will be lost through redundancy, like death in service life cover or private medical insurance, as it could be a priority to replace them with self-funded policies.

3. What is my redundancy tax situation?

There is a tax-free threshold for qualifying redundancy payments, set at £30,000, with any amount over this threshold taxable at your marginal rate of income tax. Employee National Insurance is not deducted from a redundancy payment.

For example, someone who has an annual salary of £36,000, has earned £15,000 so far this tax year and is offered £50,000 redundancy would owe £4,000 in tax on their redundancy pay.

This is because the first £30,000 of their redundancy pay is tax free but the remaining £20,000 is taxable. As they have earned £15,000 so far this year, even with the £20,000 added to this, they are still within the basic rate tax band, so tax of £4,000 is due on the redundancy pay (20% of £20,000).

Employees should also consider whether they could end up in a higher rate tax bracket, depending on their income and redundancy pay.

Payments in lieu of notice and holiday entitlement will be taxed as regular income. Depending on where you are in the tax year, and how much you earn for the remainder of it, you might be overcharged by PAYE. But it is up to you to check this and notify HMRC, and it might involve claiming back overpaid tax with a self-assessment tax return.

4. Using your pension to avoid tax

If your redundancy pay-off exceeds the tax-free amount, and you don’t need the cash right away to live on, the most straightforward option for keeping more of it is to have the excess paid into your company pension. This allows you to benefit from income tax relief and possibly National Insurance relief.

Little explained: “How you receive or claim your tax relief will depend on how the pension scheme is operated.

“While a salary sacrifice system will grant both your full income tax and employee National Insurance relief on payments automatically – with some employers passing on all or part of their National Insurance relief as well – other schemes will require the saver to claim some of their income tax relief on their tax return if they are a higher or additional rate taxpayer,” he said.

The maximum most people can pay into a pension each tax year with pension tax relief is £60,000 gross – this includes monthly contributions and any lump-sums you have already made into your pension in that tax year, whether by you, your employer or in the form of tax relief.

Personal contributions are also limited by your relevant earnings for the year. Plus the annual allowance can be tapered down for higher earners. The standard annual allowance of £60,000 reduces by £1 for every £2 of adjusted income you have above £260,000. The minimum tapered annual allowance is £10,000.

Little said: “Financial advice can be useful if you want to squeeze more into your pension by utilising carry forward allowances going back up to three tax years. In combination with salary sacrifice, large redundancy packages can turbo-charge retirement savings by massively reducing income tax and National Insurance liability.”

For some of our clients, taking this action with voluntary redundancy packages has enabled them to retire sooner, he added.

“But using carry-forward to maximise a pension contribution – and working out relevant earnings – is potentially complicated, can easily go wrong and is usually best supported by working with a financial planner,” Little said.

5. Planning for the future

Whether working and guarding against redundancy, or preparing for a potential drop in investment income that you rely on to fund your retirement lifestyle, it’s a good idea to make a financial plan to calculate how long you can comfortably remain without an income.

“Be realistic and get a complete picture of your financial situation and monthly outgoings in order to formulate a plan,” Little said. “And for this, it is hard to replicate a sophisticated cashflow model – and the support and recommendations that come with it from a good financial planner.”

Entrepreneurs and family business owners are being urged to act now to avoid some potentially damaging tax bills ahead of changes due to come into force in April.

A new cap on agricultural property and business inheritance tax reliefs will come into force on 6 April. This means the families of business owners are likely to face greater inheritance tax (IHT) bills at death. In some cases this could spell jeopardy for the firm itself, financial advisers have said.

Lee Matthews, senior partner in financial planning at wealth management firm Evelyn Partners, said: ‘For many business owners looking at the long-term prospects for their firm and their family’s financial security, 6 April this year is a date that creates a clear deadline for planning.

“They can still take steps now to mitigate some potentially damaging tax liabilities. A sudden and unexpectedly large IHT bill, particularly where liquid assets are in short supply, could spell the end for even a successful enterprise and the jobs it provides.”

What inheritance tax change is happening in April 2026?

From 6 April 2026 there will be a £2.5 million cap on the combined value of assets eligible for 100% Business Property Relief (BPR) and Agricultural Property Relief (APR). Any value above this cap will only receive 50% relief, potentially leading to an effective 20% IHT charge on the excess for farms and businesses.

The government had originally set the BPR and APR cap at £1 million but later U-turned on this policy to up the limit.

Another recent policy revision means spouses will be able to inherit unused tax relief, similarly to the inheritance tax allowance (also known as the nil-rate band). Any of the £2.5million allowance unused at death will be transferred to the surviving spouse – and it is not necessary for the deceased spouse to have owned qualifying assets.

What should business owners consider doing before April to avoid inheritance tax?

Evelyn Partners’ Matthews said there is a six step sequence business owners could follow ahead of April 2026, particularly in the event they want to transfer their business into a trust or sell it. What matters is not just the steps – but the order in which they are carried out.

1. Identify which assets qualify for business relief

Not all parts of a business may qualify for business relief. Owners should review the company structure, activities and balance sheet, potentially with the help of professional advisers. Large cash holdings, investment activities that creep into the company over time or group structures with mixed trading and investment entities may not qualify, said Evelyn Partners.

2. Consider a gifting strategy before the April 2026 deadline

With the rules for business relief changing, now is the time to review gifting strategies to avoid inheritance tax, particularly where trusts are involved, Evelyn Partners said.

Before 6 April 2026, it is possible to transfer business relief-qualifying shares – of any value – into a discretionary trust, with no immediate inheritance tax charge, provided the shares qualify for relief.

From 6 April 2026, the amount of business relief-qualifying assets that can be transferred into trust with 100% relief will be capped at £2.5 million per individual. Any excess above this will attract only 50% relief, potentially giving rise to an immediate inheritance tax charge.

This £2.5 million allowance is now transferable between spouses or civil partners, allowing a couple to pass up to £5 million of qualifying assets free of IHT on the last spouse’s death.

Matthews said: “Trusts can be key to succession planning, family wealth preservation and long-term control, but they should be considered as part of a broader strategy. Gifting, whether directly or into trust, must be affordable and should not put your own financial security at risk.”

If you are considering using trusts, allow for plenty of time to allow time for legal drafting, valuations and any required shareholder approvals.

3. Carry out ownership changes early

Many financial planning strategies for businesses, Matthews pointed out, require changes in the ownership structure before shares can be settled into trust or before a sale can proceed. These changes often take longer than expected due to legal processes, valuation work and the need for shareholder consent, so should be done as early as possible.

Examples include creating new share classes or preparing a holding company for a future transaction.

“It is critical that reorganisations are completed before any trust transfers are attempted,” Matthews said. “Poor sequencing can inadvertently break business relief conditions or create unexpected tax exposures.”

4. Begin life insurance underwriting

If a business is sold, business relief qualifying shares convert into cash. “The moment this happens, the potential inheritance tax protection they offered is lost. If the owner dies before the proceeds are reinvested or placed into an appropriate structure, their estate may face a large inheritance tax exposure,” Matthews said.

Life insurance held in trust can provide a simple and effective bridge through this risk period, but underwriting can take weeks or months. Medical evidence, GP reports and financial information can create delays that may push completion too close to the deadline.

“Starting the underwriting process early can help to have cover in place when it is actually needed rather than after the event,” Matthews advised.

5. Make sure your business and personal financial plans align

Business owners often prepare for a sale or refinancing without considering how this interacts with their own wills, trusts and estate plans. This can be risky.

Matthews said: “For example, a new holding company may change business relief status, or a change in voting rights may affect succession intentions. Wills may need to be updated to make best use of the business relief allowance or to direct assets to trusts in a way that preserves and maximises potential relief.”

Advisers should coordinate legal, tax and investment teams so that both the business and personal sides of the plan support each other. “A short misalignment at the wrong moment can jeopardise years of planning,” Matthews warned.

6. Prepare for post-business sale cash

Once a business sale is complete, if that is the chosen route, owners often hold large amounts of cash for a period while deciding how to reinvest. Evelyn Partners cautioned this creates an immediate inheritance tax risk and can also lead to missed opportunities if reinvestment is slow.

“A forward plan should outline where liquidity will be held, whether a family investment company or personal investment company is appropriate and how the proceeds will be managed until a long-term portfolio is established,” said Matthews.

Planning for this stage now reduces stress after completion and makes the overall transition more tax efficient.

Get financial advice

Ultimately, given the complexity of business relief and inheritance tax rules, it makes sense to speak to a Financial Conduct Authority-regulated professional financial adviser before taking any action. You can find a directory of your local experienced financial advisers on websites like VouchedFor and Unbiased.

Taxpayers have won more than 62% of appeals against automated fines from HMRC according to the latest data. Experts have said taxpayers who do not fight automatic penalties are potentially forking out hundreds of pounds unnecessarily.

HMRC’s most recent performance data showed the taxman won just 37.8% of the appeals people lodged against the automatic penalties they received for the late filing of returns and payment of tax.

There were 32,258 appeals against automated penalties from the taxman lodged in the six months between 31 March and 30 September 2025. Of these the taxpayer won 20,076 appeals.

With the self-assessment tax return filing deadline looming less than 10 days away on 31 January, HMRC is ramping up pressure on taxpayers to pay now.

Its latest communication to taxpayers signed up for self-assessment warned: “Do you still need to pay your self-assessment tax bill? If so, you must make a payment by 31‌‌‌ January‌‌‌ 2026 – or you may risk having to pay a penalty.”

We look at how to file a self-assessment tax return in a separate article.

However, accountancy firm UHY Hacker Young said: “The fact taxpayers win so many cases means that it's worth people appealing any automated fines they receive unless they feel they are in the wrong. If they do not, they are unnecessarily giving extra money to the taxman.”

Why does HMRC issue fines?

HMRC issues an automatic fine of £100 whenever someone files a self-assessment tax return late. Additional penalties are charged the longer the delay goes on.

Furthermore, penalties for the late payment of tax start at 5% of the unpaid amounts and are issued at 30 days late, then at six and 12 months. HMRC also charges interest on late payments.

The taxman also issues automatic fines when either VAT and company tax returns are not filed or not paid on time. HMRC may also issue a penalty if you send an inaccurate return or fail to keep adequate records.

Neela Chuahan, partner at UHY Hacker Young, said it is important for people to challenge the automated fines levied by HMRC to ensure that any penalties issued are fair and accurate.

HMRC’s systems can trigger penalties automatically, even when people have valid reasons for missing deadlines.

Chuahan said: “When you appeal you have the opportunity to provide evidence and argue your case. Given HMRC’s success rate, you are more likely than not to win an appeal against the taxman and overturn an automatic penalty.”.

HMRC will waive an automated penalty if someone has what it believes to be a “reasonable excuse”.

These include suffering a computer failure while preparing an online return, issues with the HMRC website, postal delays, having a life-threatening illness or bereavement, and your tax adviser or accountant failing to send in your return on time.

Last summer, the Tax Policy Associates think tank released data, obtained under a Freedom of Information Request, which showed that 600,000 people over the last five years were hit with late filing penalties, even though they owed no taxes to HMRC.

How to appeal an HMRC fine

If you disagree with a penalty, you’ll need to explain why to HMRC. For example, if you have a reasonable excuse or you think the penalty is wrong. This can include you were unaware of or misunderstood your legal obligation.

You usually have 30 days from the date your penalty was issued to contact HMRC or make an appeal. If you miss the deadline, you’ll need to give a reason.

There are different ways to challenge the penalty, depending on whether it’s direct or indirect tax.

Self-assessment is a direct tax. There is specific, detailed guidance on how you can appeal a self-assessment penalty. However the official guidance is that you should consider paying the penalty even if you appeal. If you do not, and your appeal is rejected, you’ll have to pay interest on the penalty from the date it was due to the date you paid it.

For any other type of direct tax penalty (for example income tax or capital gains tax), follow the instructions on the penalty letter or use the appeal form that came with it.

If you do not have an appeal form, send a signed letter to the HMRC office related to your return. Explain why your return or payment was late, including dates. Also include in your letter:

• your name
• your reference number – for example your Unique Taxpayer Reference (UTR)

If you could not file or pay because of computer problems, you should include the following:

• the date you tried to file or pay online
• details of any system error message

MoneyWeek has approached HMRC for comment.

Taxpayers are being urged to check their payslips and pension paperwork for errors that could be costing them money – with 5.6 million Brits paying too much income tax due mainly to tax code mistakes.

HMRC overcharged the more than five million people £3.5 billion in income tax in the 2023/24 tax year, analysis of the latest data available by accountancy group UHY Hacker Young found.

This overcharging through the PAYE system largely stems from HMRC issuing incorrect tax codes. A tax code is a series of numbers and letters used by HMRC to tell your employer or pension provider how much income tax to deduct from your pay or pension under the Pay As You Earn (PAYE) system.

For example, the common code 1257L means you can earn £12,570 tax-free – the personal allowance – before tax is taken.

If a taxpayers’ circumstances change and HMRC does not have the most up-to-date information, it will continue to deduct tax based on its own estimate of income without checking that with the taxpayer.

Taxpayers should check they are not overpaying through the PAYE system as HMRC is under no obligation to check and tell them if they have overpaid, UHY Hacker Young warned.

Neela Chauhan, partner at UHY Hacker Young, said: “Millions of people are paying the wrong amount of tax simply because HMRC is almost guessing what they earn. For too many people, this will go completely unnoticed.”

We look at which taxes are going up in 2026 in a separate article.

How HMRC could get your income tax code wrong

HMRC can issue an incorrect tax code due to a number of reasons. The most common errors, according to UHY Hacker Young, arise because of a lack of communication.

For example, HMRC could assume an employee is still receiving company benefits-in-kind such as company cars, healthcare and even gym memberships even though they may no longer be receiving that benefit.

Incorrect assumptions by HMRC about an employee’s additional income, such as rental income, dividends, or freelance work that they are no longer doing, is another reason a taxpayer may be given the wrong tax code.

Other reasons HMRC gets it wrong include confusion over how many jobs an individual is currently working and out-of-date or late employer payroll information.

HMRC’s coding assumptions often go unchecked because paper tax code notices are no longer routinely issued, UHY Hacker Young said.

This means millions of employees may be unaware that their tax code is wrong and they are being overcharged.

How to check your tax code

People need to be proactive in checking how much tax they are paying because HMRC now conducts fewer internal assessments to find errors and overpayments, accountants warned.

You can find your tax code on any payslip or your payment advice (P60) from your pension provider. You may have different tax codes for each job or pension.

If you have registered with HMRC for an online tax account or have downloaded the HMRC app, you will also be able to find your tax code there.

UHY Hacker Young’s Chauhan said: “HMRC won’t always correct overcharging mistakes automatically. If you don’t check your tax code or your PAYE calculation, you may never get your money back. The onus is on taxpayers to spot HMRC’s errors.

“Individuals must check their tax codes and year-end PAYE summaries for mistakes. Particularly those with any form of non-PAYE income or company benefits.”

If you discover HMRC has the wrong tax code for you, the remedy may not be a quick fix however, as even when overpayments are identified, reclaiming the money can be slow and frustrating, in UHY Hacker Young's experience, something HMRC disputed.

An HMRC spokesperson said: “Everyone is responsible for ensuring their own tax code is correct, and they can manage and update their details quickly and easily via the HMRC app or their online tax account. Customers should also discuss any tax code issues with their employer first.

“The vast majority of repayments are paid promptly, and we are investing £500 million in digital services to help customers pay the right tax first time so fewer refunds are necessary.”

What could be greener than a tree? For anyone interested in sustainable investment, forestry has obvious appeal. But the allure of investing in forestry goes well beyond its environmental credentials: the potential for competitive returns and a generous range of tax incentives are also turning the heads of long-term investors. UK forestry assets drew record investments last year, attracting hundreds of millions of pounds. Some of that money came from institutional investors, including pension funds, family offices and charities, but there are also a growing number of individuals exploring forestry investment, either directly or through a professionally managed fund.

Investing in forestry is exactly what it sounds like. You’re buying ownership of a commercial forest (or a share of ownership) – either a mature, established woodland, or newly planted land. As the trees grow, you’ll hopefully make capital returns from an increase in the value of the forest; there’s also an opportunity to generate income by selling some of the trees for timber, as Alex Davies, the founder and chief executive of Wealth Club, the investment platform aimed at high-net-worth and sophisticated investors, points out. It’s an investment for the long term.

The returns are highly tax-efficient. There’s no capital gains tax (CGT) to pay on the rising value of the trees, although any rise in land value is potentially subject to CGT. And there’s no income tax due on revenue generated from sales of timber. You’ll also benefit from generous inheritance-tax rules when passing forestry investments on following your death, as long as you’ve owned your trees for at least two years.

Don’t invest in forestry for the tax benefits alone

It’s never a good idea to make an investment purely for tax reasons, not least since chancellors can – and very often do – change the tax rules, diminishing the value of incentives and reliefs. However, even after the impact of tax benefits, forestry has an impressive performance record. “UK forestry has a long-term... record of producing strong performance with relatively low volatility, therefore providing risk-adjusted returns that are in excess of many traditional asset classes,” says Davies.

Indeed, forestry is the UK’s best-performing asset class over the past five, ten and 25 years, delivering double-digit annualised returns over each of these periods. And forestry funds in the UK have produced an average annual return of 11.4% a year since 2008, when the first such fund was launched. That’s after fees, but before the positive impact of tax reliefs.

Past performance, of course, is no guarantee of the future. But forestry is also useful as a way of diversifying your portfolio. Returns from forestry investments tend to move independently of returns from other asset classes, including the stock market; in the jargon, returns have low correlations with other assets. Forestry can, then, be an excellent way to boost the resilience of your overall investment strategy.

It is also a tangible asset that is regarded as a good inflation hedge. Demand for timber often increases during stronger periods of economic growth, as construction projects accelerate. Timber prices, therefore, tend to rise during periods of increased inflationary pressure, protecting investors from the eroding effect of inflation on their portfolios.

In any case, during periods when timber prices are lower or falling, forestry managers and funds can simply choose not to sell any of their timber. Most investable forests in the UK largely comprise Sitka spruce trees; there is typically a 15-year window to harvest these trees, so there’s no need to cut them down in any particular year. And since Sitka spruce tend to add around 5% of volume each year, waiting means there’s more timber to sell when the market looks more attractive.

The risks of investing in forestry

Still, despite these plus points, it’s important to recognise that investing in forestry also carries some significant risks. As with any investment where prices can rise or fall, there’s always the possibility for capital losses. Returns will inevitably vary – and are closely linked to the fortunes of the UK’s construction sector. During slower periods for the building trade – which aren’t always predictable – investors may see losses.

Another risk is that this is a natural asset and so vulnerable to environmental factors. Sitka spruce is considered a hardy type of tree, but it’s not immune to problems such as forest fire, wind damage, or even disease. And while it’s possible to insure trees against the risk of fire and storms, there is no cover available against disease; in the worse-case scenario, your investment could be wiped out entirely.

Perhaps the biggest issue of all for many investors will be liquidity risk – forestry is a physical asset that can be difficult to trade. If you own a forest directly, you’ll need to find a buyer when you want to realise the value of your investment, and that may take months, or even years. If you invest through a fund, there may be a set time period for return of capital; in the meantime, the manager may operate some sort of secondary market to help investors get out early, but there are no guarantees. At the very least, think of forestry as an investment you’ll hold for at least ten years.

This is, therefore, not an asset class for investors who feel uncomfortable with risk and illiquidity. Forestry will, though, continue to prove popular and potentially get even more of a boost from recent tax announcements, says Davies. “Forestry has long been a favourite among tax-efficient investors in the know. And its appeal is likely to increase now that the government has upped the inheritance-tax-free business property relief.” Even before the chancellor’s Christmas intervention, more investors were getting on board. Gresham House, one of the UK’s most established forestry investment managers, raised £375 million for its Forestry Fund VI fund, which closed to new investors last year. That was the largest fundraising in forestry ever conducted in the UK. Gresham House now plans to launch a new vehicle in April.

“We’ve had a lot of interest from private-client investors, but we increasingly have an institutional client base too,” says Anthony Crosbie Dawson, director of forestry and private clients at Gresham House. He sees that as a vote of confidence in forestry investment, since institutions don’t qualify for the same tax reliefs as individuals and therefore can’t be investing for that reason. “We raised from UK institutions, but also [from] international investors,” says Crosbie Dawson – “one of our fund investors was a Japanese institution, for example.”

The collective-fund approach makes sense for most retail investors, who get access to professional forestry-management expertise and diversification – managers will invest across multiple forests and woodlands – as well as much lower minimum investments. Buying your own commercial forest is likely to require an upfront investment of hundreds of thousands – and often millions – of pounds, plus you’ll need to manage the woodland yourself, or appoint a manager. By contrast, funds typically have minimum investments of around £50,000.

Clearly, that’s still a significant sum – and Financial Conduct Authority rules only allow forestry funds to take money from sophisticated or high-net-worth investors – but it’s a more accessible entry level than investing directly.

Par Equity – now part of PXN Group – is the other major name in UK forestry, having raised two funds already. The formal launch of its third vehicle, Par Forestry III, is expected soon, and is targeting an average annual return of 7% after charges. “The historic long-term returns from forestry have been extremely good,” said Par Equity’s investment manager Paul Atkinson in a recent interview on the Wealth Club platform, which provides access to forestry funds. “It’s also completely uncorrelated with other capital markets and a pretty good hedge against inflation and, of course, there’s increasing interest in the asset class” due to concerns about climate change.

It’s not just that planting trees and maintaining forestry is a good way to remove carbon dioxide from the atmosphere and store it, although this is important. (Indeed, some forestry funds may generate extra income from the carbon credits available from government schemes aiming to increase carbon sequestration.) It’s also that timber is far less carbon-intensive than steel, concrete and other materials that the UK construction industry has traditionally depended on. The packaging industry, also looking to reduce its environmental impact by moving away from plastics towards recyclable materials, is an important customer too.

The big picture is attractive

In that sense, the big-picture outlook for timber prices is encouraging, with increasing demand from industry buyers likely even if overall levels of activity in their sectors remain relatively flat. There will be short-term ups and downs – prices fell 5% or so in the final quarter of 2025, their first declines for two years, largely because of supply factors – but as homebuilders, for example, start to use more timber, and to work towards the UK’s ambitious new-homes targets, there should be no shortage of customers.

Not that timber prices are the be-all and end-all for investors. “The price of timber can be volatile, as with all commodities, although it’s a lot less volatile than some, but there’s not actually much correlation with the value of the asset because we own the land as well as the trees,” explains Crosbie Dawson. “Forest valuations are based on discounted cash flows over a 35-to-40-year rotation, so what the timber price is today, or in six or 12 months’ time, is not particularly relevant.” In that context, Gresham House has forecast a near doubling in global demand for timber over the next 20 years, providing an encouraging backdrop for investors considering forestry. “People do want more of their portfolios allocated to sustainable assets, but only if those assets are delivering compelling returns,” says Crosbie Dawson.

Reeves’ inheritance-tax U-turn is more good news for forestry investment

One potential driver of the renewed interest in forestry investment is the recent government U-turn on business property relief (BPR) and agricultural property relief (APR). This will enhance the appeal of forestry as a tool for families planning for inheritance tax (IHT). The two reliefs work in the same way, allowing the owners of a wide range of business assets to pass these assets on to their heirs with no liability for IHT, as long as they’ve owned them for at least two years on death. In her first Budget, in the autumn of 2024, chancellor Rachel Reeves unveiled reforms of BPR and APR; from April 2026, she announced, only the first £1million worth of assets would qualify for the reliefs at 100%, with any excess getting only 50% relief. That prompted a huge backlash from farmers worried that they would no longer be able to hand family farms down to the next generation because their children wouldn’t be able to pay the tax bill.

In December, the chancellor backed down, announcing that she would raise the planned £1million threshold to £2.5million – or £5million for couples, since the cap can be transferred between spouses and civil partners. That’s good news for farmers affected by the original proposals – but also for investors in forestry, since most investments in woodland and forestry are qualifying assets for BPR. The chancellor’s decision therefore, substantially increases the attractiveness of forestry from the point of view of IHT planning.

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The number of Brits earning six-figure salaries is set to exceed two million for the first time in the 2026/27 tax year, pulling tens of thousands more workers into an effective 60% tax rate.

Around 2.06 million taxpayers – around 6% of the total UK workforce – will earn above £100,000 in the next tax year, according to a Freedom of Information request of HMRC’s estimates by wealth manager Rathbones.

That is an increase of 5.7%, or around 112,000 individuals, from HMRC’s current estimate for the 2025/26 tax year of 1.95 million.

When placed in the context of the last five years, the latest estimates show the number of people earning £100,000 or above are expected to have increased by around 69% (842,000 people) between 2021/22 and 2026/27.

As wages rise, more people than ever before will be subject to a quirk of the tax system that means they can be paying an effective 60% tax rate on their earnings.

While the top rate of income tax is 45% in the UK (excluding Scotland), those who earn over £100,000 will start to see their tax-free personal allowance of £12,570 gradually reduce.

It starts to taper when you earn £100,000 at a rate of £1 for every £2 worth of income over this threshold. It is completely lost once you earn £125,140 a year, meaning people are subject to an effective 60% tax rate while their earnings are within this range.

For example, if your pay increases from £100,000 to £110,000, you would pay 40% in tax on the £10,000 pay rise, which is £4,000. However, you would also lose £5,000 of your personal allowance.

The 40% rate would then apply on that £5,000 – equating to £2,000 in tax. You are therefore paying £6,000 in tax on the extra £10,000 – which is an effective tax rate of 60%. You lose the personal allowance entirely at £125,140, and will need to pay the 45% additional tax rate on income above this threshold.

Parents on £100,000 penalised further

But that is not all. High-earning parents are penalised even further. If your income is just £1 over £100,000, you can lose childcare support as all entitlement to tax-free childcare and free childcare hours is lost. Rathbones estimates this to be worth almost £20,000 for parents with two children under five.

Olly Cheng, senior financial planning director at Rathbones, said: “Earning £100,000 once felt like financial freedom, but today it often comes with a hidden tax sting. Frozen thresholds are inflating tax bills, dragging more people into higher bands, while inflation erodes the real value of earnings.

“This has created a generation of HENRYs – high earners, not rich yet – where those on strong salaries struggle to build wealth because of the double hit of a growing tax burden and the corrosive effect of inflation.”

Frozen tax thresholds mean more people than ever will pay 60% tax rate

Since the 2022/23 tax year, income tax thresholds have been frozen after the then-chancellor Rishi Sunak announced tax bands would not be adjusted yearly with inflation, as had previously been the norm.

The freeze was extended until the 2027/28 tax year by Tory chancellor Jeremy Hunt. It was then extended again until the 2030/31 tax year by Labour chancellor Rachel Reeves in the 2025 Autumn Budget.

By freezing income tax bands, rather than adjusting them for inflation, people are ‘dragged’ into higher tax brackets when their earnings increase. This phenomenon is known as fiscal drag. It is often called a “stealth tax”.

With tax thresholds now frozen until at least 2030/31, more people will be dragged into the effective 60% tax rate as thresholds remain at 2022 levels. This is despite eight years of inflationary pressures making £100,000 mean less in real terms.

Cheng at Rathbones added: “Fiscal drag has become one of the most damaging factors affecting the cost of living. What was once considered a ‘stealth tax’ is now widely understood and much maligned.”

Can you avoid the 60% tax trap?

With an effective marginal tax rate of 60% on each pound you earn between £100,000 and £125,140, many high-earners will be asking whether they can avoid the tax trap.

The good news is that there are ways to avoid a 60% tax rate – but you won’t necessarily have more in your pocket immediately.

One option is to give up a portion of your salary, if you’re still working, and add it into a workplace pension through salary sacrifice, thereby reducing your annual pay.

Cheng at Rathbones said: “One of the simplest ways to avoid or limit the impact of the 60% income tax trap is to pay more into your pension. Doing so via salary sacrifice not only saves on income tax but also National Insurance for both employee and employer, making it a more tax-efficient way to boost pension savings compared to personal contributions.”

This can be done through either an employer pension scheme, or through a self-invested personal pension (SIPP).

If you are a parent, sacrificing your salary to keep your adjusted net income below the £100,000 threshold may mean you retain your eligibility to the tax-free childcare scheme.

Another way to avoid the 60% tax trap is to donate to charity as Gift Aid contributions lower your adjusted net income in the same way that pension payments do.

Cheng explains: “If your workplace permits it, you can also use salary sacrifice to make charitable contributions or exchange part of your salary for non-cash benefits, such as private medical insurance, which further reduces your adjusted net income. National Insurance savings apply here too.”

Finally, you can also make the most of share loss relief if you have qualifying shares and offset your losses against your income, bringing it below the £100,000 mark.

Cheng said: “If you subscribed for qualifying shares – such as those in an Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) company – and they fall in value, you can elect to offset the loss against your income rather than capital gains.

“This means the loss reduces your taxable income at your marginal rate, which for higher earners can potentially save a significant amount in tax.”

Owners of high-value homes worth £2 million may already be on alert about a mansion tax but there are warnings that the new levy could affect homes below the threshold.

Chancellor Rachel Reeves unveiled plans for a mansion tax in her 2025 Autumn Budget.

Under Treasury proposals that will be consulted on this year, owners of homes in England worth £2 million or more will have to pay an extra High Value Council Tax Surcharge from April 2028.

The Valuation Office Agency (VOA) will be tasked with valuing homes but its boss revealed this week that even homes below the £2 million threshold could be hit.

Meanwhile, homeowners with prime properties in Scotland also won’t escape the charge after the Scottish Government this week unveiled plans for its own version of the mansion tax, which will apply on homes worth more than £1 million.

What is the mansion tax?

Reeves has claimed that the charge will make the tax system fairer.

Launching the tax in her Budget speech, she said: “A typical family home in England pays more council tax than a £10 million Westminster mansion, so the Budget also introduces a High Value Council Tax Surcharge on homes worth more than £2 million, while protecting those on low incomes."

Once valued, eligible homes will be placed in four price bands based on their house prices. The bands start at £2,500 for a property valued in the lowest £2 million to £2.5 million band and go up to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.

The money will be collected by local authorities and will be used to support funding for local government services.

The government said it will set up a support scheme for those who may struggle to pay the charge and will consult on a full set of reliefs and exemptions.

Who will be affected by the mansion tax?

The Treasury estimates that fewer than 1% of properties in England are expected to be above the £2 million threshold.

But speaking to MPs this week, Jonathan Russell, head of the VOA, revealed that its valuation professionals will “probably look at houses that have an indicative value of £1.5 million just to make sure we're not missing anything".

This has prompted warnings that family homes on the cusp of the threshold could be hit.

Louis Mason, communications director at Oportfolio Mortgages, said the comments from the VOA are already creating unease among owners of high-value properties, particularly those sitting anywhere near the proposed thresholds.

He said: "Prime and super-prime markets are highly sentiment-driven, and uncertainty around future tax liabilities tends to delay decisions. We’re likely to see some owners hold off on buying, selling or refinancing until they understand how values will be assessed and how often.

"For those close to the threshold, behaviour is already becoming more cautious. Some homeowners may delay major improvements that could push them over a valuation line, while others may consider selling earlier than planned to avoid future exposure."

Separately, the Scottish Government has confirmed plans for a mansion tax in Scotland from April 2028 that will be applied to properties worth more than £1 million and collected through council tax.

Marc Acheson, specialist at wealth manager Utmost, said this is indicative of a wider trend we are seeing across the Western world, with governments and policymakers increasingly turning to the wealth community to plug fiscal gaps.

He said: “While this may seem like a politically lower-risk lever to pull, Scotland – like other countries – faces the reality that the wealth community is highly internationally mobile.

"Even if such measures don’t end up being implemented, the mere suggestion of them can trigger behavioural responses, accelerate capital flight and ultimately leave governments with a smaller tax base.”

There are plenty of other critics of the move.

While the mansion tax could be seen as a way of targeting some of the wealthiest homeowners in the UK, Jack Malnick, managing director of Sell House Fast, said there’s the risk that families who purchased modest homes several decades ago are unfairly hit.

He said: “These families and homeowners aren’t living in sprawling, vast estates, nor are they necessarily cash rich, they’re victims of living in an area where the value of homes has risen at a rate that far exceeds the national average, leaving them in a precarious position.

“Penalising them with an additional levy feels unfair, especially when many are retired or on fixed incomes. Policymakers must recognise that a home’s value doesn’t always reflect a homeowner’s financial position and adjust this accordingly.”

Jonathan Turner, partner at law firm Morr & Co, where he specialises in property law, suggests there will be plenty of disputes over valuations, especially if they are plus or minus £100,000 from the threshold.

He said: “This tax will trigger a surge in downsizing, which will saturate the market with valuable properties. In turn this will likely depress values overall, thus decreasing the ‘mansion tax’ income to the government.”