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Claim tax back if you’re married.

If you haven’t heard of the Marriage Allowance, you could be one of the estimated 2.1 million couples missing out on an important tax break. The Marriage Allowance is a tax break that’s available to some married couples and civil partners. It allows a non-tax payer to transfer 10% of their personal allowance to their spouse.

To be eligible, the higher earner must be a basic rate (20%) tax payer. Save £252.00 in tax every year if you or your spouse earns between £12,570 and £50,270 a year. Provided the other earns less than the tax-free personal allowance.

Ultimately, the Marriage Allowance enables those eligible to transfer £1,260. Accordingly, the lower earner can transfer their annual tax-free Personal Allowance to their husband/wife or civil partner. Thus, saving tax in the process.

Can you get Married Allowance if your spouse doesn’t work?

Yes, you can get married tax allowance if your spouse doesn’t work. Basically, as long as they earn less than the £12,570 personal allowance between 6 April 2025 and 5 April 2026, though to get the full benefit, the non-tax payer actually needs to earn £11,310 or less. However, even if they don’t work, they may still owe tax or have savings interest that takes them over the threshold.

In fact, you can apply for this online gov.uk/apply-marriage-allowance

Furthermore, you can backdate claims for up to four years.

The maximum savings available int he previous four tax years are:

• 2023/2024 – £252
• 2022/2023 – £252
• 2021/2022 – £252
• 2020/2021 – £250

When added to the current tax year’s saving, this means you could be eligible to receive up to £1,256. Assuming you were eligible for the Marriage Allowance in all four previous tax years. If you want to claim the Marriage Allowance for the 2021/2022 tax year, make sure you apply by 5 April 2026.

Claim tax back if you’re married. For help with financial planning, contact us today. Call 01603 957599 for your free initial consultation.

How Good are LISA’s? The Treasury Select Committee’s inquiry into the effectiveness of the LISA, has been published.

Ultimately, this reflects many of the issues that have already been raised.  Particularly, the view that the product is fundamentally flawed.  Notably, as it does not always deliver good outcomes for savers.

The Committee acknowledged that its dual purpose was confusing for savers.  In practice, this undermines its effectiveness. Savers are often unsure how to use the product, and this can lead to poor decisions.

The withdrawal penalty is one of the product’s most pressing problems. For example, it removes the government bonus and also reduces the saver’s contributions. For those facing unexpected costs or whose house purchase exceeds the price cap, the penalty feels disproportionate and unfair. Hence a simpler system that only recovers the bonus would be far fairer.

The report also cites the need to increase the age limit.  The current cut-off does not reflect the reality of when people now buy their first home.

How good are LISA’s: The £450,000 Property Price Cap

Similarly, the £450,000 property price cap is no longer realistic.  Ultimately, the ever-more-expensive housing market.  Despite saving diligently, many find they cannot use their LISA.  In particular, they need the property without facing a financial penalty.  Moreover, this undermines confidence in the product and adds to its complexity. There are numerous anecdotes of home buyers being constantly outbid by small sums over the threshold.  Subsequently, the other interested party knows that by doing so, the other buyer loses their ability to use their LISA.

In summary, this report should be the catalyst for change.

The Lifetime ISA does not sit comfortably within the wider savings system.  Furthermore, trying to make it serve two purposes has only added to the confusion.

There is a clear opportunity to replace it with a simpler, more targeted tool.  Fundamentally, a product that gives people the right support, whether they are saving for a home or planning for later life.

How good are LISA’s?. For help with buying a home and financial planning, contact us today. Call 01603 957599 for your free initial consultation.

Withdrawing pension at 55. Last year, 120,000 people made lump-sum withdrawals from their pensions early.  This is an increase of 10% from the previous year,

Consequently, the total value of these withdrawals by those aged 55-56 hit a five-year high.  Notably, totalling £2.2bn, up 10% from £2bn.

Accordingly, the rising cost-of-living is a likely reason for people wishing to access their pensions early.  Subsequently, this raises concerns that many could run out of money later in life.  With increased life expectancy and growing healthcare costs.

Similarly, a total of £15.3billion was withdrawn as lump sum payments, by all age groups, over the same period.

Inheritance tax increase could increase trend of early withdrawals

The trend for lump sum withdrawals from pensions may increase further due to changes to IHT rules. From April 2027, most unused pensions and death benefits will be included in the value of an individual’s estate. Moreover, this makes pensions a less effective tool for passing on wealth.   

Since Inheritance Tax (IHT) isn’t due on gifts made seven years before death. This may encourage individuals to withdraw money from their pensions early and gift it to their family or friends. Furthermore, this will reduce their estate’s value, and consequently their IHT bill.

People should be aware of the tax consequences, particularly the Money Purchase Annual Allowance (MPAA). The MPAA is triggered when taxable income is taken from a defined contribution pension using a flexible payment option.

If taxable income is taken in addition to the available 25% tax-free lump sum allowance, then the MPAA applies and the annual allowance is reduced to £10k (from £60k or 100% of earnings, whichever is lower). This lower allowance also applies to employer pension contributions.

People dipping into their pension pots at 55 must do so with extreme care. Triggering the MPAA can drastically reduce what you can contribute to a pension moving forward – something that often catches people out later in life.

Increasingly more people are withdrawing from their pensions age 55. This is due, in part, to cost-of-living pressures. See the Table below.

Withdrawing Pension at 55. For help with your retirement planning, contact us today. Call 01603 957599 for your free initial consultation.

People in their 20s save only 2.5% into pensions.  Accordingly, they should increase their annual pension contribution by £22 billion.  This is up from the £2 billion they are currently saving.  Ultimately this would ensure a good standard of living in retirement.  

For those in their 20s, saving into a defined contribution pension, are only saving about £721 per year.  In fact, this only equates to 2.46% of their salary.

Furthermore, the shortfall in private pensions can be estimated based on the frequently used ‘half your age’ rule.  Notably, this recommends saving half your age as a percentage of your salary. So someone aged 26 should aim to contribute 13% of their income.

Other Age Groups are also falling behind

However, this hardly improves as people get older.

Firstly, individuals in their 30s saved an average of £321.  This is well below the recommended £3,800 target.

Secondly, those between 40 and 50 only saved 3.3% of their income.  This equates to only £445 out of a £4,600 target.

Thirdly, those between 50 and 60 saved £557 towards a £4,500 target (see table below).

As a result, the gaps are large in percentage terms.  Ultimately, this shows that many people will considerably drop their standard of living when they retire.

Subsequently, delaying contributions means missing out on the long-term gains from compound interest on early investments. Basically, the earlier you start, the easier it is to save enough.

Age Group	Current total contribution (£bn)	Target total contribution (£bn)	Current contribution per individual (£)	Share of salary contributed	Target contribution per individual (£)
20 to 30	1.9	23.8	221	2.46%	2,639.36
30 to 40	3.00	56.6	321	2.74%	3,759.37
40 to 50	3.8	84.6	445	3.27%	4,596.63
50 to 60	5.1	111.7	557	4.33%	4,484.72
60 to 70	2.1	86.9	279	5.71%	3,452.00

For help with your retirement and financial planning, contact us. For your free initial consultation, call us today on 01603-957599.

People in their 20s save only 2.5% into pensions.

Source: HMRC – contributions to Relief at Source pension schemes by age bracket. Figures calculated by applying the half your age rule to the savings rates of both contributors and non-contributors in the 2022/23 tax year. An average employer contribution of 3% has also been factored into the calculation

Source: HMRC, Source: ONS – average salaries by age group.

Individual targets referenced are based on savings rate recommendations from the Pensions and Lifetime Savings Association (PLSA), combined with salary data from the Office for National Statistics (ONS).

Estates without a valid Will reach a 5-year high. Those not leaving a Will but have left assets have risen to 51,140*.  This is up 17% from 43,600 in the previous year.

Hence, estates where the deceased passes without a Will are known as ‘Intestate Estates’.

Grant of Letters of Administration

Notably, if someone dies without a Will, you can’t gain easy access to their estate. Moreover, if they owned assets, such as property, the court must issue a grant of letters of administration. Ultimately, this appoints someone to manage the estate.

In such cases, the court appoints someone to distribute assets.  But they need to follow strict intestacy rules.  Thus, this may lead to outcomes the deceased never intended.  Such as assets passing to estranged spouses and/or distant relatives.  Or, even passing the money to the Crown if no surviving relatives can be found.

Accordingly, the number of grants of letters of administration rose sharply in the last quarter.  In brief, up 27% to 16,090, from 12,680 the previous quarter.

In particular, many people delay writing a Will because they consider themselves too young.  Similarly, they do not wish to consider their end-of-life plan.  But, this can lead to legal and personal complications for loved ones left behind. 

Intestacy Rules

Notably, intestacy rules prioritise blood relatives.  Yet, makes little to no provision for unmarried partners.  As such, loved ones may miss out on inheriting property and possessions.  

Under intestacy rules: 

• If the deceased was married or in a civil partnership. Their spouse or civil partner would inherit the first £322,000. 
• The remainder is divided equally between the spouse and any children. 
• If there is no surviving spouse or children, a strict hierarchy of relatives is followed.  This may bear little to no resemblance to the deceased’s personal wishes.

In summary, intestacy cases are likely to rise as more individuals die owning property.  As such, this typically requires a grant of letters of administration.

For help with writing your Will, call us today on 01603-957599. For your free initial meeting, contact us.

*Source: Ministry of Justice, 2023/24 vs 2022/23, year-end Q3 2024