top of page


Financial Planning

June 2023

Welcome to the latest bulletin in our series which we publish every 4 months. These bulletins cover topical subjects around taxation and financial planning and provide tips on how the adverse effects of tax changes may be mitigated.

Please note that references to taxation concern the taxation of residents of England, Wales and Northern Ireland unless otherwise specified. Residents of Scotland are taxed under a different regime on their non-savings, non-dividend income (which includes income from employment, self-employed profits and rental income from property).

The March Budget

Changes to Pensions

Jeremy Hunt delivered his first formal Budget on 15 March 2023, with many proposals taking effect from the start of the new tax year on 6 April 2023. The biggest change concerns the taxation of pensions with significant increases to the annual allowance, minimum tapered annual allowance and money purchase annual allowance (MPAA) and the removal of the lifetime allowance cap.


The effect of these changes is to allow higher pension contributions without incurring annual allowance charges and to remove tax charges that previously applied to those with large pension funds or who have accrued significant pension benefits. From 6 April 2023, the annual allowance (the maximum amount that can be contributed to pension schemes during a tax year whilst benefiting from income tax relief) is increased to £60,000 from £40,000 in 2022-23.


The annual allowance is tapered for ‘higher earners’ (in 2023-24, those with adjusted income in excess of £260,000 and threshold income in excess of £200,000). The annual allowance reduces by £1 for every £2 that adjusted income exceeds £260,000 until it reaches the minimum tapered annual allowance of £10,000 from 6 April 2023 (£4,000 in 2022-23).


Those who have crystallised benefits in a defined contribution (DC) pension scheme and withdrawn income benefits are subject to the money purchase annual allowance (MPAA). In 2022-23 the MPAA was £4,000 but, from 6 April 2023, the MPAA has increased to £10,000.


The maximum amount of the pension commencement lump sum (PCLS or tax-free cash) that can be taken from 6 April 2023 has been frozen at £268,275 (25% of the lifetime allowance of £1,073,100) or 25% of the value of the pension fund, whichever is the lower. However, if the pension holder had elected for a protected lifetime allowance before 15 March 2023, the maximum PCLS is 25% of the protected lifetime allowance amount, or fund value, whichever is the lower.


Those who had previously elected for fixed or enhanced protection are now able to restart pension contributions after 5 April 2023 without losing the benefits of that protection (e.g. the higher maximum PCLS figure).


Those with significant accrued pension benefits should review their pensions strategies to take account of the new rules. Salary and/ or bonus sacrifice arrangements may become more attractive for many employees. The increase in the annual allowance will allow high earners to make higher contributions, especially if combined with carry forward relief.


Pension funds do not generally form part of a deceased person’s estate for inheritance tax purposes so can offer a tax-efficient solution for passing assets to family members on death. Those with significant potential inheritance tax liabilities on death may wish to consider using other (non-pension) assets, where possible, to provide income in retirement. Such strategies not only preserve the value of funds held in pension schemes but also reduce the value of the state on death that may be subject to inheritance tax.


As the final legislation governing these changes to pensions will not be confirmed until the Finance Bill is ratified (normally in July), those anticipating making pension contributions to take advantage of the new rules may wish to delay any action until the Finance Act is available. The likelihood of future changes to pensions legislation (for example, should there be a change of government) should also be assessed.



Stealth Taxation

& Fiscal Drag

Stealth taxation and fiscal drag have been a feature of mainstream taxation for the last couple of decades but the effects of these have been accentuated by the recent high inflation rates, causing many to pay increased amounts of tax.


Historically, tax bands and allowances have tended to increase each year in line with inflation which then prevents taxpayers suffering real terms drops in net income as wages and prices increase.


Some tax allowances, such as the inheritance tax £3,000 annual exemption and £250 small gifts allowance, have not changed since they were introduced – for these exemptions, over 40 years ago! Income tax bands and the personal allowance were frozen in 2021 for 5 years. This freeze has since been extended to the 2027-28 tax year but we have also seen the higher rate tax threshold being reduced from £150,000 to £125,140 from 6 April 2023, pushing more of taxpayers’ income into the additional rate of tax (top rate for Scottish residents). For Scottish residents there has also been an increase to the rates of the higher and top rates of income tax to 42% and 47% respectively (from 41% and 46% respectively in 2022-23).


Combined with the freeze to National Insurance contribution thresholds, the ‘freezing’ of income tax thresholds is expected to raise an additional £28 billion of tax every year until 2028. The IFS has estimated that one in five taxpayers will be higher rate taxpayers by 2028.


Where possible, taxpayers should look to maximise the use of tax reliefs and allowances, possibly by transferring assets, and any attaching income, between spouses. Tax-efficient investments, such as ISAs, pensions and investment bonds may also be considered. Professional advice may be needed to help take full advantage of the available tax-saving opportunities.


Self-assessment tax returns

In a bid to encourage individuals to submit tax returns digitally, HMRC has removed the ability to download the SA100 Self-assessment tax return from its website, although the supplementary pages are still available to download.


Those wishing to complete a paper SA100 tax return will need to call HMRC on 0300 200 3610 to request it. There are limited exemptions to submitting the return digitally, including for the visually impaired and those aged over 70 who have not previously submitted a digital return.


The High-Income Child Benefit charge

The High Income Child Benefit (HICB) charge was introduced in 2013 to claw back Child Benefit received by families with at least one ‘high earner’. If a partner in the family has adjusted net income (broadly, gross income less any member pension and Gift Aid contributions) of at least £50,000 p.a. the HICB charge applies to claw back Child Benefit received by the family (regardless of which partner receives it) at a rate of 1% of the Child Benefit received for every £100 that adjusted net income (ANI) exceeds £50,000 p.a. The HICB charge will equal the total Child Benefit payments received by the family once ANI exceeds £60,000. If both partners have ANI in excess of £50,000, the partner with the highest ANI is assessed for the HICB charge.


The £50,000 threshold has not changed over the 10 years that the HICB has been in existence. In 2013-14, a taxpayer became subject to higher rate income tax when taxable income exceeded £32,010. In 2023-24, higher rate tax is payable once taxable income exceeds £50,270 so, now, even a basic rate taxpayer can become subject to paying the HICB charge due to the freezing of the HICB thresholds.


Taxpayers who may otherwise be subject to the HICB charge can opt out of receiving Child Benefit payments but those doing so should ensure that a non-working (or low earning) partner remains eligible to receive National Insurance credits as these will count towards their State pension entitlement from State pension age.


Tip: Gross member pension contributions and/ or Gift Aid contributions have the effect of reducing adjusted net income. If ANI is reduced to below £50,000 p.a. an HICB charge will not apply. Any reduction in ANI to between £50,000 and £60,000 p.a. will reduce the HICB charge and increase the net benefit of any Child Benefit received.

High income

Gross member pension contributions and/ or Gift Aid contributions have the effect of reducing adjusted net income. If ANI is reduced to below £50,000 p.a. an HICB charge will not apply. Any reduction in ANI to between £50,000 and £60,000 p.a. will reduce the HICB charge and increase the net benefit of any Child Benefit received.



Changes in the ‘basis year’

for the self-employed

We are now in the transition year prior to the change in basis year for the self-employed and partners in partnerships. From 2024-25 sole traders and partners will be taxed on profits generated during the tax year (6 April - 5 April) rather than the current arrangement where they are taxed on profits accruing during the accounting period ending in a particular tax year. Those whose accounting period ends between 31 March and 5 April will not be affected (HMRC views such accounting periods as corresponding to the relevant tax year).


During the 2023-24 transitional tax year, those affected by this change will need to declare profits from the end of the last accounting period in 2022-23 to 5 April 2024 (‘transitional profits’). Any overlap relief accrued from when the business started can be deducted from these transitional profits, with the balance of these profits, transitional taxable profits, then taxed in equal instalments over the next 5 tax years.


The individual will then be assessed for income tax in the 2023-24 tax year on profits accruing during the accounting period ending in 2023-24 plus 20% of the transitional taxable profits (with a further 20% of these transitional taxable profits being assessed in each of the 2024-28 tax years).


These additional transitional taxable profits will have the effect of increasing the individual’s income subject could tax and could result in some profits becoming subject to higher rates of income tax. In addition, if the individual’s adjusted net income is increased to over £100,000, the individual may suffer tapering of their personal allowance resulting in a marginal income tax rate of up to 60% on a slice of their income. Transitional taxable profits are not, however, taken into account when calculating whether an individual is subject to the High Income Child Benefit charge or in the calculation of adjusted income for the purposes of the tapered pensions annual allowance.


Taxpayers can reduce the period over which any transitional taxable profits are spread and elect that these are assessed in equal instalments over a period of 1, 2, 3 or 4 tax years rather than the ‘default’ option of 5 years. Reducing the period over which transitional taxable profits are assessed can allow higher pension contributions to be made (especially if carry forward relief is available) whilst minimising tax liabilities.


Pension contributions and/ or Gift Aid contributions can reduce adjusted net income and ‘stretch’ income tax bands. These could help avoid any tapering of the individual’s personal allowance and/ or result in slices of income being subject to income tax at lower tax rates. Taxpayers with transitional taxable profits may need to seek advice to determine the most tax effective period over which these should be assessed.

basis year

Automatic enrolment

The auto-enrolment thresholds that are used to set workplace pension contribution rates remain unchanged in 2023-24. ‘Workers’ who are aged at least 22 and earning at least £10,000 per year are required to be automatically enrolled into a workplace pension scheme unless they meet one of the exemptions. Other workers can also ask to join the scheme and the employer cannot refuse this.


Typically, the employer will contribute of at least 3% of the worker’s earnings between £6,240 and £50,270 per year, and the worker at least 5% (including any basic rate income tax relief) of these earnings, to a workplace pension scheme. A worker who does not wish to join a workplace pension scheme can opt out of joining the scheme, but this opt-out will need to be renewed every three years.


Further details on workplace pensions are available here.

auto enrolment

Capital gains tax

& separating couples

Capital gains tax (CGT) legislation allows the transfer of assets between spouses or civil partners on a ‘no gain, no loss’ basis in any tax year in which they are living together. This means that the receiving partner is deemed to have acquired the asset at the same base cost as the transferring partner and the transfer of the assets does not trigger a disposal for CGT purposes.


Should the spouses separate, or cease to live together, this treatment only continues to apply during the tax year in which the separation takes place. Any transfers made in subsequent tax years are treated as disposals for CGT purposes.


New legislation is being introduced in this year’s Finance Bill to provide more flexibility for separating couples from 6 April 2023, in particular:

  • Separating spouses or civil partners will be given up to three tax years, following the tax year of separation, to make transfers of assets on a no gain, no loss basis;

  • The no gain, no loss treatment will also apply to assets transferred as part of a formal divorce agreement;

  • If an interest is retained in the former family home, the spouse or partner leaving the house but retaining the interest will be able to claim Principal Private Residence Relief when the house is sold; and

  • Those who transfer their interest in the family home to their previous spouse or civil partner but are entitled to receive a proportion of the sales proceeds when the house is sold, will be able to apply the same tax treatment to the sales proceeds that applied at the time that they transferred their interest.


Changes to the taxation of investments

The reduction in the capital gains tax annual exempt amount from £12,300 in 2022-23 to £6,000 in 2023-24 (£3,000 for trustees in 2023-24) and to the dividend allowance to £1,000 (£2,000 in 2022-23) could lead to investors incurring higher tax liabilities on their portfolios.


To avoid unwelcome surprises, investors should review their portfolios and make adjustments, as required. Situations for review could include:

  • Portfolios with large gains;

  • Portfolios from which income is withdrawn or capital regularly encashed;

  • Portfolios subject to tax which may be automatically rebalanced to maintain a target asset allocation and/ or to match the investor’s risk profile;

  • Portfolios from which encashments are made automatically to fund an ISA (or other scheme) each year; and

  • Portfolios held within a trust.

tax invest

Investors holding investments showing a loss within their portfolio should consider using these losses to reduce the CGT liability on any realised gains. Any losses that are realised within the same tax year as gains are used to offset the gains until the gain is reduced to £0.

If there are insufficient losses to reduce the gain to £0 but net gain is then less than £6,000, some or all of the CGT annual exempt amount will have been lost. Investors should plan, where possible, to limit same year realised losses to allow full use of the available CGT annual exempt amount.

If realised losses exceed realised gains in a tax year, the excess losses can be carried forward to set against realised gains in future years (such losses must be registered with HMRC within 4 tax years of the year of the loss, typically via the self-assessment tax return).


Those with carried forward losses can choose how much of these losses are set against realised gains in a particular tax year. Again, losses should be used to reduce, where possible, the net gain to the level of the CGT annual exempt amount applying in that tax year. Any remaining losses can again be carried forward to set against future realised gains.




Those seeking to secure a guaranteed income, either for life or for a defined period, may wish to consider whether annuities offer a solution. Recent increases to interest rates have boosted gilt yields and had a knock-on effect on annuity rates.


Those in ill-health or who have a reduced life expectancy may also be offered an enhanced annuity rate. Some providers will also take the applicant’s post code into account when setting annuity rates. An annuity can provide income for the annuitant’s lifetime or for a defined period. Joint annuities allow the income to continue after the first death.


An annuity can be purchased using funds held in a registered pension scheme (a pension annuity) or with other (non-pension) capital (a purchased life annuity). There is a wide range of different options available when purchasing an annuity and it is likely that the purchaser will need to seek advice to fully understand these options.


Pensions dashboard

The roll-out of the pensions dashboard has suffered a further delay. The revised date when the dashboard will start to be rolled out has not been announced yet.


Once available, the pensions dashboard will allow pension savers to see all of their pensions (including private pensions, workplace pensions and State pensions) in one place. This should help savers to plan effectively for later life. We will provide further detail on the pensions dashboard in a future bulletin.

Pension dash

Buy-to-let landlords

Refinancing loans

Buy-to-let landlords who may be looking to refinance mortgages, for example when a fixed term deal ends, need to be aware of interest coverage ratios (ICRs). The ICR is the key affordability measure that mortgage lenders use for buy-to-let mortgages when assessing loan applications.


For basic rate taxpayers and limited companies the ICR sets the maximum mortgage repayments at 125% of the rental income, while for higher rate taxpayers, the ICR is set at 145% of rental income, so, for example, if rental income of £10,000 p.a. is received by a higher rate taxpayer, the maximum mortgage repayments are £6,896 p.a. (£10,000/ 145%).


As interest rates have increased over the last couple of years, rental income has not kept pace with these increases, so a buy-to-let mortgage borrower may find that they are not able to refinance an existing loan without raising rents (which may not, in itself, be feasible) to meet the lender’s minimum ICR requirements.


If a property’s ICR falls below 110%, the property may be deemed unmortgageable. Changes to the taxation of buy-to-let rental income, high inflation rates, increasing interest rates and the effects of fiscal drag are all combining to make ownership of buy-to-let properties using mortgage finance increasingly unattractive. Other changes to legislation that landlords face are also not helping!


Those with buy-to-let mortgages that may require refinancing over the next couple of years, during which interest rates are expected to remain high, should assess their borrowing capabilities against the ICR and, where their ability to borrow may be impacted, consider taking action before reaching the end of their current mortgage term.


Trust regulation

Trustees of most trusts in existence before 3 June 2022 were required to register their trusts on HMRC’s Trust Registration Service by 1 September 2022. A trust created after 3 June, requiring registration, should be registered within 90 days of its date of creation.


It appears that several hundreds of thousands of trusts, that should be registered, have not been. We would recommend that trustees of such trusts act sooner rather than later to ensure that their trusts are registered. At some stage, HMRC will start enforcement action and trustees who have failed to register a trust requiring registration could face penalties of up to £5,000 per offence. Trustees of unregistered trusts may also encounter difficulties when dealing with ‘obliged entities’ such as banks, building societies, insurance and investment providers, estate agents and other professional advisers.


Those trustees who have registered their trusts must also ensure that the details held on the Trust Register remain accurate and up to date. Any changes should be updated within 90 days of the date of the change. In addition, trustees of a taxable trust are required to make an annual declaration, through the Trust Registration Service, that the registered details are accurate and up to date.

Trust reg

Insuring business owners

& key personnel

The loss of a business owner or key employee through serious illness or death can have a catastrophic effect on a business. The financial effects of such a loss can be mitigated by the business taking out insurance policies on key personnel to provide for the financial consequences that can arise on such events.

  • Shareholder protection can provide funds allow remaining shareholders to purchase a deceased or incapacitated shareholder’s shares in the business, thereby passing the funds to the shareholder’s family and allowing the remaining shareholders to maintain control of the company.

  • Partnership protection can perform a similar role to shareholder protection for partnerships

  • Keyperson insurance allows an employer to insure against the loss of profits attributable to the loss of a key person(s) in the company.


There is no ‘one size fits all’ solution so advice is important to ensure that the correct solution is implemented.

insuring business

Avoiding HMRC penalties

The UK tax code is now some 21,000 pages and 10 million words long. This complexity means that many taxpayers may make innocent mistakes, particularly when they are not receiving professional help, when reporting their tax affairs through the self-assessment system.


Whilst it is possible to submit a corrected self-assessment tax return within 12 months of the 31 January following the end of the relevant tax year, this relies on any mistake being identified in time. Although it will not necessarily protect the taxpayer from incurring an HMRC penalty, it may help with mitigation. Any additional tax liability that may arise should, of course, then be settled promptly to avoid interest payments rolling up on the outstanding amount.


There have been a number of articles in the press recently where HMRC has taken enforcement action against taxpayers who have not reported a liability to the High Income Child Benefit charge.


When setting penalties, HMRC will take account of whether the taxpayer has behaved in a careless, deliberate or deliberate and concealed manner and whether the issue had been raised by the taxpayer with HMRC or they had had to find it themselves. Where the taxpayer reports the mistake, a penalty can be reduced by up to 30%. Helping HMRC with their enquiry could lead to a 40% cut and providing access to relevant records a further 30% cut, although HMRC also takes account of the time it took for the disclosure to be made. It may also be possible to negotiate on the size of the penalty!


Taxpayers also have the right to appeal a penalty which could lead to it being cancelled, but the appeal itself may generate costs, especially if professional help is needed.


It is also important to remember that it is the taxpayer’s responsibility to report any tax liability to HMRC, it is not up to HMRC to find it! Those who are taxed under the PAYE system and may not be required to complete a self-assessment tax return may still incur other income tax or capital gains tax liabilities that need to be reported (examples include savings income in excess of the personal savings allowance, dividends in excess of the dividend allowance or gains made when assets are disposed of).


It is the taxpayer’s responsibility to accurately declare tax liabilities to HMRC. If a mistake in a declaration is identified, the taxpayer should take action to inform HMRC as soon as possible. In some cases, professional assistance from an accountant or tax specialist may also be required.



The information provided in this bulletin is based on Financial Framework Wealth & Estate Planning's understanding of applicable legislation and current HMRC practice as at 1 May 2023. Nothing should be deemed as advice as areas will depend upon your own personal circumstances. Individuals should consult with their advisers before taking positive action.

bottom of page