How to Limit Taxation After Retirement

Many of us look forward to retirement and hope that we can be financially secure by the time we finish working for good. Careful planning helps but being aware that taxation can continue even past retirement is important if you are going to organise your finances properly. Here, we take a look at the issue of taxation after retirement a little closer.

Income tax

Many people do not realise that you will continue to be liable for income tax after you retire. You may not be receiving a salary any more, but many of you will receive a pension income. Although the State Pension is paid tax-free, this is only the case because it is under your Personal Allowance. You will pay tax on income received from a personal or workplace pensions once you exceed this Personal Allowance. The Personal Allowance for most people is £12,500 tax-free as of April 2019. You will also be able to withdraw 25 per cent of your pension pot tax-free in most cases.

Did you know you can now apply for a State Pension Forecast by filling in this form. This will provide you with an estimate of how much state pension you will receive, together with the date from which you can claim. Or if you know your Government Gateway login, you find out immediately online here.

For those receiving larger pension payouts, income tax is payable at the normal rates on anything over their personal allowance.

Savings and investments

Your income from savings and investments may be taxed, so it’s important to try to limit your exposure by making the most of tax-free savings products. You can invest £20,000 per year into a Cash ISA completely tax-free.

Interest on other savings is taxed, but each of us has a Personal Savings Allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. This is the amount of interest from your savings you can receive each year tax-free.

Annoyingly, you used to be able to opt into receiving your savings income with the tax already taken off by filling in the R85 form, but this is now not the case. However, if you have previously done so, you will continue to receive your interest this way. For the rest of us with savings income over £1,000, HMRC collects the tax through our PAYE code.

Capital gains tax is payable on investment income, so bear this in mind when investing in the first place. Speaking to a good IFA about tax-efficient savings and investments can help to reduce your tax liability.

Inheritance tax

We can’t talk about retirement tax without touching on inheritance tax. Changes have been made recently to inheritance tax rules, which will scrap the tax completely for couples passing on their property up to the value of £1m from the 2020/2021 tax year.

This is being brought in through a new Main Residence Allowance, which will increase in increments over the coming years until it reaches £175,000 per person in 2020. This can be added to the existing £325,000 inheritance tax allowance to total £500,000 per person, hence the £1M per couple.

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Capping the tax-free lump sum would be a mistake

A new report by an influential think tank has suggested that the tax-free lump sum for pensions should be capped at just £40,000. Giles Warren Financial, and many other independent financial advisors, think this would be a mistake.  Here, we explain why.

What is the tax-free lump sum?

Currently, pensioners are usually able to take as much as 25 per cent of their pension savings as a tax-free lump sum. The maximum this could be, with a lifetime allowance standing at £1m, is £250,000.

Now, the Resolution Foundation has published a report calling for this tax-free lump sum to be capped at just £40,000. It argues that this would generate massive revenues for HMRC while only impacting a quarter of pensioners.

The report states: “The current ability to take over £250,000 tax free is worth up to £119,000 to an additional rate taxpayer, £105,000 to a higher rate payer, £53,000 to a basic rate payer and nothing to lower income pensioners who’d be below the personal allowance each year anyway.”

Why are IFAs hitting back?

IFAs around the country have been hitting back against these claims, pointing out the fact that a move to cap the tax-free lump sum would be damaging in several ways. Most importantly, we think that capping the amount you can withdraw as a pensioner without paying tax would discourage people from saving for their retirement in the first place.

“People are already feeling discouraged from saving for their retirement and a cap on the tax-free lump sum would simply disincentivise pension saving even further,” stated Giles Warren. He added: “We have seen cuts to the lifetime and annual allowances in recent times and a further cap would make pension saving less appealing to younger workers who need to be putting money aside for their future.”

As well as the pension cap idea, the Resolution Foundation’s report also called for the inheritance tax tax-free threshold to remain at £1m. This would mean that it would not increase alongside inflation.

Here at Giles Warren Financial we believe this would amount to a stealth tax increase. It is another idea that will work to disincentivise saving – as the real rate of tax will increase over the years. Failing to adjust the tax-free threshold in line with inflation means a greater proportion of people’s inheritance will be taxed.

Other ‘tweaks’ proposed by the Resolution Foundation in their report included scrapping savings schemes such as the Help To Buy ISA and the Lifetime ISA, both of which are aimed at trying to encourage responsible attitudes to money. They are open to everyone and help people to save tax-free for their future or for a home of their own.

Giles Warren argues: “Scrapping these products will leave a great number of people with very few avenues for saving without heavy taxation.

“Saving is already unattractive to many younger people, but at least tax-free ISAs give them a means through which to grow their cash. Taking these away would be damaging.”

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How much money do I really need to retire?

Whether you have a final salary pension scheme, a private pension or no pension at all, you are likely to wonder how much money you will actually need for retirement. Perhaps you are hoping to retire early and wonder if you have enough in savings to allow you to do this. Here, your trusted Windsor IFA, Giles Warren, takes you through some simple steps to help you work out how much you are likely to need once you’ve stopped working for good.

Consider your priorities

Firstly, it’s important to point out that enough money to live on for one household isn’t necessarily enough for another. Of course you need to consider the amount of money you are used to living on now, but you also need to think about how many luxuries you are hoping to enjoy in retirement.

Many people see retiring as an opportunity to travel more, so the cost of this needs to be factored in. Others prioritise things like new cars, or eating out. Your plans for retirement, in terms of how you see yourself spending time (and money), are a crucial in helping you work out how much you need.

Will you have debts?

We all hope to be debt-free by the time we retire (and that includes a mortgage), but this isn’t always possible. Factoring in mortgage or other debt repayments is a must-do when you start to plan for retirement.

What do most people live on in retirement?

Again, this is hard to say, but research by Which? found that their members spent an average of £2,200 per month (£26,000 per year) in retirement, rising to £39,000 per year for those leading more luxurious lifestyles with long-haul travel etc.

Another common calculation for working out how much you need to retire is to aim for around 70 per cent of your current annual salary, or your final salary before retiring. You’ll then need to deduct the state pension you receive, and the value of your workplace pension and other retirement income, if you have any. This will help you to identify if you have a shortfall that will mean you need to increase your savings.

What does a state pension provide?

The current state pension for a retired couple amounts to, a not-inconsiderable, £251.90 per week. This will go some way towards covering your retirement expenses, but you’ll need to find the remainder from elsewhere if you hope to live any more than a pretty simple existence.

And Workplace Pensions?

These automatically put aside 8 percent of your income each month (from April 2019) but you may need to increase this to save enough to retire in comfort.

If you have a pension through work, you have several options in terms of how you draw down the cash – including a lump-sum, a choice that requires some self-discipline.


To conclude, there’s an awful lot in the media about the shortfall in pension and retirement income. However, many people also tend to overestimate how much they will spend in retirement. Consider talking to us about your specific situation if you have concerns about retirement and we can help you to plan for a prosperous future.

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The Autumn Budget – Our View

As trusted providers of financial planning services in Windsor and beyond, we think it’s important to provide you with a quick debrief on how the recent Autumn Budget might impact you. Below we’ll explain how Philip Hammond’s latest Budget will actually affect you and your finances.

For taxpayers…

There was good news for taxpayers in the Autumn Budget. The Chancellor had previously announced his intention to increase the Personal Allowance to £12,500 from April 2020. He also promised to up the Higher Rate threshold to £50,000 at the same time.

In the Autumn Budget he brought these changes forward by a year to April 2019, so some of will see a meaningful reduction in our tax bill a little sooner than expected.

For homeowners…

Hammond also announced the extension of the relief on Stamp Duty to First Time Buyers of shared ownership properties up to the value of £500,000. This is the second year in a row that the Chancellor has extended Stamp Duty relief, further cementing the government’s attempts to help more people get onto the property ladder.

There were also some changes that will impact those selling their homes. As a homeowner, you can avail yourself of the Private Residence Relief on Capital Gains Tax charged on profits made from property. However, there were some minor changes to tighten this relief a little.

Now, if you let out your primary residence for a period, you must be in joint residence with the tenant to still qualify for full Private Residence Relief. Also, if you move out towards the very end of the period of ownership, you will only qualify for the relief if this takes place within nine months of the sale date.

For savers and investors…

There was very little in the budget to interest savers this Autumn. Hammond did, however, offer a small crumb to parents saving for their kids’ futures with an increase in the Junior ISA and Child Trust Fund tax-free limit to £4,368.

And for National Savings and Investment (NS&I) savers, there was good and bad news. On the one hand the government said it wants to attract more people to Premium Bonds by relaxing rules on parents buying them for their children. It is also planning to reduce the minimum purchase of the bonds and release an app to make them even more attractive to savers. On the other hand, those who invested in NS&I’s index-linked savers certificates, will see their returns reduced significantly as the interest will now be linked to the Consumer Price Index, as opposed to the Retail Price Index (reducing the interest from 3.3% to 2.4% as things stand today). This is likely to leave around 500,000 people rather disappointed.

For pension savers…

Although many of us expected changes to the pension tax relief regime, this didn’t come up. However, the Lifetime Allowance, which is the limit on the value of the private pension each person can draw from before they are taxed, will increase a little to £1,055,000, from £1,030,000 from April 2019.

Our conclusion…

Despite all the talk of the ‘end of austerity’ and increased economic growth projections, there was very little in this Budget to suggest anything much has changed. It seems that the shadow of Brexit is simply looming far too ominously for Hammond to make any significant moves towards putting cash back into people’s pockets just yet.



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Pension changes – Annual Allowance and how it affects high earners.

Postitstax3There is something called the Annual Allowance which is the maximum pension contribution that an individual and employer can make into a pension.   The size of this annual allowance has been reduced from £40,000 to £10,000 for those earning over £210,000 a year.

Let’s assume Dave’s salary is in the middle of these figures – £180,000 and his employer puts in a 10% Employers salary and Dave puts in 5% – he is effectively making a £27,000 annual pension.  This will not affect Dave immediately however when it comes to January in the following tax year its time to do his Self Assessment,  he will then not be able to claim all the extra tax on his pension.

So you work it out like this – £ 180,000 – £150,000 =  £30,000 divide by 2 = £15,000.  Therefore the annual allowance will drop from £40,000-£15,000 = £25,000.

In this rough example, Dave would have normally received 20% at source on the contribution of £27,000  (£5,400) and then claimed back on Self Assessment an additional 25% (£6,750) making a total tax break of £12,150 for his £27,000 contribution.  However, under the new rules, he will only receive 45% on the £25,000 i.e. £11,250.  This equates to a loss of tax relief of £1,100.

However, there is a way in which you can claim extra pension contributions and this is by making sure you’ve used up your previous allowances by using a Carry Forward Calculator.  The Prudential has a good one which can be found at the following link Annual Allowance Calculator

 If you would like us to help you with any of this information then please call us on 01753 668831 or email


Giles Warren

[This is Giles Warren’s interpretations of the rules.  E&OE]

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New Years Resolutions

Around 50% of us make New Year’s Resolutions and “sort the finances out” must be one of the most popular: but that’s a little vague – it’s more a wish than a firm commitment to take action.

Looking at the January appointments we’ve had with new and existing clients, here are the topics that we’ve discussed most often. If you’re determined to sort out your finances, these may give you some food for thought.

1. Sort out the mortgage

The mortgage is the biggest monthly expense for the vast majority of people, and making sure that the rate you’re paying is competitive is basic common sense. Many people are paying a higher rate than they need to and half an hour with a financial planner or independent mortgage broker can be time very well spent. Yes, there are costs involved in moving your mortgage, but these can often be outweighed by the savings to be made.

2. Sort out our life cover

This is an absolute priority, especially if you have children. Many people don’t know the answer to questions like ‘how much life cover do I need?’ ‘How much do I have?’ ‘Does it include critical illness cover?’ No-one likes to think about the possibility of being seriously ill or dying, and therefore we tend to neglect our protection policies. Life cover can be surprisingly inexpensive: and even if you do have cover in place, make sure you have it checked on a regular basis. In many cases the cost of protection is continuing to fall and it may be possible to replace old policies and increase the amount of protection you have, without increasing your premiums.

3. Start saving for the children

However much you’ve just spent on Christmas presents, your children are going to cost you a lot more in the future. Whether it’s university tuition fees, a first car, your daughter’s wedding or the deposit on a house, the numbers are only going to go one way. Even if you only save a small amount, doing it on a regular basis over a long period can make a significant difference – and with the ability to save tax efficiently through an ISA, at least the taxman will be on your side.

4. Start saving for ourselves

What’s true for the children is equally true for yourself; if there’s a specific savings target you have in mind, or whether you simply need to save for the proverbial ‘rainy day,’ the earlier you start to save the easier it is to achieve your goal.

5. Sort out my pensions from previous employment

Many people have pensions left over from previous jobs, and despite various Government initiatives aimed at simplifying the system they still don’t have an accurate idea of how much is in their pension ‘pot.’ Good pension planning is impossible without knowing the position you’re starting from, so it’s a sensible idea to talk to a financial planner and find out the position with any old pension policies. For example, can they can be brought together and simplified?

6. It’s time I understood the company pension scheme

Just as importantly, far too many people don’t understand their existing company pension scheme. Is it final salary? Money purchase? Eightieths? Sixtieths? Can I make additional contributions? Buy extra years? Again, half an hour with a knowledgeable financial planner will be time well spent. He’ll be able to summarise the main benefits of the scheme for you, tell you the sort of pension you’re likely to receive and advise you of the best course of action if you want to improve your pension benefits.

7. Investigate Inheritance Tax and Long Term Care

If it’s the case that your parents are elderly, then it may be worth thinking about Long Term Care planning. Similarly if their – or your – estate is likely to be subject to Inheritance Tax, then action taken now could pay significant dividends in the future. Again, a financial planner will be able to tell you what’s possible, and the steps that could be taken now to prevent an unpleasant surprise in the future.

8. Look at Private Medical insurance

Many people look at the option of private medical insurance. This may be an investment worth making, particularly if you run your own business and would need treatment at a time to suit you.

9. We need to sort out the partnership insurance

Many businesses are run as a partnership (whether it’s a straightforward partnership or through equal shares in a limited company). The death or serious illness of one of the partners could have catastrophic consequences for the business – and serious implications for the other partner. And yet very few businesses have addressed the simple question of partnership assurance. Your financial planner will be able to explain the basic rules to you and give you an idea of what protection might cost: you may well be pleasantly surprised!

10. We need to make a will

Last – but by no means least – make sure that you have an up to date will. The consequences of dying ‘intestate’ (that is, without a will) can be severe, and with a simple will being relatively inexpensive it’s sensible to make sure that this area of your financial planning is kept up to date.

So there’s plenty to think about… If you would like to discuss any of the above points – or any other aspect of your financial planning – then as always, please don’t hesitate to contact us on 01753 668831 or

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The New Help to Buy ISA – Windsor

HotelsoncoinsDuring the 2015 Budget announcement, the Chancellor, George Osborne revealed a new type of ISA, to be made available to the public in the Autumn of this year. The Help to Buy ISA is sure to be of interest to young people in particular, or to parents with children who are currently in the process of searching for their first home. So, just what is a Help to Buy ISA and how exactly do they work?

Like a regular Cash ISA, the Help to Buy ISA is a relatively short-term savings vehicle with a few unique features. Firstly, as well as earning interest on the ISA, at a rate set by the provider, the holders of Help to Buy ISAs will also receive a contribution from the government. This contribution is set at 25%, to a maximum of £3,000. To receive the maximum government contribution, therefore, individuals will need to save £12,000 into their Help to Buy ISA to reach a total savings amount of £15,000.

The other unique feature is that the Help to Buy ISA savings can then only be used as a deposit on a first home, which is going to be the main residence of the account holder. Because of this tight control, the government’s 25% contribution will only be added to the account at the point it is converted into a deposit.

Other features

There are other controls around the Help to Buy ISA that it is worth taking note of for those planning to use them for themselves or their family. Although the monthly contribution to the accounts is capped at £200 per month, savers will be able to boost their account with a £1,000 deposit when they open it. This measure has been introduced to allow people to save for the £1,000 figure now, with one eye on the account’s introduction in the Autumn.

For anyone planning on taking advantage of this though, be aware: if you contribute to an existing Cash ISA, or set up a new one after April 5th 2015 but before the introduction of the Help to Buy ISA, you will need to wait until April 2016 to open your Help to Buy ISA account. This is because the Help to Buy ISA is classed as a Cash ISA, and tight rules around Cash ISAs only allow you to contribute to one account per tax year.

Following their introduction, it is envisioned that the Help to Buy ISA will be available for four years, to anyone aged 16 or over. For savers who open their account during that period, there is no proposed limit on the amount of time they can save into them, nor on the timeframe for exchanging the accounts for a deposit and ‘cashing in’ the government contribution. The accounts are limited to one per person, rather than one per home, so a couple can save double the deposit and receive double the contribution. The savings can be used to purchase a home worth up to £250,000 or up to £450,000 when purchasing in London.

If you have any questions please call me on 01753 668831 or email




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Pension Drawdown Freedom – Windsor

JAR_PENSION1-e1409224432636The new pension freedoms are great news for savers, with more flexibility and options for retirement now available. However, the freedoms also come with a level of risk, particularly for that first wave of savers looking to exercise their new rights in the next twelve months or so.

The main recommendation for savers is to seek independent financial advice. An adviser will be able to talk you through your options and ensure you get value for money. Whilst you weigh up your decision though, here are four more things to add to your checklist and consider carefully alongside any decision you make about how you’ll receive your pension income.

Make sure you factor in, but don’t overestimate, your state pension

It is important to remember that, alongside your private pension savings, you will also probably benefit from a state pension in your retirement. Where once it might have been tempting to rely on the state pension, now it is more readily expected that your personal savings will be your main source of income in retirement and the state pension a nice ‘bonus’.

With this as your model, it’s important to remember the income the state pension will give you when planning for your retirement, but at least equally important to not overestimate the contribution the state will make. Factor a realistic figure into your plans, alongside the income your personal pension will generate.

Don’t underestimate your lifespan

It is very common for retirees to underestimate their own lifespan and, by extension, the amount of money they will need throughout their entire retirement. Whilst it is, of course, a difficult factor to put any sort of prediction on, it is vital that you plan for a long and happy retirement, rather than risk trying to ‘get away’ with having less capital available to you. When planning your retirement income, make sure you’re planning for the long term!

Consider tax carefully

If you are looking at the new pension freedoms with some eagerness then don’t forget: whilst the taxation implications have been reduced, they have not been eradicated entirely.

After the first 25% tax free lump sum, withdrawals from your pension will be charged at your normal rate of income tax. If you are still earning an income, or if you make sizeable withdrawals in a tax year, then this could mean you enter the upper tax bracket.

Of course, if what you are planning for your pension income requires this level of withdrawal, then it may well be worth that level of taxation, but take care and make sure you have planned for, and are aware of, the taxation implications that your actions will create.

Work out what you want to do with your money, rather than just trying to get the highest amount

Perhaps the most important point of all! Whilst money is important to each of us, ultimately it is merely an enabler. There is no better aid to a happy retirement than clearly planning how you want to spend your money: the things you want to buy, the experiences you want to have, the family you want to help.

Once you have planned what you want to do with your retirement, money decisions become much easier. Will accessing your pension through the new pension freedom arrangements help you get to where you want to go in your retirement? More so than any monetary factors, this is arguably the most important question for retirees to attempt to answer.

If you have any questions please call me on 01753 668831 or email




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Pensions vs ISA’s – Windsor


Many of our clients will be aware of the tax advantages that can come from using an ISA or a pension to save for your future. If you are not currently a client however, or are unfamiliar with the tax benefits available, then it is worth briefly recapping just what you could be missing out on!

Both pensions and ISAs offer various ways to reduce the amount you pay in tax. Though there are many different types of pension – and two different types of ISA – the main difference between the two is broadly that, with a pension, you are typically locked in to saving for longer, whilst with an ISA you could access your money whenever you wanted to, though this may affect the returns you generate.

Deciding on which one is right for you or whether actually, as many clients do, that you would like to pursue both options, is a matter for each individual’s financial planning. If you are saving for an income in retirement, for example, then typically a pension would normally be appropriate. If you are perhaps planning on a large purchase in your 50s then it could be that an ISA, along with other more sophisticated financial planning strategies, can help you to achieve that.

The tax benefits of both savings options can be significant and are worth considering when deciding on your financial plan. ISAs present the promise that, in most cases, you pay nothing on any income you withdraw from your ISA account. The money you put in will more than likely have been subject to income tax already, so rather than taxing the money twice, ISAs allow you to report a gain, without incurring another tax bill. Depending on how and when the money is invested, and how long it is invested for, the gains from ISAs can potentially be sizeable, so the fact that there is no tax to pay can form significant extra income.

Pensions, meanwhile, save on tax at source. By paying in to a pension, you do not need to pay income tax on the sum submitted to your pension savings, as you do with the rest of your income. When you retire and gain access to your pension, you can take 25% of it tax free and then pay a rate of income tax on anything else you withdraw from your pension pot. If this amount lands you in a lower tax band than you had when you were working, then you could make a further tax saving here.

When it comes to deciding on how to leave your inheritance too, there is also a decision to make on how you save and pass on your wealth. More pensions than ever will now avoid the so-called ‘death tax’, which saw some pensions taxed at 55% before they were passed on to beneficiaries. This potentially makes pensions a very good option for passing on wealth, as ISAs form part of your estate for Inheritance Tax purposes, whilst pensions do not. If your estate is worth more than £325,000 on death, anything above this amount is taxed at 40%.

As you can probably tell from the above, careful individual financial planning can really help to make sense of when ISAs and pensions can be most beneficial for you and your family. There’s little doubt, though, that as part of a properly conceived financial plan, both could help to provide a real boost to your savings, helping you out in both the short, medium and long term.


Thanks for reading!

Giles Warren

tel. 01753 668831

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Property Prices Update – Windsor

House Logo Child drawingGreater caution appears to be being exercised across the UK housing market as house price momentum slowed to the same level it was 16 months ago, according to the latest Royal Institute of Chartered Surveyors (RICS) Residential Market Survey. Nationally, new buyer demand slipped for the third consecutive month and in London, caution took a particular toll, with prospective new buyer demand seeing its fifth consecutive monthly decline – a trend not seen since April 2012.

Meanwhile, stock coming onto the market remained virtually unchanged in September (a net balance of -1%), which led to a number of surveyors reporting a ‘return to more sensible prices’, as properties staying on the market for longer were now beginning to receive offers below asking price.

Interestingly, and likely in response to political rhetoric around Mansion Tax, the survey showed a drop in 12 month member price expectations for larger properties (three and four or more bedrooms), which have fallen since the start of the year to 2.2% (down from 3.8% at the start of the year) for three bedroom properties and 2.0% for four or more bedroom properties (down from 3.5% at the start of the year).

At a national level, the slowdown in buyer activity stands in contrast to the lettings market, where demand has continued to grow solidly across the majority of the UK, despite new instructions to let not keeping pace with the rise in tenant demand.

However, despite market conditions, surveyor expectations for price growth over the coming three months remain positive, with only surveyors in London expecting to see values decrease and prices across the rest of the UK still expected to rise by an average 2.1% over the year.

Demand and supply are looking a little more balanced, which is removing some of the upward pressure in prices, particularly in London. Part of this is down to the Bank of England becoming more vocal about the risks, with affordability, new mortgage rules and the expectations of higher interest rates all playing their part. Ideally, more supply should be coming onto the market, but with interest rates still at historically low levels and long term house price expectations positive, households are not under any real economic pressure to sell. RICS commented that the outlook for 2015 was expected to look significantly more subdued than it has in 2014.

Sources: ( Resdidential Market Report: 2014/10/09)

We can help with your Buy to Let enquiries and can offer you a free rental yield calculator to check the rental yield of the property you are interested in.  Call us for more information.

Giles Warren

tel: 01753 626866

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