Navigating the numbers: Budget update and tax year end planning

Thanks very much for your time today. My name is Craig Muir, and I'm joined by my colleague Fiona Hanrahan, and we are both senior technical managers with Royal London. Today's session is, well, it's pretty obvious, isn't it, because it's on the screen. It's navigating the numbers: Budget update and tax year end planning.

Now, what we're going to do is, we're going to explore some of the main changes announced in the November 2025 budget and how they impact tax year end planning, not just this year, but future tax years as well. We'll look at the future changes to salary sacrifice and state pension, as well as how paying a pension contribution, potentially make a use of carry forward, can help with childcare costs and avoiding tax traps.

We'll also talk about the options pension beneficiaries and personal representatives will have when paying an inheritance tax charge from April 2027, because that changed recently. Finally, we'll go over the proposed changes to the ISA limit and the taxation of dividends, savings and rental income because all of those were impacted in Rachel Reeve's budget in November 2025. But, before we get onto that, just a few housekeeping rules. If you're watching this as a live webinar, then you'll be able to raise questions using the chat facility down the right-hand side of your screen, and we'll get back to you with the answer as soon as we possibly can.

Alternatively, you can raise your question with your usual Royal London contact if you prefer to do that. Now, if you're watching a recording of this, then you know the chat facility won't be available, and you'll only have the option of raising your questions with your usual Royal London contact.

Now with regards to your CPD certificate, you'll need to answer some questions after the webinar, and this will automatically generate your certificate. Now for this session to be CPD-able, you need to have some learning objectives and they are: at the end of this session, you'll be able to outline the changes announced in the November 2025 budget, describe how the freezing of tax bands will mean more people will be caught in tax traps, and how paying a pension contribution can help. Demonstrate how to calculate unused annual allowance using Carry Forward and what some of the pitfalls are, and explain the changes to the taxation of savings from April 2026.

Okay. Let's start by looking at some of the highlights from the November 2025 budget. So, from the 6th of April 2029, the National Insurance savings, which you currently get when using salary sacrifice for pension contributions will be restricted to the first £2,000 only. I'll talk about this in more detail in a few minutes because we all know it's still quite a way off, but I think it's important to consider it now, especially for employers and employees who are in salary sacrifice schemes. Next, we've got the freezing of the tax bands. Now the personal allowance will stay at £12,570 and is set to remain frozen until 2031.

Additionally, the income tax thresholds for the UK excluding, Scotland will also be kept unchanged until April 2031, as will the National Insurance bands and IHT nil Rate Band and the residential nil Rate Band, they'll remain frozen until April 2031, too. And although it's not on this list, we had a bit of a change of heart by the government, this was on the 23rd of December 2025 when it was announced at the, remember, the £1 million, 100% allowance on qualifying business and agricultural assets being introduced from April 26, it's going to be increased to two and a half million and it's going to be transferable as well. So, from 6th of April 2026, a hundred percent IHT relief will be available on the first £2.5 million of qualifying business property and/or agricultural property assets per individual with 50% relief applying to the accessor. In practice, this now means that spouses and civil partners should be able to leave up to a combined £5 million of qualifying assets to their chosen recipients free of IHT and then an effective 20% IHT rate will then apply to any excess value on qualifying assets.

Then we've got the change to the options for paying any IHT charge on pensions, which Fiona will talk about that a bit later. And she'll also cover the state pension changes, the changes to the saving rates of tax, the ISA changes and the introduction of the HVCTS, that is the High Value Council Tax Surcharge, commonly known as the mansion tax.

But the first point I want to touch on is that of salary sacrifice because it's been quite a high-profile topic in the wake of the November budget. But before I talk a bit more about the salary sacrifice changes, I just want to remind you all, and I'm sure it's not necessary, but I'm going to do it anyway. I'm going to remind you all about the increased employer national insurance from April of 2025.

Now as you can see from our first point there, the employer National Insurance rate increased from 13.8% up to 15%. And in addition, the threshold at which an employer needed to begin paying employers National Insurance contributions decreased from £9,100 to £5,000. Now that reduction in the threshold alone meant employer's National Insurance bill increased by £615 per employee per annum.

On a slightly brighter note though, we also need to be aware of the change to the employment allowance. Now that's a level of National Insurance that employers have a liability for before they don't have to pay. So, the employment allowance lets eligible employers reduce their National Insurance liability by up to £10,500, and that came into effect from 6th of April 2025. And prior to this, it was only available to employers whose total National Insurance bill for the year fell below £100,000. And if that was the case, they wouldn't have to pay the first £5,000 of the National Insurance they would otherwise have been liable for. However, from 6th of April 2025, the employment allowance increased from £5,000 to £10,500 and is available to all eligible employers. So that means it'll now be available to employers with a National Insurance bill over £100,000 too. Now, it was really designed to support smaller employers with their employment costs. The employer, they need to claim for this, usually through selecting the employment allowance box which should be on the payroll software. And if it's not there, then they need to contact HMRC. They can also claim for the previous four tax years, but only if their National Insurance bill, their total National Insurance bill was below £100,000.

And remember, they wouldn't get £10,500 back, but it was £5,000 for the previous three tax years, and then £4,000 for 2021, but that's still potentially £19,000 for previous years, plus £10,500 for this year. Now pretty much all businesses are eligible, but those not eligible are public authorities, so bodies doing over half the work for the public sector for example, councils, single director companies if the only person paid is above the secondary threshold as a director, and state funded schools and public bodies - they're excluded if their work is predominantly in the public sector.

So let's get back to the November 2025 budget and the change to salary sacrifice. Now, we know with the increasing employer National Insurance rate from April 2025, many employers were looking at salary sacrifice to offset some of their additional costs, and there'll no doubt be some confusion about the impact, the changes that were announced in November are going to have. So, what I want to try and do here is allay some of those fears and explain how important salary sacrifice is still going to be, even after April 2029. So, anyway, from April 2029, National Insurance savings will be restricted to the first £2,000 of salary sacrificed. To be honest, we actually feared the worst, as we thought that the government might remove salary sacrifice altogether. But as we now know, it's not quite so bad. There was actually three options proposed, and this was the least worst option. So, I just want to take some time to think through some of the implications of this change. Now, the £2,000 cap is likely to result in reductions to pension contributions in some instances, but there'll still be some significant advantages to continuous salary sacrifice, even in excess of £2,000 after this date.

Now, in this policy paper, which came out, it was on the 4th of December 2025, they stated using the latest available data that an estimated 7.7 million employees currently using salary sacrifice to make pension contributions. Sorry, they currently use that. And out of those, 7.7 million, 3.3 million sacrifice more than £2,000 of salary or bonuses. So, this means 44% of employees using salary sacrifice for pensions would be impacted by this measure while 56%, which is around 4.3 million people are fully protected by that £2,000 threshold. Of course, what these figures don't take into account is any pay increases in the future. So obviously as pay increases, so will pension contributions, and therefore more and more people will get hit with that £2,000 limit. Now, this measure is expected to have an impact on 290,000 employers who operate salary sacrifice arrangements for pension contributions, and they'll now need to account for relevant pension contribution amounts and report and pay class one national insurance contributions on these where appropriate.

Now, I just want to clarify that salary sacrifice isn't being limited to £2,000. It's just the National Insurance savings for employees and employers that are limited to the first £2,000 sacrifice. This is quite significant. A salary sacrifice enjoys benefits in excess of just the National Insurance saving, and that's something we all need to bear in mind. Although only the first £2000 sacrifice will benefit from the National Insurance savings, sacrificing beyond this figure will reduce taxable income and potentially keep an individual below a tax threshold, or perhaps keep them out of one of the tax traps. Now tax traps are bands of income where the effective rate of tax exceeds the headline rate, for example if child benefit has been lost because the highest earner in the household is earning, say, £70,000, then sacrificing salary of £10,000 even though only £2,000 benefits from the National Insurance saving will recoup the otherwise lost child benefit.

Another benefit salary sacrifice beyond the National Insurance saving is the ability to secure tax relief beyond 20% at source, and for this relief to go into the pension fund. Now when relief at source system is being used, 20% tax relief is given at source and anything above this needs to be claimed from HMRC by the scheme member.

Now, as well as some people neglecting to claim this relief, those that do usually get this relief, it's in the form of an altered tax code. So, while the tax relief is received, it doesn't necessarily go to the pension plan unless the scheme member makes a manual contribution. Using salary sacrifice enables the scheme member to get their full marginal rate of tax relief into their pension fund without needing to claim anything from HMRC.

And actually just on that point about clients neglecting to claim tax relief back, I remember reading that some three quarters of higher rate tax payers eligible to claim tax relief through self-assessment failed to do so and almost half of eligible additional rate taxpayers also failed to claim back, and this amounted to several hundred million pounds of unclaimed relief each year, so please remind your clients to claim. And also, for any of you that have clients who pay income tax in Scotland, remember, they have four tax plans higher than the 20% tax relief at source level, and they should claim their additional rate of tax relief back too.

Now, the importance of securing tax relief beyond 20% at source shouldn't be overlooked. Take a higher rate taxpayer sacrificing £10,000 above the £2000 cap. Even if all the National Insurance savings are redirected to the employee's pension scheme, the changes in 2029 are likely to reduce the pension contribution by £1,700. That's a 15% NI for the employer and 2% NI for the employee.

Cancelling a salary sacrifice arrangement, and operating the standard relief at source system, could see those scheme members missing out on a higher rate tax relief going into their pension. Yes, they can claim it back, pay it into their pension, but not all will, and their pension pot at the point of taking benefits will be lower as a result.

Now, further reason to maintain salary sacrifice arrangements after April 29 is that many employees simply won't be impacted by the proposed changes. The average full-time adult salary in the UK is approximately £35,000 per annum. Now a worker contributing the standard 5% employee contribution within an auto enrolment scheme would see their gross contribution as £1,750, and if salary sacrifice has been used for this employee even where they redirect all the employee National Insurance savings to the pension, and not many people do that, the amount of salary sacrificed is actually £1,944.44, so therefore it's still within that cap. In fact, the budget document claimed that 74% of basic rate taxpayers will actually be shielded by the £2,000 cap. Now, it's obviously pretty early to be talking about this when the changes aren't coming into effect until April 2029. And you know what, we don't have much in the way of detail of how this is going to be implemented from a practical point of view. But, there's still quite a lot of talking points as a result of the changes. For example, the impact on employers, especially those who've used their National Insurance savings, say for ancillary benefits for their employees. Now, if they're going to maintain these benefits, then this'll come at a cost of the employer, and possibly it'll impact things like future pay increases for their employees. There's also considerable amount of planning required for individuals using salary sacrifice with that target income. Should they increase their pension contributions to counter this? Now remember, they'll, they get tax relief and in fact the tax relief will be greater than the national insurance that the chancellor is trying to recover if they're higher or an additional rate taxpayer. And remember, the pension contribution will reduce the adjusted net income, and it could help with the high-income child benefit tax trap and the personal allowance tax trap. And, I'm going to talk a bit more about tax traps in just a couple of minutes. And just for your convenience, here's a table outlining the National Insurance impact on a 5% employee pension contribution at different salary levels pre and post April 2029. So, you can see the salary levels across the top, and then at the bottom, the additional national insurance costs for the employee and the employer. So, at a salary of £35,000, you can see there's no additional National Insurance costs for either the employee or the employer. Even at £100,000 salary, the impact on the employee is £60 per annum, so it’s a fiver a month. Now, the costs are higher for the employer however, and of course this is on top of the recent increase in the rate of National Insurance for employers, and the reduction in the threshold. I'm not going to go through each one of these, but what I will say is that at any salary level, the saving’s still greater than not using salary sacrifice at all.

So as it says here, salary sacrifice benefits will remain. You know, there's still the tax relief, with higher and additional rate, taxpayers still enjoying full marginal rate tax relief at source. And with the tax thresholds remaining frozen, we'll see ever more higher and additional rate taxpayers.

And, if they don't use salary sacrifice, and don't claim back their additional tax relief and pay it into the pension, we'll likely see a greater number of higher earners with a pension shortfall. The tax relief at marginal rate from salary sacrifice is of huge benefit and really shouldn't be overlooked. Next point there is £2,000 will cover many.

You know, we've seen the stats and how 74% of basic rate taxpayers will be unaffected. I've already mentioned this, but there's no need to claim tax relief. It saves the hassle of claiming higher rate tax relief, or worse still, the folly of neglecting to. And of course, it's still three years away. And you know what?

Three years is a long time in politics. So, we've got planning points throughout our presentation today, and our first planning point here is to be mindful of upcoming changes. You know, begin formulating plans to deal with them, be well versed enough that you can explain them to your clients and allay any concerns they have, but it’s still a few years off and probably too early to implement any changes other than perhaps getting those who don't currently use salary sacrifice to consider it now because they can still make savings.

Okay. The next section here I've called it teetering on the £100,000 cliff edge, and recently there's been a number of reports in the financial press in London about people refusing pay increases, which if they took them, would take their salary over the £100,000 mark.

Now, we're all aware of the personal allowance tax trap, which kicks in once adjusted net incomes above £100,000. And you know, this is something we've talked about for years, but when we researched this, we discovered there's another factor exacerbating this issue and you know, and we're going to use a case study to demonstrate it, and then we'll explain a potential solution as well.

And you know what? This is an issue impacting an increasing number of people. The higher rate income tax bands have been frozen in England and Wales since April 2021, the additional rates since April 2023 and both are due to remain frozen until April 2031. And inflationary pressure has pushed wages up, meaning more and more people find themselves moving into higher and more costly tax bands.

So, while a £100,000 is undoubtedly a, you know, it's a good income level, it’s no longer the domain of the uber wealthy, and in fact, HMRC estimates over 2 million people will earn over £100,000 per annum in the 2026-2027 tax year. Now, although the press stories were focused on London, the same issue will be relevant to any of your clients who start to have address adjusted net income over £99,999.99.

So, let's meet Ashley and Michael. Here they are. Here's Ashley and Michael, and they've got twin 2-year-old boys. As the image shows here, they probably have a favourite because the other one's missing from the picture. Anyway, they live in London and Ashley earns £95,000 per annum and Michael earns £60,000 per annum.

Now, the twins attend nursery and each benefit from 30 hours of free childcare per week for 38 weeks. Now, that's thanks to the government's Free Childcare for Working Parents scheme. However, the couple still incurs additional childcare costs of £20,000 a year. And to help with this, Ashley signed up for the government's Tax-Free Childcare scheme, which provides a further £4,000 of use.

That's £2,000 per child. Now, Ashley's been offered an exciting new job with a significant pay rise, taking her salary up to £120,000 a year. Now, while this is a fantastic opportunity, her financial adviser has made her aware of the financial implications of earning over £100,000.

Now, first, Ashley's adviser explained about adjusted net income. As you know, our tax system is progressive and the amount of tax you pay should increase as you earn more, but there are tax traps where more taxes paid than you'd expect. So, the personal allowance tax trap is one of those. So, if adjusting net income is over £100,000, then a client starts to lose their personal allowance on a two for one basis until they lose it completely at £125,140. So, for every £2  someone earns over £100,000, they lose £1 of their personal allowance. Now that £25,140 over £100,000 is of course, twice the personal allowance of £12,570.

So hence why the personal allowance is completely lost at £125,140. And in this tax trap, the individual is effectively paying 60% tax instead of 40%. And in Scotland it's even worse, it's 67.5% tax instead of 45%. Now basically, adjusted net income is total taxable income, less pension contributions, gifted and trading losses. As a result of the personalized tax trap, Ashley's net income for the £25,000 increase would only be £10,500. There's going to be lots of numbers in the next few slides and I just want you to focus on the concept rather than the actual figures used. But of course, I do need to use figures to demonstrate the concept, so bear with me please.

So as well as a personal allowance tax trap, once Ashley's adjusted net income hits £100,000, she'll no longer be eligible for the government's Free Childcare for Working Parent scheme or the Tax-Free Childcare scheme. According to the website childcare.co.uk, the average cost of a nursery is £8.43 per hour in London.

Therefore, Ashley and Michael will need to fund the 30 hours per week for 38 weeks, which the government's Free Childcare for Working Parents scheme provided, and that's going to cost them £19,220.40, and they'll lose the £4,000 for the government's Tax-Free Childcare scheme. So that's £23,220.40.

Now bearing in mind Ashley was only going to see £10,500 from the £25,000 pay increase due to the personal allowance tax trap, then overall, she'll actually be £12,720 worse off than she has currently. So clearly Ashley wouldn't want the pay increase, and this is why journalists have been writing about this.

However, there is a solution. So, Ashley's financial adviser explains that by making pension contributions, she can reduce her adjusted net income. She can recover both government schemes and avoid the personal allowance tax implications. Now, adjusted net income, which is your total income after certain deductions, is a key factor in determining eligibility for government schemes.

So to bring her just net income below £100,000. Ashley would make need to make a gross pension contribution of just over £20,000, and that would reduce her adjusted net income to £99,999 in pence. Now, this would allow her to remain eligible for both government schemes and avoid a personal allowance reduction as well.

Now, unfortunately, Ashley can't afford to pay the £20,000, but she can pay £800 per month, which will get grossed up to £1,000 per month due to basic rate tax relief. Now, as her parents have a potential IHT problem, they've agreed to pay an annual amount of £8,000 per annum to her pension via the normal expenditure from income.

Now this will help to reduce an IHT bill by £3,200 per annum, so 40% of £8,000 and the parents’ contribution will also track basic relief and will be grossed up from the £8,000 up to £10,000. Together, Ashley's and her parents’ contributions will total £22,000 a year reducing her adjusted net income to £98,000.

Now as a higher rate taxpayer, Ashley will also be able to claim back 20% tax relief on the total pension contribution amounted to £4,400. Now by taking these steps, Ashley's adjusted net income will still be £15,400 higher than in her current role, netting her an additional £8,932 after tax and National Insurance.

On top of this, she'll receive £4,400 in extra tax relief. Now on an individual basis, instead of being £12,629 worse off as a result of the pay rise £220,000. By paying in a net pension contribution of £17,600, Ashley will effectively receive £13,332 more than on her current salary.

She'll be able to receive £23,220 from the government schemes and have £22,000 in her pension. That's a top gain of £58,552. Now if you look at this on a family basis, so if we include the £3,200 reduction in the parents' potential IHT bill, it means that the total tax relief and financial gains for the family actually amounts to £56,781, which is a highly impressive 322.6% return on the net pension contribution.

So by making these changes, Ashley can not only help secure her family's financial future, but also enjoy peace of mind knowing she's making the most of her income. So, our planning point this time is to watch out for any clients who currently use the government childcare schemes and are approaching the £100,000 mark because you know, once they've hit it, they'll need to fund the childcare themselves.

Also, look out for those who receive a bonus or redundancy payment, which may push them over the cliff edge. Explain to them how paying a pension contribution will reduce their adjusted net income and ensure they don't lose these very valuable government schemes. Of course, for other clients who don't have childcare schemes, you know, the same issues and solution exists with a personalised tax trap where you know the payment of a pension contribution can get them out of that tax trap and recover their personal allowance. And of course, it helps to fulfil their retirement need too. And don't forget that a pension contribution can also help those who are subject to the high-income child benefit tax trap.

Okay. I'm now going to pass you over to Fiona who will take you through the remainder of the webinar. Okay. Over to you Fiona.

Fiona Hanrahan: Thanks, Craig. And, and hi everyone. As I'm sure you're all aware, from the 6th of April 2027, most unused pension funds and death benefits will be included in the value of a person's estate for inheritance tax purposes.

We've covered this off in previous webinars, and I'm sure we'll be talking about it a lot more in 2026. So, in this session, we're just going to focus on what was announced in the most recent budget. So up until the 26th of November then, that was the date of the most recent budget, we were already aware of some of the options available for paying inheritance tax due on pensions.

The inheritance tax can be paid from the free estate, so that means personal representatives can pay the inheritance tax owed on the whole estate, including the portion or the proportion relating to the pension benefits directly from available funds before applying for probate. And it could be that the individual or individuals and the beneficiaries of both the free estate as well as the pension, you know, they're the same people.

And if income tax is due on any pension payments, the beneficiaries can claim any refund from HMRC for overpaid income tax. In other words, this avoids both inheritance tax and income tax being paid on the portion of the pension subject to inheritance tax. If they're not the same individuals, the personal representatives have a legal right to recover this charge from pension beneficiaries.

The pension beneficiaries can also take the benefits in full and pay any inheritance tax directly to HMRC. And again, any overpayments of income tax due to inheritance tax being payable can be recovered. And the personal representatives can ask the pension scheme administrators to pay the inheritance tax due in respect of the pension.

And this is called a payment notice, and the scheme administrator would have 35 days to pay the charge after that. And the additional detail announced in the most recent budget was called the withholding notice. If personal representatives know or expect inheritance tax to be due on a pension, they can give a withholding notice to the scheme administrator, and this just means they instruct the scheme administrator to hold back 50% of the benefits subject to inheritance tax for up to 15 months after the end of the month that the member died.

And then they can during this time direct the scheme administrators to pay any inheritance tax due from the withheld funds before releasing the funds to the beneficiary, and the other 50% could be paid out to beneficiaries during this time. Now it wouldn't be a tax year end presentation if we didn't talk about carry forward.

Carry forward in some form of another has been around for many years, but the rules also have changed over the years and changes to annual allowance affect carry forward too. So, it's always worth going over this and we always get lots of questions about carry forward around this time. And most of the questions we get about carry forward come under the main headings on the screen just now.

So firstly, let's just clarify eligibility. You need to have been a member of a pension scheme in the year you're carrying forward from, in order to be eligible to use carry forward. And that definition of member for this purpose is actually really broad. You could have been an active member of a pension scheme, a deferred member of a pension scheme, a pension credit member, or a pensioner member.

So really then the only people not eligible to use carry forward are normally those taking out a pension for the very first time. Even if you've lived abroad during those previous years, or in one of those previous years, if you were a member of a pension scheme, then left the UK and are now back in the UK with earnings, you will still be able to pay into a pension and use carry forward.

You will still be classed as a deferred member for those previous years and therefore meet the definition of member for carry forward eligibility. Also, the removal of the lifetime allowance has meant that some individuals are able to pay into schemes without bursting their protection when you know they weren't previously.

So these individuals will be eligible in theory for carry forward and potentially large contributions without a tax charge applying are available if they haven't contributed for a number of years. And if you're using carry forward, you can make this payment to any scheme or a brand new one. It doesn't need to have been a contribution to your current scheme.

It's important to remember that if you're making an individual contribution, whether you're using carry forward or not, actually, you need to have relevant earnings in the current year, the year you're making the payment. When using carry forward, you're carrying forward unused annual allowance, not unused tax relief.

For example, if someone is wanting to make a gross contribution of £50,000 this tax year and they haven't made any other contributions, they won't need to use carry forward as they can't pay in more than £60,000, in other words, the standard annual allowance. So even if the unused annual allowance or available carry forward was £100,000, they're limited to an individual contribution of £50,000 or a hundred percent of earnings.

And it's quite a common question to be asked. I've received a large inheritance; how do I get it into my pension? And really, you would need the earnings to support this because that would be an individual contribution. Carry forward, you know, will only help if you've got earnings above the available contribution or the amount you're trying to make, or the payment can be made over a number of tax years.

Remember though, that employer contributions are not limited to 100% of earnings. Next, both the tapered annual allowance and money purchase annual allowance have an impact on how much annual allowance or carry forward is available. If the client has triggered the money purchase annual allowance, then it's not possible to use carry forward to increase contributions to defined contribution schemes above £10,000 without an annual allowance tax charge applying.

Carry forward though still is available for any defined benefit schemes that the member happens to have. The tapered annual allowance rules have applied for a number of years since 2016-17 onwards. So, in theory, could apply to all four years in your carry forward calculation. And if the taper does apply, carry forward can still be used.

That's a question in itself. And the standard annual allowance is simply substituted by the tapered annual allowance for each year that it applies. And this calculation would potentially involve four separate tapered annual allowance calculations. So that's about as tricky as it gets. I mentioned the standard annual allowance there, which is currently £60,000.

And if you're doing a carry forward calculation, remember the annual allowance increased from £40,000 to £60,000 from tax year 23-24 onwards. So, if tax year 22-23, then your calculation, so the first of those four, the standard annual allowance for that year is £40,000, and you would use that in your calculation.

In theory, then the maximum available annual allowance or maximum carry forward that someone would absolutely have is £220,000. That's three times £60,000 plus £40,000. And lastly, we often get asked if you need to tell HMRC or your provider if you're using carry forward, you don't have to do this.

You used to have to, but it's always recommended that you keep good records of your calculations, you know, in case these are queried in the future. As usual with carry forward, it's always best to work through a calculation or case study to help with our understanding. So, meet Sam, she's a director who receives a salary of £10,000, and she tops this up with dividends.

So right away, in our minds, we should be thinking that if she wants to maximise her pension contributions, she's probably looking at an employer contribution as her individual contributions will be limited to £10,000 less what she's already paid, if anything. She's been paying in £5,000 a year for a number of years.

So we therefore know she's eligible for carry forward for the previous three years, she hasn't triggered the money purchase annual allowance, and the taper doesn't apply to her. So that makes things a bit easier. And she hasn't paid anything this tax year yet. So, what is the maximum contribution Sam can pay or have paid in by her employer without a tax charge applying?

In other words, what carry forward is available? Remember, in theory, the employer could pay in more and get corporation tax relief, but Sam would face an annual allowance tax charge on the amount above the available annual allowance or carry forward. Most people asking about the maximum they can pay into their pension really mean the maximum that they can pay in without a tax charge applying.

The best way to work out available annual allowance or carry forward is to use a table. We have here, the four tax years. You can see in the far left. Remember, we maximise the current year first before going back to the earliest of the previous three years. Next, we have the standard annual allowance. Remember that change from £40,000 to £60,000.

The taper or money purchase annual allowance doesn't apply, so we're not worried about that. We have the total contributions paid in any previous carry forward use. There hasn't been any here. Then the remaining annual allowance. Totalled up, this is £205,000, so fairly straightforward. Thinking of it another way, if that's how you like to work, it's the maximum of £220,000 that we talked about earlier, less what was paid in or £15,000, arriving at that same figure of £205,000.

As this is an employer contribution, this is the maximum the employer can pay in for Sam without her facing an annual allowance tax charge, her individual contributions would be limited to £10,000. If it helps, I've shown this as a picture too. Green is what's available, and purple has what has been paid.

Total carry forward or available annual allowance is £205,000. Remember, this is the maximum that can be paid in from all sources without a tax charge applying. It's not the maximum that can be paid in. So, our planning point here is when it comes to carry forward, be aware of the rules and the pitfalls, and know firstly if it's individual or employer.

The planning early point is especially important if you're dealing with DB schemes as they can take a while to provide you with the information if you don't have it already. Okay, let's have a chat about the state pension. We know the state pension is rarely away from the news, and forms a significant part of some people's retirement income.

So what was announced in the most recent budget. The triple lock is being maintained. The basic state pension, new state pension and pension credit standard minimum guarantee will be increased in April 2026 by 4.8%. This is in line with earnings growth from September 2025, so the new state pension will rise to £12,547.60 per year.

And there's been talk for a number of years about what will happen when state pension income exceeds the personal allowance. And in the budget, it was announced from 2027-28, the government intends that individuals with state pension income only, which exceeds the personal allowance, will not have tax to pay.

This is one really to keep an eye on, as the government has yet to make it clear how this will work in practice. For example, you could have clients with small annuity income who will pay tax, and those with just state pension income, including search, for example, who won't. This will be a debated topic in the near future, I'm sure.

So one to keep an eye on. There were a number of changes announced into the rates of tax on savings in the budget. But be aware of the dates these changes are effective from, they're not all April 2026. And these changes are broadly to reflect the non-payment of national insurance from these sources.

So this is where that extra 2%, if you see that, that's where that's coming from. So, from April 2026, the basic and higher rates of dividend tax will increase by 2%. This means the basic rate or dividend ordinary rate will increase from 8.75 to 10.75. The higher rate or dividend upper rate will increase from 33.75 to 35.75, and there's to be no change to the additional rates or the dividend additional rate of 39.35%.

The dividend allowance of £500 allows dividends up to this amount tax free in addition to the personal allowance, so that's April 2026. Those faced with the options of salary, dividends, or pension contributions then will likely have more of a think about their options due to this change. But for immediate income needs, the combination of salary plus dividends will likely remain their favoured options.

There’ll just be that 2% extra to pay. Tax and savings increase will increase by 2% across all bands to 22, 44 and 47, and that's from April 2027. ISAs will remain tax free up to the annual limits. We'll talk about them in a little minute. Lower earners benefit from the starting rate of savings and can receive up to a further £5,000 on top of their personal allowance without paying any tax.

Basic rate taxpayers can receive £1,000 of interest without paying tax and higher rate taxpayers, £500. The biggest change really is from April 2027 there's going to be a separate rate for property income, a basic rate of 22%, and higher rates of 42 and 47%. Property income of less than £1,000 does not need to be reported to HMRC and is tax free.

So due to those different tax rates applying to property income from April 2027, the order of taxation's going to change. From then our new order will be, employment, self-employment, pensions first, then property income, then savings, then dividends. So that's one to remember from April 2027. So now on to ISAs.

The overall ISA limit is to remain at £20,000 until 2031, but the cash ISA limit is going to reduce to £12,000 for under 65’s from April 2027. This one, you know, we were expecting. The remainder up to £20,000 can be paid into a stocks and shares ISA. And this is going to add some complexity.

For example, there's going to be rules to prevent £20,000 being transferred from a stocks and shares ISA to a cash ISA and there's going to be rules or limits around cash within stocks and shares ISA. Further clarity on all of that will be needed. The aim of this change is to encourage more people to invest in the wider economy, but those over 65 can still hold the maximum of £20,000 into cash ISA’s.

Our planning point then is to be on top of these taxation changes as well as the order of taxation changes, the ISA changes, and importantly, when they're happening, they're not all 2026. Younger clients could be looking for advice on where to place cash ISA money if they've been used to maximising that to the £20,000 limit.

Next, the high value council tax surcharge or more straightforward the mansion tax, is a proposed new annual property tax announced in the budget. The original proposal at the moment only applies in England, and the estimate is that 1% of properties will be affected, which will predominantly be in the Southeast and London, of course.

The homeowner will be liable, not the occupier, and properties are expected to be valued in April 2026, and there's potential market impact for this tax charge being this or use equity release and could lead to some IHT effective gifting or other estate planning, especially with pensions being included in the estate from April 2027. And the proposed rates of the tax will be as follows.

Remember, this is in addition to council tax and the proceeds will go directly to the treasury rather than the local authority. So, the charge will be £2,500 per annum for properties between £2 and £2.5 million, £3,500 for properties between two and a half and three and a half, £5,000 for values between three and a half and five, and £7,500 for values above this.

Now, earlier this month, the Scottish budget announced similar proposals for a mansion tax in Scotland, but the starting value for that is going to be £1 million. And there's been a fair bit in the press, in Scotland and in England, about the practicalities around the valuations of properties.

So that's one to really keep an eye on because I don't think the problems with that are going to go away. So that’s us come to the end of our budget update and tax year end planning presentation. We hope you found it useful. Here's a look at our learning outcomes for your CPD – Outline the changes announced in the November 2025 budget, and Craig did that nicely for us.

Describe how the free of tax bands will mean more people will be caught in tax traps and how paying a pension contribution can help - I hope our case study helped you do that. Demonstrate how to calculate unused allowance using carry forward and what the pitfalls are. Hopefully I was able to do that for you. And explain the changes to the taxation of savings from April 2026, so we know what's coming in April and we know what's in 2027 too.

And here's our website if you're looking for further information. Craig and I hope you found our webinar useful. If you're listening live and you've asked any questions through the system, we'll get back to you as soon as we can. Remember to stick around to answer the quiz questions to get your CPD certificate or otherwise, get in touch with your usual Royal London contact if you want to speak to us and look out for the invitation to our next webinar, which will be in February.

Thanks very much and enjoy the rest of your day.