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Financial Planning

September 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).

Budget pension changes

Passed into law

A number of important pension changes were announced in the Budget in March 2023. These included increasing the annual allowance to £60,000 and the removal of the lifetime allowance. These changes have been placed into law in the Finance (No 2) Act 2023, which was passed in July.


At the Budget, it was made clear that the lifetime allowance would still effectively apply for the purposes of the pension commencement lump sum (PCLS), with tax free cash limited to 25% of £1,073,100 or, if applicable, a higher elected lifetime allowance. One slight surprise was a provision that means that lump sum death benefits, paid in respect of those who died aged under 75, that exceed that person’s previous lifetime allowance figure would, going forward, be taxed on the individual recipient with the Scheme Administrator deducting tax under PAYE on the payment to the beneficiary. If paid to a bypass trust, the Scheme Administrators must deduct income tax at 20% from the lump sum payment.


It remains the case that no such income tax liability arises on death benefits designated to drawdown.

So, currently, if a scheme member dies aged under 75 with scheme benefits above the lifetime allowance and it is desired to get those benefits fairly quickly into the hands of a single beneficiary, a designation to drawdown with a subsequent large income withdrawal by the beneficiary would be the most tax efficient route. But beware, a government policy paper in July 2023 raises the possibility of all beneficiary payments from income drawdown arrangements set up on a member’s death to be taxable - even if the deceased died before the age of 75.


As ever, members should make arrangements so that Scheme Administrators have the choice to make payments on death as lump sum or by income drawdown in the most effective way, depending on the personal circumstances of beneficiaries and dependants and the tax rules that then exist. Professional advice is essential.


triple lock.jpg

State pensions

& the triple lock

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.

State pension

The additional tax rate band

& fiscal drag

As covered in previous bulletins, 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 dramatically accentuated by the recent high inflation rates, strong growth in wages and the reduction in the additional rate tax band threshold to £125,140 from 6 April 2023, causing many to pay increased rates of tax.


It is estimated that 862,000 taxpayers will pay income tax at the additional rate of 45% by April 2024, almost double the number subject to the additional rate in 2020-21. The cut in the additional rate threshold from £150,000 in 2022-23 to £125,140 in 2023-24 is expected to push a further 310,000 taxpayers into additional rate tax in 2024-25. These figures exceed the figures previously forecast by the Office of Budget Responsibility (OBR) and will result in HMRC raising an estimated additional £300 million in tax revenues.

fiscal drag

Where possible, taxpayers should look to minimise the amount of income becoming subject to additional rate income tax. Strategies such as the payment of member pension contributions, salary and/ or bonus sacrifice and independent taxation strategies (where possible) can reduce the impact of the additional rate income tax band. Professional advice may be needed to help take full advantage of the available tax-saving opportunities.


Influencers, online sellers


HMRC started sending ‘nudge’ letters to social media ‘influencers’ and online sellers in January this year to remind them that they cannot receive payments or payment-in-kind for promoting a company’s products without suffering tax consequences.


Those who receive payment or ‘gifts’ from companies should consider whether they may be seen as conducting a trade, leading to income tax, National Insurance and possible VAT implications. Where a company can be seen to be exerting control over an individual, the IR35 rules could result in that individual being treated as an employee for tax purposes.


The nature of an influencer’s or online seller’s activities mean that they are in the public view, so they are likely to be easy targets for HMRC to identify.


Changes to the

Intestacy rules

The fixed sum payable to surviving spouses or civil partners in England & Wales when an individual dies intestate leaving issue has increased by 19.3%.


From 26 July 2023, the surviving spouse or civil partner will receive the first £322,000 (up from £270,000 previously) of the deceased’s estate as well as the deceased’s personal chattels. The surviving spouse also receives 50% of any excess with the remaining 50% of the excess paid to the surviving issue in equal shares (or held in trust for them while they are minors).


Legislation states that the fixed sum should be reviewed at least every 5 years and should increase in line with the increase in the Consumer Price Index (CPI).


The distribution of an estate where an individual dies without a valid will (intestate) is set out in legislation. Whilst it is possible to change this distribution using a deed of variation, this does require the agreement of all affected parties, which may not be possible if there are minor beneficiaries. Those wishing to determine how their estate should be distributed on death should ensure that they maintain a valid will that meets their wishes.


Inheritance tax relief

& woodlands relief to be restricted

From 6 April 2024, agricultural relief and woodlands relief will be restricted to cover property located in the UK only. This will apply to transfers of value and any other occasions or events that cause an inheritance tax liability to arise.


Currently, property located in the Channel Islands, Isle of Man and EEA countries (the EU, Norway, Iceland and Lichtenstein) as well as the UK can benefit from agricultural relief and/ or woodlands relief, provided certain conditions are met.


Those considering the transfer of agricultural property or woodlands situated in currently qualifying countries outside of the UK should look to complete the transfer by 5 April 2024 if there is a desire to claim agricultural relief and/ or woodlands relief.

SA900 Trust & Estate

Self-assessment tax returns

Trustees and executors needing to submit an SA900 tax return for 2022-23 have until 31 October 2023 to submit a paper return. If submitting after this date, the return must be submitted electronically which is likely to involve the purchase of a software package from a third-party vendor. A list of commercial software suppliers is available here.


To avoid HMRC penalties, 2022-23 tax returns and any tax payable should be submitted to HMRC no later than 31 January 2024.



Savings certificates

National Savings and Investments (NS&I) has removed the ability for investors to access funds held in Index-linked Savings Certificates and Fixed Interest Savings Certificates renewed after 22 July 2023 before the certificate reaches the end of its new term. The investor will, however, have the right to cancel the certificate within 30 days of its renewal.


Certificates renewed before 23 July 2023 can be accessed early subject to penalties. For an Index-linked Savings Certificate, the penalties are 90 days’ interest on the amount repaid plus the loss of a year’s index-linking on the whole certificate. For a Fixed Interest Savings Certificate the penalty is 90 days’ interest on the amount repaid.


A summary of NS&I products is available here.


Child Benefit

& the high income child benefit charge

The High Income Child Benefit (HICB) charge applies where a parent or couple is in receipt of Child Benefit and the claimant or their partner (who need not be the person receiving the Child Benefit payments) has adjusted net income in excess of £50,000 p.a. Adjusted net income is generally gross income less any member pension contributions and Gift Aid contributions.


The HICB charge has the effect of clawing back 1% of the Child Benefit for each £100 that adjusted net income (ANI) exceeds £50,000 p.a. Once ANI exceeds £60,000, the HICB charge equals the amount of Child Benefit received. For couples, the HICB charge is assessed against the partner with the highest ANI, regardless of who actually receives the Child Benefit payments.


If a couple have subsequently separated, it is important to determine who made the original claim for Child Benefit (it can only be claimed by an individual and not a couple), as that individual (and, if applicable, a new partner) could be assessed for the HICB charge if their ANI exceeds £50,000 p.a. This is the case even if they are not the recipient of the Child Benefit payments or that they may no longer be living in the same house as the former partner and/ or the child(ren) for whom the Child Benefit payments are paid. For the purposes of the HICB charge a partner includes not only a spouse or civil partner (unless separated) but also someone with whom the person is living with, as if married or in a civil partnership.


The claimant of the Child Benefit payments is the person who receives National Insurance credits for State pension purposes.

Child benefit

Claimants who have separated, who do not receive the Child Benefit payments themselves and who have, or expect to have, adjusted net income in excess of £50,000 should consider ending the claim for Child Benefit payments. Their former partner, who is in receipt of the payments, could then make a new claim for Child Benefit.


A claimant who may not have declared a liability for the HICB charge in previous tax years should consider regularising their tax position with HMRC



HMRC to write to parents

To check NI records

HMRC and the Department of Work & Pensions (DWP) have identified that some parents may have errors in their National Insurance (NI) records due to credits for time bringing up children not being correctly allocated. NI records are used to determine the amount of State pension that one is entitled to receive.


HMRC will be writing to parents who do not have Home Responsibilities Protection (HRP) showing on their National Insurance records but have gaps in contribution histories between 1978 (when HRP was introduced) and 2010 (when HRP became NI credits). Those affected are likely to have first claimed Child Benefit before May 2000. If a National Insurance number was not provided when the claim was made, the correct number of credits for HRP may not have been added to their NI account. Those who first claimed Child Benefit after May 2000 should not be affected.


HMRC is developing an online tool to help people identify if they have been affected. They can then claim online.


Where an error is identified, NI records will be corrected and DWP will recalculate State pension entitlements and pay any arrears to those already in receipt of State pensions.

NI records



The HMRC app is available from the Google Play Store for Android devices or App Store for iOS. A government gateway account is also required, but this can be set up in the app. The app allows access to your personal tax account and also provides other information, including National Insurance history, State pension benefits, details of tax credits and Child Benefit and estimates of tax liabilities in the current tax year.


New Child Benefit claims can now be made through the app and payments can start to be made in as little as 3 working days for straightforward claims. Claiming Child Benefit also ensures that the claimant receives National Insurance credits for periods when they may not be working and that the child for whom the claim is being made will automatically receive a National Insurance number just prior to their 16th birthday.

SA threshold


Threshold change

The self-assessment threshold for those taxed through PAYE only has changed from £100,000 to £150,000 from tax year 2023-24 onwards.


However, taxpayers with income taxed through PAYE of less than £150,000 will still need to submit a tax return in 2023-24 and future years if they are:


  • in receipt of other taxed income;

  • a partner in a business partnership;

  • liable to pay the High Income Child Benefit (HICB) charge; and/ or

  • self-employed with gross income in excess of £1,000.


Taxpayers can check whether they need to submit a self-assessment tax return here.


Changes in the "basis year" for the self employed

Overlap relief information

HMRC launched an online form on on 11 September 2023 to allow self-employed taxpayers affected by the change to the basis year for tax assessment to request information on the amount of overlap relief available for their business. The form is available here. The intention of this form is to provide the information much faster than the current system where requests are made to HMRC by phone or in writing.


Details of available overlap relief are needed to calculate income tax liabilities in the current ‘transitional’ tax year, 2023-24, for those whose accounting year end date is not 31 March or 5 April and will be used to calculate the additional payments to be made in each of the next 4 tax years to 5 April 2028. Those who have changed their accounting year end date to align with the end of the tax year but who did not claim overlap relief at the time, or who have stopped trading in the 23-24 tax year may now wish to also make a claim.

basis year

Chargeable event gains

On investment bonds

An investor realising chargeable event gains on an onshore (UK) investment bond and/ or offshore investment bond is obliged to report these gains to HMRC even if they have not received a chargeable event certificate from the insurance company providing the bond.


HMRC has updated its guidance on chargeable event gains in help sheets HS320 (for onshore investment bonds) and HS321 (for offshore investment bonds). These guides now explain how to report chargeable event gains.

investmet bonds

Dividend diversion schemes

To fund education

HMRC has warned that dividend diversion schemes to fund education costs are caught by specific anti-avoidance legislation and, therefore, do not work. The schemes are structured using an owner managed limited company to create a new class of shares eligible to receive dividends.


These new shares are then purchased by, say, a parent or sibling of the company owner who then places the shares in trust for the benefit of the company owner’s children.


The company then declares a substantial dividend on the new share class which is then paid to the trustees of the trust who use it to fund education costs. As the absolute beneficiaries of the trust, the company owner’s children are assessed for income tax on the dividend income. As the children are likely to have a full £12,570 personal allowance, £1,000 dividend allowance and eligibility for dividend taxation at the basic rate of income tax (8.75%), it is likely that a substantially lower income tax liability arises on this dividend income than if the dividends had been paid to the company owner directly.


HMRC believes that the income tax settlement rules are likely to apply to neutralise any tax advantage of such arrangements and strongly advises that anyone involved in such a scheme should withdraw from it and settle their tax affairs. It is likely that professional advice will be required.

div diversio

Relevant life policies remain attractive

Following the removal of the lifetime allowance

Although the government announced in the March 2023 Budget that the lifetime allowance is to be abolished, the reality is that the lifetime allowance has only effectively been removed as far as pension benefits are concerned.


As regards tax free cash (pension commencement lump sum) or lump sum death benefits, it still effectively exists with excess lump sum death benefits now being taxed as income on the recipient beneficiaries, rather than levied at 55% by the Scheme Administrator. 


This means, in effect, that when a Scheme Administrator is paying out a lump sum death benefit:


  • they need to check whether the payment, taking account of other payments, exceeds the relevant lifetime allowance (LTA) or numerical equivalent that applies to the deceased member. This is undertaken by liaising with the deceased’s personal representatives; and

  • if it does exceed the LTA, they must deduct income tax under PAYE on the part of the payment that exceeds the member’s LTA.


Relevant life policies (RLPs) offer small and medium-sized businesses (SMEs) an alternative to group death-in-service schemes for employees (including salaried directors). An RLP is taken out as an individual term assurance policy written on the life of the employee which is then placed into a discretionary trust for the benefit of the employee’s family or dependants. It pays out benefits, that are free of income tax, in the event of the employee’s death or on diagnosis of a terminal illness. An RLP must end before the employee reaches age 75.


Where it is desired to provide life cover for an employee that exceeds that employee’s LTA (or former LTA), a relevant life policy will continue to be very attractive because there is no limit on the amount of tax-free death benefits that can be paid. RLPs also offer several other tax benefits including tax relief on employer contributions, no benefits in kind charge on the employee and it is very likely that benefit payments will be free of inheritance tax.

Relevant life
shares in private comps

Share purchases in private companies

Extending entitlement to business relief

Probably the most effective way of providing for the purchase of a deceased shareholder’s shares in a private company by the surviving shareholders is by using a share protection arrangement. This involves a life assurance policy written in trust, a single or double (cross) option agreement and suitable provisions in each shareholder’s will.


The arrangement provides tax-free funds to the surviving shareholders to purchase the shares from a deceased shareholder’s personal representatives, meaning that the cash value of the shares is then received by the beneficiary(ies) of the deceased shareholder’s will. If the purchase is made under a single or double option agreement, there will be no inheritance tax liability on the shares on the shareholder’s death because they will be treated as shares in an unquoted limited company rather than cash. This is important if somebody other than the deceased’s spouse or civil partner inherits the shares as the inheritance tax spousal exemption is not available. 


However, once the purchase has taken place, the cash will then be in the taxable estate of the beneficiary(ies) who inherited the shares and who is, potentially, fully exposed to inheritance tax on his or her subsequent death. This can be avoided by each shareholder making a provision in their will so that, on their death, their shares pass to a will trust under which the intended will beneficiary(ies) is a potential beneficiary.


In such circumstances, as well business relief being available on the shares on the shareholder’s death, the sale proceeds for the shares would not form part of the taxable estate of the beneficiary(ies) and the cash would not increase the inheritance tax liability on a beneficiary’s subsequent death. Of course, the trustees can still pay benefits out of the trust to a beneficiary, and, if these payments are made as interest-free loans repayable on demand, which the surviving beneficiary then spends, they will be debts on his or her estate and further reduce inheritance tax on that beneficiary’s subsequent death. 


In a business succession arrangement, the use of bypass trusts in the wills of each of the shareholders can save inheritance tax in the long term with no effective loss of financial flexibility or security for the beneficiary(ies) of the deceased shareholder’s will inheriting the company shares.


IR35 off payroll

Working rules

A legislative flaw in the current IR35 off payroll working rules can result in a double tax charge on businesses should non-compliance with the rules occur.


Currently, HMRC does not take account of any taxes that a contractor has already paid when calculating the tax liability due from the business engaging the contractor in the event of non-compliance. This then results in HMRC netting more in taxes than it should and has acted as a deterrent for businesses to engage contractors.


We now understand that HMRC will correct this legislative flaw from 6 April 2024 and start to take account of taxes already paid by contractors when calculating a business’ tax liability in the event of non-compliance with the rules. This should be good news for freelancers and contractors as it removes reasons for a business not to engage flexible workers.


Changes to auto-enrolment pensions

On the way

The Pensions (Extension of Automatic Enrolment) (No 2) Act will widen the scope of the current auto-enrolment (AE) rules and result in younger workers and those in lower-paid employment being able start building pension benefits earlier and faster.


The Department of Work and Pensions (DWP) will be holding consultations on how the new measures should be implemented. It is likely that they will be phased in over time so that employers and employees have time to get used to the increased contribution levels.


The new measures include:

  • the removal of the lower age limit for employees (currently age 22); and

  • the removal of the current £6,240 qualifying earnings lower limit so pension contributions will apply from the first pound earned.


It is not currently known when the new measures will be implemented, but we will provide updates in future bulletins.

Auto enrol
CTF unclaimed
trust find.jpg

Child trust funds

Unclaimed funds

HMRC is encouraging around 430,000 18-21 year olds, who may have unclaimed Child Trust Funds, to claim these funds. The average account value is £2,000.


Child Trust Funds were set up for children born between 1 September 2002 and 2 January 2011. The government made an initial contribution to each account of at least £250. The accounts mature when a child attains the age of 18 and any funds can then either be withdrawn or transferred to an adult ISA.


There were around 5.3 million Child Trust Funds in existence on 5 April 2022. Between 1 September 2020 (when the first eligible children attained age 18) and April 2022 around 956,000 accounts matured, of which 528,000 were claimed or transferred to an ISA. Several hundred thousand further accounts will also have matured in the last 18 months or so.


If details of a Child Trust Fund cannot be found, HMRC can provide information on where the account was originally opened. Further details are available on


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.

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