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The UK tax system has grown increasingly elaborate, thanks to revenue-raising tweaks such as the freezing of many elements and multiple reforms of dividend taxation. With more changes possible in coming years – even after the £40 billion Autumn Budget 2024 tax rises – the complexities are only likely to increase.

This guide offers a brief outline of how your investments are currently taxed and future changes (or freezes) that have already been announced, including those set out in the 2024 Autumn Budget. The Covid-19 pandemic and 2022 energy price spike both hit Government finances hard and ever since, successive Chancellors (and their Scottish counterparts) have been taking significant steps to raise revenue. As result: 

• Many personal tax allowances and bands are now frozen until April 2028, despite inflation having peaked at over 11% in October 2022, in the first tax year of the freeze.
• There was a six percentage point jump in the main rate of corporation tax from April 2023.
• April 2023, the starting point for additional rate tax (top rate in Scotland) has been £125,140, nearly £25,000 below the previous (frozen) level.
• In Scotland a further 1% was added to the higher and top rates from 2023/24 and another 1% to top rate in 2024/25, taking them to 42% and 48%. Scotland also saw the introduction of a new 45% ‘advanced rate’ of tax for income between £75,000 and £125,400 in 2024/25.
• The taxation of dividends is now much less generous than when the current structure was introduced in 2016/17.
• Following the Autumn Budget 2024, the tax burden is on course to reach 38.2% of GDP by 2029/30, its highest since 1948 and over five percentage points above the pre-pandemic figure.

Expert advice is necessary if you require more information or a greater insight into how to cut your share of the growing tax burden.

Click here to download your copy of Investing tax efficiently.

This publication is for general information and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. This publication represents our understanding of the Finance (No 2) Act 2024 and law and HM Revenue & Customs practice as at 6 April 2025.

We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change.

There were no tax increases in the Chancellor’s Spring Statement (upgraded from an initial Spring Forecast), but that might just be pain deferred.

Before becoming Chancellor, Rachel Reeves set out a new goal for the public finances, now badged the ‘Stability Rule’. In simple terms, this requires that the Government should at least match its day-to-day expenditure with what it receives in tax and other revenue. In 2024/25, the Office for Budget Responsibility (OBR) projects there will be a shortfall under this rule (technically a current budget account deficit) of £60.7 billion. Following past Government tradition of fiscal targets, the Chancellor has set a five-year goal taking us to 2029/30. 

When Rachel Reeves presented her Budget last October, the OBR projected that she would meet her Stability Rule with £9.9 billion to spare. However five months later, the OBR recalculated the margin (often called headroom) in preparation for the Spring Statement and concluded that, with no changes, the Rule would be missed by £4.1 billion – a £14 billion reversal. 

Given that the margin of £9.9 billion (about 0.7% of total Government expenditure) proved inadequate last time, it is surprising that the new headroom figure is also £9.9 billion. This is despite the raft of Spring Statement measures – mostly spending cuts. The apparent circularity of the Spring Statement process has prompted speculation that the large cuts to welfare benefits were tailored to fit the Stability Rule, rather than wholly founded in encouraging more people into work.

The problem with maintaining a small £9.9 billion headroom is that when the OBR’s next assessment arrives in the autumn, there is a similar risk of missing the Stability Rule once again. The OBR’s judgement day will coincide with the Chancellor’s one ‘fiscal event’ of the year – the Autumn Budget. A second miss would probably see Reeves turn to tax increases rather than more spending cuts to recover the situation. 

There were already signs of preparation for such a move in the Spring Statement. For example, hidden in the main document was a comment about reviewing the balance between cash and shares in Individual Savings Accounts (ISAs). Reducing the amount that could be placed in cash ISAs would yield extra revenue, because it would mean less tax relief being given.  

It seems likely that, as happened in 2024, speculation about tax rises will get underway before summer begins. Taking time to focus on your financial planning over the next few months could be more important than ever.  

Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.  

The Office for National Statistics has taken a fresh look at our mortality. 

Roughly every two years, stories in the media tell us how many children will live to the age of 100. The latest projections are that 11.5% of boys and 17.9% of girls born in 2023 will become centenarians.

The prompt for these biennial tales is the Office for National Statistics (ONS), which publishes updated tables of UK life expectancies every other year. The ONS work draws on the latest mortality data and research-supported estimates of how rapidly life expectancy will improve in future years. The data not only provides a few clickbait headlines: it feeds into many areas of Government policy, providing projections for the size and shape of the country’s population over the next 50 years.

SPA increases

One area where the ONS data has an impact is the thorny topic of increases to State Pension Age (SPA). While the move to an SPA of age 67 is now set in stone (by April 2028), the timing of the next step to age 68 is yet to be finalised. Currently, legislation dating back to 2007 says the change will be made between 2044 and 2046. Since 2007, there have been two ‘periodic reviews’ on the subject, the first of which proposed 2037–39 and the second proposed 2041–43. Both prompted the same Government response: the promise of a further (post-election) review. 

The next review is due by July 2026. As the Government has promised to give at least a decade’s notice of any change, there is little time if 2037–39 is to be chosen. However, it now seems unlikely that a 2030s change will happen as illustrated by the graph above. When the first review was issued (in 2017), it drew on ONS projections (with a 2014 base year) which said that by 2038 a 68-year-old male and female could expect to live another 21.2 years and 23.1 years respectively. The latest ONS data (2022 base year) has cut those projections to 18.5 years and 21.0 years.

Those drops, which reflect a marked slowing in the speed of life expectancy improvement, suggest that the Government may take the easy option and keep to the original 2044 and 46 schedule. They also imply the move to a SPA of 67 should be deferred, but there is little chance of that, given the state of Government finances. 

The House of Commons Treasury Committee has been pondering the future of Lifetime ISAs (LISAs).   

The Lifetime ISA (LISA) is arguably a good example of brand overstretch. When ISAs were first launched in 1999, there were only two varieties, and they replaced two existing tax-favoured savings plans – PEPs (personal equity plans) and TESSAs (tax exempt special savings accounts). As ISAs grew in popularity, Chancellors could not resist expanding their remit. In 2011, the Junior ISA was introduced, followed in 2015 by the Help to Buy ISA and in 2016, the Innovative Finance ISA. Finally, in 2017, LISA came on the scene.

LISAs have survived and grown in popularity but still account for less than 4% of total ISA subscriptions, based on the latest (2022/23) HMRC data. That relative lack of success has prompted the House of Commons Treasury Committee to open an inquiry, “into whether the Lifetime Individual Savings Account is still an appropriate financial product nine years after it was created”.

The Committee has been taking evidence from experts in the savings field, including the think tank member credited with designing the LISA and the ubiquitous Martin Lewis. As a reminder, the broad rules for LISAs are:

• They can only be started by somebody aged 18–39 and no subscriptions can be paid beyond 50.
• The maximum subscription is £4,000 per tax year (which counts towards the overall ISA maximum of £20,000). 
• The Government provides a 25% uplift to the contribution, e.g., a £4,000 subscription becomes a £5,000 investment.
• The funds in a LISA can only be used without penalty:
  • To provide for the purchase of a first home with a maximum value of £450,000 (unchanged since 2017); and/or
  •  If drawn from age 60 onwards.

If benefits are otherwise withdrawn, a 25% penalty applies, e.g., a £5,000 fund delivers a net £3,750 to the LISA owner.

Among the points made by the experts, one that drew common criticism was that the 25% withdrawal charge does more than claw back the Government uplift. During the pandemic, the charge was temporarily reduced to 20% (effectively matching the uplift) and there was a consensus that the post-Covid reversion to 25% was an error.

There was less agreement on the suitability of LISAs as replacements for other forms of retirement planning, a reminder that if you are considering a LISA then advice should always be taken. 

Tax treatment varies according to individual circumstances and is subject to change.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. 
The Financial Conduct Authority does not regulate tax advice.  
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. 
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. 

The Government is showing no signs of changing its plans to levy inheritance tax (IHT) on pensions. 

Sometimes what creates the most noise (in the wake of a Budget) is not what will hurt the taxpaying population most in the future. A perfect example from last October’s Budget is the set of measures aimed at increasing IHT receipts. 

The changes to agricultural relief and business relief, which have brought tractors out in force around the UK, is projected to add £520 million a year to the Exchequer’s coffers by 2029/30, according to the Office for Budget Responsibility (OBR). There is no breakdown between the farming and non-farming aspects. However, the Treasury’s Budget Day press release on the changes showed that in 2021/22, the tax cost of business relief was almost twice as much as that of agricultural relief.

The proposed introduction of IHT on pension benefits has not as yet produced any organised blockades of central London nor caused disruption of ministerial speeches. However, the reform is projected to yield £1,460 million extra in IHT receipts in 2029/30. For comparison, the total amount raised by IHT in 2025/26 is forecast by the OBR to be £8,700 million.

The Government ran a 12-week technical consultation on the new pension/IHT framework which ended on 22 January 2025. There were over 500 responses according to media reports, an abnormally high number for a tax consultation. Unusually, the Chief Executive Officers of several major investment platforms (that administer pensions) wrote a joint letter to the Chancellor, setting out their concerns. They said, “The complexity of the proposed approach, namely bringing all pensions into estates for IHT, will lead to substantial delays paying money to beneficiaries on death and cause distress for bereaved families.”

The Treasury was reported to be surprised at the volume of responses, but there is no evidence that it is having second thoughts. In mid-March, the new Pensions Minister, Torsten Bell, told the Pensions and Lifetime Savings Association conference that “…we are going ahead with making sure pensions are used for [their intended purpose].”

The final details of the new regime are still awaited and there might be further consultation. For now, if you have any doubts about the wisdom of making further pension contributions, do take advice. 

Tax treatment varies according to individual circumstances and is subject to change.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. 
The Financial Conduct Authority does not regulate tax advice.  
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.

2025 introduces a technical change to company car tax, which could alter your next choice of car.   

In recent years, the tax rules for company cars have provided a major incentive to choose a battery electric vehicle (BEV), with zero CO2 emissions, or a plug-in hybrid electric vehicle (PHEV) with CO2 emissions of 1-50g/km.

While there is no argument that a pure BEV produces no CO2, the amount of CO2 emitted by PHEVs has been called into question. A PHEV that could cover only 30–40 miles using the battery alone can have official CO2 emissions that are less than a fifth of its petrol or diesel counterpart. That surprising difference is also revealed in the official fuel consumption figures, which sometimes suggest a PHEV can cover over 200 mpg against the low 30s for the fossil fuel-only version.

That CO2 difference is now about to shrink considerably because of the replacement of the old WLTP CO2 emission test with the Euro 6e-bis standard. This new measure has been introduced by the EU as a stepping stone to a new set of emission tests, which aim to better reflect ‘real world’ emissions. Euro 6e-bis has applied to all newly launched PHEVs since 1 January 2025 and will apply to all newly manufactured PHEVs from 1 January 2026. During the current year, manufacturers will have their existing PHEVs re-tested and certified under the new regime in preparation for 2026. There are few published comparisons between the two tests for the same vehicle, but one estimate is that the CO2 emission figure could nearly double.

For company car tax purposes, Euro 6e-bis will be used in place of the old WLTP as it becomes available. However, if you have a PHEV already, then your company car tax will continue to be based on the emission figure that applied when the car was registered. 

If you are changing to a PHEV this year, you may find that between ordering your new car and its delivery, the emission basis changes from WLTP to Euro 6e-bis. The result could be more than a doubling in the level of company car tax. If you are relying on a salary sacrifice scheme, the outcome could be even worse if the new measure is over 75g/km. 

Tax treatment varies according to individual circumstances and is subject to change.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. 
The Financial Conduct Authority does not regulate tax advice. 

If anything happened to you tomorrow, how much does your partner know about your finances and how easy would it be for them to find out?  

It’s been five years since the pandemic turned the world upside down. The experience provided lessons in many aspects of life, not least its potential fragility. During the lockdowns, many people became suddenly aware that they had no will or, if they did, it was woefully out of date. The realisation came at a time when making an appointment with a solicitor or will-writer was nearly impossible because of the restrictions imposed on movement and meeting.

Half a decade later, were a new pandemic to arrive, such as a mutant bird flu, are you sure that your will is up to date? If you cannot answer yes, then you know, for your family’s sake, what you need to do. However, whether or not you have made sure your will is up to date, it is best thought of as a starting point rather than the end of the matter.

To be able to follow your will’s instructions, for all but the smallest estates, the people you have chosen as your executors must first obtain a grant of probate (confirmation in Scotland). In turn, this will require them to calculate the net value of your estate. This is often the point at which executors begin to realise the task they have taken on. 

Accessing records

Imagine that your estate was the one to be valued: how easy would it be for your executors to prepare a list of what you owned and what you owed? Initially, they might ask a surviving spouse or partner – if one exists – for details. Unfortunately, that can sometimes produce a response such as, “Sorry, I always left money matters to him/her”. 

What your executors would hope to find is a reasonably up-to-date list of your investments, bank accounts, pensions and other assets, including any borrowing (for example: credit cards, personal loans and mortgages). Ideally, each item on the list would have the relevant account/customer numbers and contact details. 

If you haven’t already set up such a document – on paper or an accessible digital form – your executors are not the only ones facing a struggle. You may be, too, trying to manage your finances, especially as you get older. Taking the time to organise your affairs now, while you can, could be one of your greatest gifts to those you will leave behind. 

The Financial Conduct Authority does not regulate wills and will writing. 

The start of the new tax year warrants as much planning as the end of the old tax year. 

While the end of the tax year on 5 April is a major focus of tax planning, it doesn’t end there. The following day may require much less immediate attention, but there is an argument for considering it to be just as important. For example:

• Personal allowances
  The personal allowance for 2025/26, the new tax year, remains at £12,570, the same as it has been since 2021/22. Above that level, income tax will normally enter the equation. If you (or your spouse/civil partner) do not have enough income to cover the personal allowance, then you could consider transferring investments between yourselves so that the income generated escapes tax. You should also consider whether or not to claim the marriage allowance if your partner pays no tax and you pay no more than the basic rate (or vice versa).
  • At the opposite end of the income scale, once your income (after certain deductions) exceeds £100,000, you start losing your personal allowance at the rate of £1 for each £2 of excess. In those circumstances, a transfer of investments and the income generated can also make sense – this time by reducing your taxable income. 
• Other tax allowances and bands
  Similar principles apply to other allowances, such as the personal savings allowance (up to £1,000), the dividend allowance (£500) and the thresholds of tax bands. It is much easier to shuffle around future income at the start of the tax year than attempt to do so as 5 April looms near. 

• High income child benefit charge (HICBC)
  If you or your partner (marriage is irrelevant) have income (after certain allowances) of over £60,000 and both claim and receive payments of child benefit, then whichever of you has the higher income is taxed on that benefit. The tax charge is 1% of the child benefit for each £200 of income over the £60,000 threshold, meaning the tax matches the benefit at £80,000. If you have two children, this is equivalent to an extra 11.26% added to your marginal tax rate. Shifting your investment income could therefore save tax, even if you both pay the same marginal rate of tax.

For more details on these and other new tax year opportunities, please talk to us – as with year-end planning, the sooner, the better. 

Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice. 

This year Action Fraud and Meta are encouraging the public to protect their social media and email accounts as data shows there were more than 35,000 reports made last year.

Data shows there was a rise of social media and email account hacking reported in 2024, with a total of 35,434 reports made to Action Fraud, compared to 22,530 reports made in 2023.

Action Fraud, the national fraud and cybercrime reporting service, has launched a campaign, supported by Meta, to encourage people to take an extra step of online protection by enabling 2-Step Verification for each online account they have. The warning comes as reporting shows nearly £1 million was lost to hackers last year.

The most common motives for social media hacking were either investment fraud, ticket fraud or theft of the targeted account, reporting insights revealed.

Adam Mercer, Deputy Director of Action Fraud, said:

“As social media and email account hacking remains the most reported cybercrime this year, this Action Fraud campaign marks a critical issue for everyone who has online accounts. That’s why we’re raising awareness of the ways people can protect themselves online.

“Follow Stop! Think Fraud advice and protect yourself online: enable 2-Step Verification on each online account you have – this will help prove your identity and stop fraudsters trying to steal or access your valuable information. Secure your social media and email accounts by ensuring each password is strong and uses three random words. Remember to never share your passwords with anyone else.”

David Agranovich, Security Policy Director, Meta, said:

“Scammers are relentless and continuously evolving their tactics to try and evade detection, which is why we’re constantly working on new ways to keep people safe while keeping bad actors out. Two-Factor Authentication (2FA) is one crucial example of how people can add an extra layer of security to their Meta accounts, to help reduce the risk of scammers accessing your accounts. We’ve also started rolling out facial recognition technology to help people get back into compromised or hacked accounts and are always working on new ways to stay ahead of scammers.”

In the reports made to Action Fraud, there were various different methods of hacking highlighted, these include:

• On-platform chain hacking
  This is when a fraudster gains control of an account and begins to impersonate the legitimate owner. The goal is to convince people to reveal authentication codes, including one-time passcodes, that are sent to them via text. Many victims of this type of hacking believe it’s a friend messaging them, however the shared code was associated with their own account and the impersonator can now use it to access their account. Usually when an account is taken over, fraudsters monetise control of the account via the promotion of various fraudulent schemes, like fake tickets or crypto investment schemes, while impersonating the original account owner. 
• Leaked passwords and phishing
  The other common method of hacking is when account details are gained via phishing scams, or the use of leaked information used from data breaches, such as leaked passwords. This becomes prevalent as people often use the same password for multiple accounts, so a leaked password from one website can leave many of their online accounts vulnerable to hacking. 

What can you do to avoid being a victim?

• 2-step verification (2SV) will keep criminals out of your account – even if they know your password. Turning on 2SV gives your most important accounts an extra level of protection, especially your email and social media accounts. It can be turned on in a matter of minutes – time well spent to keep the fraudsters out.
• Email and social media passwords should be strong and different to all of your other passwords. A good way to make sure your passwords are ‘long enough and strong enough’ is to combine three random words to create a unique password which is easy to remember.

Report suspicious emails by forwarding it to: [email protected]

Find out how to protect yourself from fraud: stopthinkfraud.campaign.gov.uk

If you’ve lost money or provided your financial information to someone, notify your bank immediately and report it to Action Fraud at actionfraud.police.uk or by calling 0300 123 2040. In Scotland, call Police Scotland on 101.

By clicking on one of these links you are departing from the regulatory site of Sky Blue Wealth Management Ltd. Sky Blue Wealth Management Ltd is not responsible for the accuracy of the information contained within the linked site.

PROTECTING WHAT MATTERS MOST

Financial resilience is the ability to recover quickly from unexpected financial shocks. 

Many of us insure our homes and cars without really thinking about it, but far fewer insure their lives and incomes. Savings can help in the short-term. But what happens when they run out? Or if an illness goes on for three, six, or even 12 months? What then?

The uncertainty that a new Government brings, together with the continuing cost-of-living crisis, has focused many people’s minds on the need for a rainy day fund and financial protection, particularly considering greater awareness of the meagre nature of State support.

Increasing numbers of people are seeking advice around financial protection. Creating your own safety net can lessen the stress of financial uncertainty. Life and health insurance protection underpins most financial planning. These types of insurance can ensure that, should you or your family need it, the right amount of money will reach the right hands at the right time.

Please note that all scenarios and examples included in this guide are fictitious.

Click here to download your copy of Financial protection for you and your family.

This publication is for general information and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The Financial Conduct Authority does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme. This publication represents our understanding of the law and HM Revenue & Customs practice as at 9 July 2024.