Autumn Newsletter 2023


It was a wetter summer than we had hoped for and the true summer weather was pretty much confined to June and early September.  We hope you have managed to have some nice breaks in the sun though, either timing it right in the UK or going abroad.

The ever changing and unpredictable weather has many similarities to the global economy and over the last three years we have had the sharp fall in investment markets from Covid, followed by a sustained rise until the Ukrainian war and inflation which sharply reversed the growth.  There are signs, with inflation starting to fall now, that there might be growth ahead, although there are arguments for and against this trajectory.  As ever, we try to be proactive and ensure the shorter term cash requirements for our clients are covered, so that we can concentrate on the longer term growth potential for their investments.

It’s not just the direction of investments that are of concern to us, as the tax landscape seems to be ever changing too and this is just as important as growth.  Some of the articles in this newsletter highlight recent changes in tax legislation and we can continue to work with you to explore how these changes affect you.

Opportunity for high earners to add more to their pensions now

In the March 2023 Budget, the Government announced that the Annual Allowance for pensions (the maximum gross amount that can be paid into an individual’s pensions in a tax year without suffering a tax charge on the contributions) was to increase from 6 April 2023 from £40,000pa to £60,000pa.  This means more can now be added to pensions if it is affordable to do so and an individual’s earnings allow it.

Linked to this, the taxable income level at which the Annual Allowance begins to taper downwards was also increased, meaning high earners at certain income levels can now add much more into pensions, after being severely restricted for many years.  The minimum taper amount was also increased.

The tapering is not just based on earnings though and the calculation of it is not simple.  There are two tests applied and if they both “bite”, a tapering figure is arrived at based on an individual’s Adjusted Income.  In very simplified terms the Adjusted Income includes all of your taxable income, including bonus, rental income, dividends, etc and also adds on any pension contributions your employer makes.

A comparison of the available contributions for this year and last year is shown below and illustrates where high earners can now make larger pension contributions depending on their Adjusted Income.  As the calculation of the Adjusted Income is complicated, we would advise you to contact us to help calculate this figure, along with the resulting Annual Allowance maximum pension contribution that can be made for you.


Removal of Lifetime Allowance provides options for protected pensions

With the removal of the pension Lifetime Allowance tax charge in this tax year, it may now be an ideal time to have any form of protection against the Lifetime Allowance reviewed.

The Lifetime Allowance of £1,073,100 was the maximum value of all the pensions, apart from the state pension, an individual was allowed before an additional tax charge was applied when drawing the pensions.  Although the tax charge has now been removed, the actual Lifetime Allowance level has changed many times since it was introduced in 2006.  The below chart shows this graphically (the blue bar) along with the change in the Annual Allowance referred to in the earlier article (not the tapered Annual Allowance).

Where the Lifetime Allowance has been reduced in the past, there has been an opportunity to protect existing pensions at the previous Lifetime Allowance level if certain qualifying rules were met.  Additional protections were also available to existing pensions when the original Lifetime Allowance rules were introduced in April 2006.

In order of the date these protections were available, they were:

  • Enhanced Protection
  • Primary Protection
  • Fixed Protection 2012
  • Fixed Protection 2014
  • Individual Protection 2014
  • Fixed Protection 2016
  • Individual Protection 2016

For Enhanced and Primary protection, separate tax free cash protections were also available.

Although the Lifetime Allowance tax charge no longer applies, the protections still remain as they will determine the maximum level of tax free cash available.  Therefore these protections should generally not be given up.  Adding to pensions again, where individuals previously couldn’t without losing some of these valuable protections, is now an option although we would strongly advise you contact us before doing so.

Currently only Individual Protection 2016 and Fixed Protection 2016 are still available to apply for, if certain conditions are met, but the deadline for these is expected to be 5 April 2025 under draft legislation.

Although the Lifetime Allowance tax charge has been removed, the Lifetime Allowance is still used to determine how much tax free cash can be paid.  Under draft legislation to be confirmed for April 2024, tax free cash will be limited to 25% of the current Lifetime Allowance amount or 25% of a protected amount if higher.  A figure equivalent to the current Lifetime Allowance is likely to feature with the calculation of tax free lump sum maximums on death too, although this is also draft legislation at the current time and further details will be confirmed in due course.

Overall, if you have very large pensions or have existing protections in place against the Lifetime Allowance, it would be worthwhile speaking to your adviser at Headley before the end of 2023, if you have not already discussed this subject at a recent financial planning meeting with us.


Intestacy threshold increases for spouses and civil partners

The fixed sum for spouses and civil partners payable under the Intestacy regime (where a Will has not been made) in England and Wales has been increased from £270,000 to £322,000. This took effect from 26 July 2023 via the Administration of Estates Act 1925 (Fixed Net Sum) Order 2023.

Where no valid Will is left by a spouse/ civil partner and the deceased has children, the Statutory Legacy is the initial sum to which a surviving spouse or civil partner is entitled.

The flowchart below shows the new rates and the process that the Intestacy regime follows:

Changes to reporting income from self employment and partnerships

HMRC has published guidance on how to report profits on the Self Assessment return for 2023/24 if the accounting year doesn’t end between 31 March and 5 April, as the reporting rules for this change from April 2024, with April 2023 as a transitional year.

In the majority of cases, we would expect that an accountant will be involved in the preparation and submission of the self assessment return and this will be particularly important as a result of these changes. However, for those who prepare their own tax returns or who are looking for further detail on these changes, the HMRC guidance provides a useful reference source.


Child Trust Funds – Do you have children who haven’t claimed their cash?

HMRC is urging young adults to check if they have a Child Trust Fund account.

According to the HMRC news release, almost 430,000 young people aged 18-21 years have unclaimed Child Trust Fund accounts worth an average of £2,000 and these people are being urged by HMRC to claim their cash.

Child Trust Funds are long-term, tax-free savings accounts and were set up for every child born between 1 September 2002 and 2 January 2011, with the government contributing an initial deposit of at least £250. Funds can be withdrawn once the account matures when the child turns 18.

At age 18 the young adult can either withdraw the funds or transfer them into an adult ISA. The Child Trust Fund will then close. Until the young adult withdraws or transfers the money, it stays in an account that no one else has access to and keeps its tax free status.

A recent student survey, conducted by UCAS, asked first and second year university students about Child Trust Funds and the results showed that they were most interested to know how much money was in their account (43%) and how to claim it (32%). The survey also revealed 60% of students got their information about Child Trust Funds from their parents.

Young adults and parents can search on GOV.UK to find out where their Child Trust Fund account is held.

More than 500,000 matured Child Trust Fund accounts have been claimed or transferred into an ISA since the oldest children on the scheme turned 18 in September 2020.

Headley Financial Services charity of 2023

We’re continuing to support The Tantum Trust as our 2023 charity.  The Tantum Trust is a unique organisation providing financial support to individuals, families and community groups exclusively in North East Hampshire and South West Surrey.

If you’d like to find out more about this great charity, or wish to donate, their website is:

We look forward to continuing to work with you and help you enjoy life enriched

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax relief depends upon individual circumstances and tax rules may change. This newsletter is provided strictly for general consideration only and is based on our understanding of current law and HM Revenue & Customs’ practice. No action must be taken, or refrained from, based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.

 The Financial Conduct Authority does not regulate taxation advice, estate planning, inheritance tax planning, wills or trusts.

 Sources for some articles in this newsletter – Threesixty, Abrdn, GOV.UK

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