3. Get to grips with CGT vs IHT
Capital Gains Tax (CGT) is a tax on profit, while IHT is a tax on the value of your estate when you die. Gifting an asset during your lifetime – while possible – may have expensive tax consequences. Equally, paying CGT now to save IHT later may not make financial sense. If you’re planning on making a large gift, you might want to seek financial advice.
4. Don’t forget your pension
Your pension sits outside your estate, so it’s a tax-efficient way of providing a financial security blanket for your loved ones. Make sure your ‘Expression of Wish’ form is up to date, as this lets scheme administrators know who you’d like them to pay your pension benefits to. You can read more about IHT and your pension here.
5. Be aware of the Money Purchase Annual Allowance (MPAA)
As soon as you take an income from your pension you trigger the MPAA. This means any future contributions into your pension are limited to £4,000 a year. This is important if you’re thinking about phasing your retirement to work part time, as it effects the amount you can continue to save into your pension, and eventually what you end up leaving behind for your nearest and dearest.
6. Try not to react in the moment
When the value of your investment falls, it’s tempting to make knee-jerk decisions in a bid to protect your savings. Don’t allow fear to skew your decision-making. History shows that markets can – and have – recovered.
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