In 2024, over 400 estates donated at least £1 million to charities, contributing to a record-breaking total.

Gifts exceeding £1m rose by 33% from the previous year, increasing from £850m in 2023 to £1.1bn.

These high-value donations accounted for 54% of the £2.1bn gifted to charities through wills in 2024. A total of 440 estates made significant charitable contributions, reducing their exposure to inheritance tax (IHT).

Many individuals choose to leave large portions of their estates to charity for personal and philanthropic reasons, often supporting organisations they value. However, there are financial incentives as well. Those who donate more than 10% of an estate to charity benefit from a reduced IHT rate of 36%, compared to the standard 40%.

The trend of large charitable donations has grown steadily over recent years. In 2018/19, £760m in gifts over £1m were left to charities through wills, rising to £930m in 2019/20.

By donating to charities, individuals can support meaningful causes while mitigating tax liabilities, reflecting both generosity and strategic estate planning.

Talk to us about your tax matters.

Public and Commercial Services Union (PCS) members have announced strike action affecting HMRC’s Benton Park View offices in Newcastle.

The strikes, scheduled across eight days from 23 December 2024 to 14 February 2025, aim to reinstate three sacked union representatives.

The industrial action involves approximately 0.5% of HMRC’s workforce and takes place during the height of the self assessment filing season. The strikes will last three hours on specified mornings, disrupting HMRC phone helplines, particularly those assisting employers and Construction Industry Scheme (CIS) users.

HMRC advises avoiding these phone lines during strike hours, as delays are expected. Webchat and phone lines will remain operational, but customers may face longer wait times. To mitigate disruptions, HMRC plans to redeploy 100 staff from its surge and rapid response team (SRRT) to support affected services.

Picket lines will be held from 7am to 10am on the following days:

• 23 January: Ainsthorpe Garden entrance
• 29 January: Main gates
• 5 February: Main gates
• 6 February: Ainsthorpe Garden entrance
• 14 February: Main gates

HMRC has updated its employer enquiries page and will provide notices on its website and helpline recordings to inform users about potential delays.

The PCS claims the strike action directly responds to the dismissal of union reps over trade union activities.

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Take control of your money

Managing finances can feel overwhelming, but it’s essential for your financial health and long-term success. Whether you’re a small business owner or an individual, staying on top of your accounts ensures you can plan effectively, avoid unnecessary costs, and meet your tax obligations.

Cloud accounting is one of the most accessible and efficient tools available to simplify financial management. With features that save time, increase accuracy, and provide better insights into your money, it’s a solution worth considering – especially with the opportunities and challenges of the current tax year.

This guide explains how cloud accounting works, its benefits for individuals and businesses, and how to get started. If you’re already working with an accountant, cloud accounting can make your collaboration even more efficient.

What is cloud accounting?

Cloud accounting software lets you manage your finances online. Unlike traditional accounting systems tied to a single computer or requiring manual updates, cloud solutions work via the internet. This means you can check your financial information or share it with your accountant anytime, anywhere.

For example, you can record expenses, issue invoices, or track your bank balance all from your smartphone. Cloud accounting also makes it easier to stay organised because everything is stored digitally, saving you from sorting through piles of paper.

How cloud accounting benefits you

If you’re not already using cloud accounting, here are some key reasons to consider it:

1. Access to up-to-date financial information:
   Cloud accounting gives you a clear, real-time view of your finances. Whether you’re checking how much you’ve earned, seeing what’s due to go out, or preparing for tax deadlines, having accurate data at your fingertips is a game-changer.
2. Time-saving automation:
   Manual tasks like calculating VAT, chasing invoices, or organising receipts take time. Cloud systems automate much of this work. For example, you can scan receipts with your phone, and the software automatically updates your accounts.
3. Easier collaboration with your accountant:
   Cloud accounting makes it simple to share financial data securely. Your accountant can access your accounts directly, making it easier for them to offer advice, prepare tax returns, or spot potential savings.
4. Cost savings:
   Instead of paying for expensive accounting software or dedicating hours to manual tasks, you can focus on what matters most – growing your business or managing your personal goals. Many cloud platforms offer affordable subscription plans.
5. Better tax compliance:
   Staying compliant with tax rules can be stressful, but cloud accounting tools are built with this in mind. They help you stay organised, ensure you don’t miss deadlines and are often updated to reflect the latest HMRC requirements, including Making Tax Digital (MTD).

How does it work with your accountant?

If you’re working with an accountant, cloud accounting doesn’t replace their expertise – it enhances it. The software takes care of many routine tasks, allowing your accountant to focus on giving you tailored advice and finding opportunities to save you money.

For example:

• They can access your data in real time, helping you make better decisions when opportunities or challenges arise.
• You’ll spend less time gathering paperwork because much of the information they need will already be in the system.
• Cloud accounting tools make staying prepared for tax deadlines easier, avoiding last-minute scrambles.

Choosing the right cloud accounting platform

If you’re new to cloud accounting, choosing the right platform is an essential first step. Popular options in the UK include Xero, QuickBooks, and Sage. Here’s what to consider:

1. Features:
   Start by evaluating what you need the software to do. Basic bookkeeping tools such as income tracking, expense categorisation, and bank reconciliation may be sufficient for individuals and small businesses. However, if you run a more complex operation, look for advanced features like invoicing, payroll management, VAT calculations, inventory tracking, or financial reporting. Some platforms also offer industry-specific features, such as property management tools for landlords or project tracking for freelancers. Make a list of your priorities to help you compare providers and ensure you’re not paying for tools you don’t need.
2. Ease of use:
   The best cloud accounting software is easy to navigate, even for those unfamiliar with technology. Look for a platform with a clean, intuitive interface and minimal jargon. Many providers offer free trials or demo videos – use these to test whether the software feels straightforward to use. If you’re not comfortable entering transactions or generating reports after a short trial, it might not be the right fit. Simple navigation and mobile-friendly apps are especially important if you plan to manage your finances on the go.
3. Cost:
   Budget is a key factor for most users. Cloud accounting platforms generally use subscription models, with plans that range from basic (around £10-£15 per month) to premium options (£30 or more per month). While the cheapest plan may seem appealing, make sure it includes everything you need. For example, a basic plan might not offer payroll services or multi-currency support. Watch for hidden fees, such as charges for additional users or advanced features. Balancing affordability with functionality ensures you’re getting value for your money.
4. Integration:
   When choosing a cloud accounting platform, consider how well it integrates with your existing tools and systems. Strong integrations reduce manual work and improve accuracy by allowing your financial data to flow seamlessly between systems. Common integrations include eCommerce platforms like Shopify, payment gateways such as PayPal or Stripe, and inventory management tools.

One of the most essential integrations, especially for small businesses and individuals, is bank feeds. Bank feeds automatically connect your accounting software to your bank accounts, importing transactions in real time. This feature simplifies reconciliation, ensures your financial data is always up to date, and significantly reduces the risk of errors from manual data entry. If you’re juggling multiple accounts, bank feeds can save hours of work and help you maintain an accurate view of your finances.

Whether you’re connecting a CRM system, point-of-sale tools, or your bank account, integrations ensure smoother workflows and better financial management. Prioritise a platform with strong integration capabilities to make managing your money as straightforward as possible.

1. Support:
   Reliable customer support is crucial, especially if you encounter issues during tax season or when you’re new to the platform. Look for software providers that offer multiple support options, such as live chat, email, or phone assistance. Many platforms also have extensive knowledge bases, video tutorials, and user communities where you can find answers to common questions. Before committing to a provider, read reviews to see how responsive and helpful their support team is. A strong support system can save you time and frustration when you need guidance.

By considering these factors, you can choose a cloud accounting platform that fits your needs, budget, and level of expertise. Working closely with your accountant during this process can also help you select a solution that complements their work and benefits your overall financial management.

Getting started with cloud accounting

Making the switch to cloud accounting doesn’t have to be complicated. Here’s how to get started:

1. Speak to your accountant:
   Your accountant can recommend the best software for your situation and guide you through setup. They’ll also ensure the platform meets HMRC requirements.
2. Set up your account:
   Once you’ve chosen a platform, follow the setup process. This may include connecting your bank accounts, uploading financial records, and setting up invoicing templates.
3. Learn the basics:
   Most cloud accounting tools offer tutorials or guides. Spend time getting familiar with key features, such as creating invoices or tracking expenses.
4. Use it regularly:
   Make updating your accounts a routine. This will save time in the long run and ensure you always have accurate data to share with your accountant.

Addressing common concerns

If you’re hesitant about moving to cloud accounting, you’re not alone. Here are some common concerns and how to address them:

• “I’m not tech-savvy”
  Many platforms are designed to be user-friendly. Your accountant can also help you get started, and most providers offer excellent customer support.
• “Is my data safe?”
  Cloud providers prioritise security. Features like encryption and two-factor authentication protect information from unauthorised access.
• “What if I lose internet access?”
  Most platforms save your data automatically so that you won’t lose anything. While you’ll need an internet connection to use the software, you can still access information offline through certain features.

Why it’s worth the switch

Cloud accounting isn’t just about keeping up with the latest technology. It’s about making financial management easier, saving time, and working more effectively with your accountant. Whether you’re running a business, managing rental properties, or simply staying on top of personal finances, cloud accounting can help you take control of your money.

By combining the power of cloud accounting with your accountant’s expertise, you can simplify your financial management, stay compliant with tax rules, and make informed decisions about your money.

Talk to us about your options and see how cloud accounting could transform how you manage your finances.

Steps to smooth business transitions

Planning for the future of your business is one of the most critical responsibilities of an owner. Business succession planning ensures your enterprise can transition smoothly to new ownership or leadership, safeguarding its continuity and success. Whether you’re passing the reins to a family member, selling to a third party, or considering other options, taking proactive steps can protect the legacy you’ve built.

Here’s what you need to know about business succession planning, why it matters, and how to make the process seamless.

What is business succession planning?

Business succession planning involves preparing to transfer ownership, leadership, or control of your business. The aim is to ensure the company thrives after your departure, whether due to retirement, illness, or unforeseen circumstances.

It’s not just about selecting a successor – it’s about creating a roadmap that includes financial, legal, and operational considerations to help the transition run smoothly.

Why is business succession planning important?

Failing to plan can lead to disruption, financial instability, and even the closure of your business. Research by the Federation of Small Businesses (FSB) shows that around 40% of UK business owners still need a succession plan. With over five million small businesses in the UK, this lack of preparation poses a significant economic risk.

Additionally, succession planning can:

• Protect business value: With a plan, your business could retain value during a transition. A clear strategy helps maintain operations and client trust.
• Minimise tax liabilities: Proper planning can help mitigate inheritance tax or capital gains tax liabilities, which can otherwise create a financial burden.
• Ensure continuity: Planning reduces the risk of operational disruption and preserves relationships with clients, suppliers, and employees.
• Prepare for the unexpected: Life is unpredictable. Having a plan means your business is better equipped to weather sudden changes.

Exploring succession options

Deciding how to transition your business is as important as preparing for the process. Here are the most common paths for business succession, along with their pros and cons:

Family succession

Handing your business to a family member can be a natural choice, especially in family-run enterprises. It allows the business to remain within the family and continue a legacy. However, assessing whether the family member is interested and capable of taking on the role is essential. Misalignment in goals or an unprepared successor can lead to conflict or instability.

Selling to a third party

Selling your business to an external buyer can maximise financial returns, especially if your business has significant market value. Preparing for a sale involves ensuring clean financial records, demonstrating consistent profitability, and presenting growth opportunities. The challenge lies in finding the right buyer who aligns with your values and ensuring the transition doesn’t disrupt operations.

Management buyouts (MBOs)

An MBO allows key employees or management team members to purchase the business. This option ensures continuity since the buyers already understand the business. However, funding an MBO can be complex, requiring the management team to be financially capable of taking ownership.

Employee ownership trusts (EOTs)

EOTs are becoming increasingly popular in the UK. This structure allows employees to collectively own the business collectively, fostering a sense of shared responsibility and commitment. EOTs can also provide tax advantages, such as exemption from capital gains tax on qualifying sales. However, transitioning to an EOT requires careful planning and financial structuring.

The steps to effective succession planning

Step 1: Define your goals

Start by thinking about your objectives. Do you want to pass the business to a family member, sell to a third party, or transfer ownership to employees? Your decision will influence the entire plan, so it’s crucial to have clarity from the outset.

Step 2: Assess the value of your business

Understanding your business’s worth is essential, especially if you plan to sell. A professional valuation will provide a clear picture of its financial standing and potential market value.

When valuing your business, consider intangible assets like your brand reputation, customer loyalty, and intellectual property. These elements often hold significant value but can be overlooked in traditional valuations.

Step 3: Identify potential successors

Choosing the right successor is one of the most critical decisions in the process. If you’re transferring to a family member, consider their skills, interests, and readiness to lead. Identify suitable buyers who align with your company’s values and goals for external sales.

Developing a shortlist of successors and investing in their leadership development may also be helpful. For example, enrolling them in external training programs or providing mentoring can ensure they’re prepared to take on the role.

Step 4: Develop a transition plan

Once you’ve identified your successor, create a detailed transition plan. This should include:

• Training and mentorship: Ensure your successor has the skills and knowledge needed to lead effectively.
• Operational handover: Define how and when responsibilities will transfer.
• Financial arrangements: Outline the structure of the sale or transfer, including any payment terms or retained interests.

Step 5: Review legal and tax implications

Succession planning involves complex legal and tax considerations. Work with professionals to ensure compliance and minimise liabilities. Key areas to address include:

• Inheritance tax: Transfers of business assets may qualify for relief under Business Property Relief (BPR).
• Capital gains tax: The sale of your business could trigger CGT. While Entrepreneurs’ Relief (now Business Asset Disposal Relief) currently reduces the rate to 10% for qualifying individuals, this is set to increase to 14% from 6 April 2025 and 18% on 6 April 2026. Factoring in these changes is crucial to optimise your tax position.
• Shareholder agreements: If your business has multiple owners, ensure agreements are in place to manage ownership changes.

Step 6: Communicate the plan

Transparency is vital. Share your plan with key stakeholders, including family members, employees, and advisers. Clear communication reduces misunderstandings and ensures everyone is on the same page.

Step 7: Monitor and update the plan

Succession planning is not a one-time task. You should regularly review and update your plan to reflect changes in your business, industry, or personal circumstances.

The benefits of starting early

Procrastination often leads to rushed decisions and missed opportunities. Starting early offers significant advantages:

Improving successor readiness

By planning well in advance, you can dedicate time to training your successor. Leadership coaching, on-the-job experience, and professional development programs contribute to their readiness for the role.

Attracting better buyers

If you’re selling your business, a well-prepared succession plan increases its appeal to buyers. A structured plan demonstrates professionalism, minimises risks, and can even boost the sale price.

Tax advantages over time

Tax planning benefits from longer timelines. For example, spreading the ownership transfer across multiple years can reduce tax liabilities or provide more opportunities to take advantage of reliefs like Business Property Relief or Entrepreneurs’ Relief.

Common challenges in succession planning

Many business owners need more time for succession planning due to its complexity or emotional nature. However, addressing these challenges early can make the process easier.

• Cultural shifts during leadership transitions: A new leader may change company culture or operations. Establish clear communication channels and support during the adjustment period to avoid disruption.
• Resistance to change: Employees, clients, or stakeholders may resist the transition due to uncertainty or fear of disruption. Clear communication and reassurance, alongside visible support from the outgoing leader, can ease this resistance.
• Economic uncertainty: External factors, such as market downturns or industry changes, can affect succession timing and execution. Building flexibility into your plan allows you to adapt as needed.
• Inadequate planning timeline: Rushing succession planning can result in oversights, such as missing opportunities for tax relief or failing to prepare the successor adequately. Starting early provides time to address these challenges methodically.
• Balancing immediate needs with long-term goals: Business owners often focus on short-term operational demands at the expense of long-term planning. Delegating daily responsibilities to trusted team members can free up time to focus on succession.

The cost of delaying succession planning

Delaying succession planning can have serious consequences. The FSB reports that many businesses without a plan face closure after the owner’s departure, putting employees’ livelihoods at risk.

Additionally, unplanned transitions can lead to disputes among family members, client loss, and a drop in business value.

How we can help

We understand that business succession planning can feel daunting. That’s why we’re here to guide you through the process, offering tailored advice considering your goals and circumstances.

Whether you’re just starting to think about succession planning or need help refining an existing plan, we’re ready to help. Our team can assist with valuations, tax planning, legal considerations, and transition strategies to ensure your business’s future success.

Let’s secure your business’s future together – with expert accounting advice to guide every step.

HMRC has urged taxpayers to be alert to scams as the self-assessment season picks up. Over the past year, nearly 145,000 scam attempts were reported, a 16.7% increase compared to the previous year.

Fraudsters often pose as HMRC, using fake tax refund offers or demanding unpaid tax to steal personal and financial details.

Alarmingly, around half of all reports involved fraudulent rebate claims. HMRC has stressed that it never contacts taxpayers via text, email, or phone to offer refunds or demand payments. It will also never leave threatening voicemails about legal action or arrest.

HMRC says tax refunds can only be claimed securely through an official online account or the free HMRC app. Suspicious messages or unexpected contacts should be ignored – do not reply, share information, download attachments, or click on links, as these can lead to data theft or malware attacks.

HMRC’s advice to report scams:

• Forward suspicious emails to phishing@hmrc.gov.uk
• Report fraudulent calls via the HMRC website on gov.uk
• Forward scam texts to 60599

Earlier this year, the Government launched the ‘Stop! Think Fraud’ campaign, which was supported by organisations in law enforcement, tech, banking, and telecoms.

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Licensed gambling operators could face a new levy from April 2025, calculated as a percentage of their Gross Gambling Yield (GGY).

Rates will range from 0.1% to 1.1%, varying by sector, operating costs, and harm caused. Operators earning under £500,000 in gross profits will be exempt, though this threshold may be reviewed by 2030.

The Government aims to raise £90-£100 million annually, with 50% allocated to NHS gambling treatment services, 30% towards harm prevention, and 20% for research led by the Gambling Commission and the UK Research and Innovation (UKRI).

Stake limits for online slots will also change, capped at £5 for over 25-year-olds and £2 for those aged 18-24.

The levy proposal received mixed feedback during the consultation process, which involved 68 respondents, including operators like William Hill, NHS bodies, councils, charities, and lottery organisations. Only 35% agreed with using GGY as the basis for the levy, while 50% opposed it. Concerns were also raised about exempting smaller operators, with fears of loopholes and unfairness in distribution.

Currently, contributions to gambling addiction research are unequal, with some companies paying as little as £1 annually. The proposed levy seeks to address this imbalance and ensure sustainable funding. If approved, the Gambling Commission will enforce the levy starting 6 April 2025.

Gambling Minister, Baroness Twycross, said: “Gambling harm can ruin people’s finances, relationships, and ultimately lives. We are absolutely committed to implementing strengthened measures for those at risk, as well as providing effective support for those affected”

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Two years after ChatGPT sparked a surge in artificial intelligence development, the Government has launched GOV.UK Chat, an experimental chatbot designed to deliver personalised, quick answers using information from relevant GOV.UK pages.

Unlike HMRC’s tax manuals, this tool focuses on reducing bureaucracy and assisting small businesses in more efficiently navigating Government resources.

Powered by OpenAI’s GPT-4o technology, the chatbot is part of a four-week trial involving up to 15,000 users. According to the Department for Science, Innovation and Technology (DSIT), the goal is to slash citizens’ time searching for guidance. The trial builds on a more minor January test where 70% of users found the chatbot’s responses helpful, and nearly 65% were satisfied with the experience.

If successful, GOV.UK Chat could eventually roll out across the Government’s sprawling 700,000-page website, which currently serves over 11 million weekly users.

To access the chatbot, users must register on the GOV.UK Chat landing page by entering an email address and answering a few questions about their purpose for using it. Once registered, the chatbot is accessible on 30 key pages, such as “Set up a business,” via a link or a button in the top-right corner.

The chatbot mimics HMRC’s web chat interface but highlights the absence of human involvement. While still in its early stages, GOV.UK Chat represents a step forward in leveraging AI to simplify access to Government information for businesses and citizens alike.

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HMRC has extended the processing time for agent services account (ASA) and VAT agent reference number applications to 40 working days – eight weeks – up from the previous 28 days.

This change applies from the date HMRC receives an application.

Applications for an ASA must be submitted in writing, as no online application process is available. Agents must have an existing HMRC online services account and at least one authorised client for self assessment, corporation tax, PAYE, or VAT to create an account.

An ASA is required for agents to access essential online tax services. These include Making Tax Digital for VAT and Income Tax Self Assessment, the online tax registration service, the Income Record Viewer, capital gains tax on UK property, the trust registration service, and taxes like plastic packaging tax, multinational top-up tax (MTT), and domestic top-up tax (DTT).

The increased processing time highlights the need for HMRC to invest in modernising its digital services. An improved digital infrastructure could streamline applications and provide accountants with better tools to manage clients’ tax affairs.

For now, agents should account for the longer approval timeline when planning client services, particularly for new engagements requiring immediate online tax capabilities.

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Saving for retirement can feel daunting for many self-employed people. Without the workplace schemes that salaried workers often rely on, self-employed individuals must take proactive steps to secure their financial futures. But with the right guidance, pensions can become a valuable tool for your retirement planning.

We’ll walk you through why pensions are vital, your pension options as a self-employed person and some practical ways to maximise your retirement savings.

Why pensions matter for the self-employed

When you’re self-employed, financial planning often revolves around the immediate needs of your business. However, looking after your future is just as important, and a pension offers a tax-efficient way to save. Research from the Department for Work and Pensions shows that only 16% of self-employed workers contribute to a pension, compared to 78% of employees. Since state pensions alone may not cover all living costs in retirement, having a personal pension plan can help secure your long-term financial stability.

Investing in a pension also comes with attractive tax benefits. As a self-employed individual, you’re entitled to tax relief on contributions, meaning a portion of what you invest is effectively returned to you by the government. For basic-rate taxpayers, this is 20%, while higher-rate taxpayers can claim up to 40% and additional-rate payers, 45%.

Your pension options as a self-employed person

Without a workplace scheme in place, you have several pension options. Let’s break down the most common choices available for self-employed workers.

Personal pensions

A personal pension is a private plan set up by an individual with a pension provider, such as a bank, insurer or investment firm. You decide the contribution level and control how your money is invested. Personal pensions invest your contributions in stocks, bonds or other assets, aiming for long-term growth. You’ll receive tax relief on contributions and any investment growth, which can provide a strong foundation for retirement savings.

Self-invested personal pensions (SIPPs)

A SIPP functions similarly to a personal pension but offers greater investment flexibility. You can invest in various assets, from stocks and shares to commercial property and even specific types of precious metals. SIPPs can be ideal if you have investment experience and want greater control over your portfolio.

The drawback of a SIPP is that it requires more time and knowledge to manage. Fees can also be higher than standard personal pensions, so you’ll need to balance the benefits of control against the costs and complexities involved.

Stakeholder pensions

Stakeholder pensions are designed to be accessible and straightforward. They have low minimum contributions, capped charges and offer the flexibility to stop and start contributions without penalties. They’re generally a good option if you’re looking for a simple, affordable way to save without managing investments actively. However, the range of investments may be more limited than in a SIPP or personal pension.

How much should you contribute?

When it comes to pension contributions, there’s no one-size-fits-all answer. Financial planners typically recommend saving at least 12-15% of your annual income for retirement. This may sound high, but remember that every little bit helps. Even small, regular contributions can grow significantly over time due to compounding.

For instance, according to Aviva’s Pension Calculator, a 30-year-old self-employed individual who contributes £200 per month could have a pension pot of approximately £130,000 by age 68, assuming moderate investment growth. Increase that to £300 a month and the pot could rise to around £195,000. These figures underline the importance of starting early, even if your contributions are modest.

Benefits of starting a pension early

The earlier you start contributing to a pension, the more you stand to benefit from compound interest. When your investments generate returns, those returns are reinvested, creating an exponential growth effect over time. Small contributions in your 20s and 30s can add to a sizeable pension pot by retirement.

On the other hand, starting later in life doesn’t mean it’s too late; it just requires a more focused approach. You may need to contribute more or choose investments with higher growth potential. However, building a meaningful retirement fund is still possible, and you’ll still receive valuable tax relief on your contributions.

Tax relief: a boost for your savings

Tax relief can significantly enhance the value of your pension contributions. For every £80 you put into your pension, the government adds an extra £20 in basic-rate tax relief. You can claim an additional £20 through your self-assessment tax return if you’re a higher-rate taxpayer and £25 if you’re an additional-rate taxpayer. This means that £100 in your pension pot costs only £60 of your post-tax income if you’re in the 40% tax band.

Tax relief effectively boosts your contributions and accelerates the growth of your pension savings, making it one of the most advantageous features of contributing into a pension scheme. This tax advantage can be a crucial factor in reaching retirement goals for self-employed individuals without the benefit of employer contributions.

Balancing pension contributions with business needs

Balancing long-term pension savings with immediate business expenses can be challenging when you’re self-employed. It may be tempting to pause or reduce contributions during lean periods, especially if cashflow is tight. However, it’s often better to keep contributing a smaller amount than to stop altogether.

z Remember that any modest contribution keeps your pension pot growing and ensures you’re still benefiting from tax relief.

Maximising pension growth through investments

While your contributions are the foundation of your pension, investment performance plays a major role in determining your final retirement pot. With self-employed pensions, you are typically free to choose your investment approach, ranging from cautious to adventurous.

For example:

• conservative investors might prefer a portfolio with a higher proportion of bonds offering stable returns but limited growth potential
• balanced investors might allocate equally between stocks and bonds, offering moderate growth with reduced risk
• growth-orientated investors may invest mainly in equities, which have the potential for higher returns but come with increased risk.

Most pension providers offer pre-built investment portfolios tailored to different risk profiles, which can help simplify the investment decision process. Remember, your risk tolerance may evolve over time, and adjusting your investments to match your age and retirement goals is a sensible approach.

A common strategy is to invest in riskier assets, such as equities, earlier in your career to maximise growth potential, then gradually shift towards safer investments, like bonds, as you approach retirement to protect the value of your pension pot.

Planning for retirement withdrawals

When you reach 55, you can access your pension savings, with up to 25% available tax free. You can take this as a lump sum, stagger it through drawdowns or leave your money invested for further growth. It’s worth thinking carefully about how you’ll structure your withdrawals to ensure your savings last throughout retirement.

With life expectancy rising, retirement can now stretch 20 years or more. Many self-employed retirees opt for a phased approach, gradually withdrawing funds to supplement their income while keeping some investments in place. Planning your withdrawals thoughtfully can provide financial security without depleting your pension pot too quickly.

Taking advantage of new pension rules and allowances

Pension rules and tax allowances can change, and it’s important to stay informed so you’re making the most of available opportunities. The annual allowance for pension contributions is currently set at £60,000, but any unused allowance from the previous three years can be carried forward. This “carry forward” rule can be especially helpful for self-employed individuals with variable incomes.

In addition, the lifetime allowance, which previously limited the amount you could save tax free, was abolished as of 6 April 2024. This change allows more flexibility to build your pension pot without concerns about tax penalties.

Is a pension right for everyone?

While pensions are highly beneficial for many, they may not be the only option. Some self-employed people prefer to invest in property, ISAs or their businesses as part of their retirement strategy. Each option has pros and cons, and it’s wise to consider all avenues when planning your retirement.

It’s worth seeking professional advice to ensure you make the best choice for your circumstances. With tax advantages, flexible contribution options and various investment choices, pensions remain among the most effective ways to secure your financial future. They offer reliable long-term growth and can complement other retirement savings efforts.

Ready to take the next step?

Taking control of your retirement planning is empowering, and a pension offers a structured way to build a secure future. Start by researching different pension providers, comparing fees and assessing investment options that align with your risk tolerance and goals.

If you’d like more personalised advice, we’re here to help. We specialise in guiding self-employed professionals through retirement planning, from selecting the right pension type to managing contributions and maximising tax relief.

Reach out to us for a consultation to discuss how we can support your journey towards financial independence in retirement.

HMRC has confirmed that double-cab pickups will be taxed as cars from April 2025, following the latest Budget announcement.

This change, outlined in the Budget Red Book, reverses earlier decisions that caused uncertainty over the taxation of these vehicles.

Previously, HMRC had briefly classified double-cab pickups as cars in early 2024, only to revert to van status a week later. The reclassification now stems from the 2020 Court of Appeal case, Payne & Ors (Coca-Cola) vs R & C Commrs, which questioned the tax treatment of vehicles with a payload of one tonne or more.

Under the new rules, double-cab pickups will be treated as cars for corporation tax from 1 April 2025 and for income tax from 6 April 2025. The change will affect capital allowances, benefits in kind and certain business deductions. However, transitional arrangements will allow employers who purchase, lease or order these vehicles before the cut-off date to continue benefiting from the previous tax treatment until 2029.

HMRC has indicated that this ruling is aimed at ensuring consistency in tax treatment across similar vehicles.

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