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+ Budget 2025: Fiscal drag and tax freezes

In our last edition, we cautioned against reacting to media speculation regarding potential changes to the tax-free lump sum in the forthcoming Budget. Once again, the forecasting proved incorrect and the Chancellor chose to boost Treasury reserves elsewhere.

Figures show that last year, over 25,000 people accessed pension pots worth £250,000 or more in the six months before the 2024 Budget – more than 50 per cent on the same period a year earlier. However, neither the tax-free lump sum nor pension tax relief were changed in either year’s announcement.

Instead, Rachel Reeves declared an income tax threshold freeze and finally revealed a ‘Mansion Tax’ in a Budget which started in chaotic fashion. After the Office for Budget Responsibility (OBR) accidentally released the entire fiscal statement earlier than planner, the markets reacted accordingly. By the end of the day, the market volatility had eased considerably.

The freeze on income tax thresholds will last until 2031, meaning more taxpayers will be subject to higher income tax rates due to ‘ﬁscal drag’.

In more bad news for those running private practices, the tax on dividends will be increased from April 2026 by 2 per cent bringing the basic rate from 8.75 to 10.75 per cent and the higher rate from 33.75 to 35.75 per cent. The additional rate remains unchanged at 39.35 per cent. This is on top of the increases in corporation tax in recent years.

One prediction which did come true was a change to ISAs. The

total ISA allowance remains at £20,000 per tax year but from April 2027, the cash ISA limit will be cut to £12,000 for the under 65s.

The Chancellor said the UK has some of the lowest levels of investment. “Someone who had invested £1,000 a year in a stocks-and-shares ISA since 1999 would be £50,000 better off today than if they had put the same into a cash ISA.”

As we revealed in our spring issue of this newsletter, ﬁgures show that cash ISA savers beneﬁtted from £2.1bn of tax-free interest in 2023/24, up from £70mn in 2021/22 which made them a likely target for a Chancellor looking to raise funds.

There will also be a 2 per cent increase to tax paid on savings income. From April 2027, the basic rate will rise from 20 to 22 per cent, the higher rate from 40 to 42 per cent, and the additional rate from 45 to 47 per cent.

From April 2029, there will be a cap of £2,000 on salary sacriﬁce pensions before National Insurance will apply – although this does not apply to NHS pensions. Contributions above this threshold will be subject to both employer and employee NICs.

There was much speculation about possible changes to the inheritance tax rules but instead, the IHT nil rate band and residential nil rate band will be frozen at current levels for another year until 6 April 2031. The nil rate band has not changed since 2009.

If you have any concerns about the impact of the Budget please speak with your adviser.

What is the Budget news for property owners and landlords?

+ Comment: Paul Hart, director

Have you received a 2023/24 Annual Allowance statement?

The ﬁgures in the statements can often be confusing enough but for the ﬁrst time, you may have seen a negative pension input amount.

A negative pension input means you have reduced your pension savings in the 1995/2008 scheme in the specific tax year. There are various reasons for this including a change in benefits, a revised salary, inflation or other regulatory adjustments.

Previously, if you had a negative pension input amount, this would be treated as zero by HMRC and it did not impact your pension growth. However, in 2023, the rules of negative pension input

amounts were changed and for once, an adjustment can be good news for pension scheme members.

From the 2023/24 tax year onwards, negative pension input amounts in the 1995/2008 NHS pension scheme can be offset against positive pension input amounts in the 2015 scheme. This change can reduce your chance of exceeding the annual allowance – and importantly remove or reduce a tax charge.

As nothing is ever entirely straightforward with the NHS pension, sometimes the negative amount will be in brackets – in the traditional accounting method of representing a deduction – and in newer statements, you may see a minus ﬁgure.

The positive aspect from this is that you potentially have more ﬂexibility with your annual allowance by balancing the threshold across two schemes.

Firstly, we need to make sure the ﬁgures in the statement are accurate – and we know from experience this is not always the case. Small mistakes can lead to big errors. We will need to accurately calculate your total pension input across 1995/2008 and 2015 pension schemes to establish your annual allowance position. We can then test this against the threshold which is £60,000 but can be tapered for those with higher incomes.

If you have received your statement, please share it with your adviser as soon as possible.

+ Budget update: What about property owners and landlords

The much discussed ‘Mansion Tax’ has ﬁnally been announced after years of speculation.

From April 2028, some homeowners will pay additional fees on top of council tax. The new High Value Council Tax Surcharge (HVCTS) will have four value bands. The lowest band will be an annual charge of £2,500 on properties worth more than £2m and £7,500 for the highest band for properties worth more than £5m. The middle band rates have not yet been announced.

It is understood that property valuations from 2026 will be used, even though the tax will not be launched until 2028. As yet, the ofﬁcial method of valuation has not been stated but we can imagine the complexity of achieving an agreed, nationwide process.

Landlords continue to bear the brunt of further changes and have been penalised numerous times in ﬁscal measures over the last few years having recently been subject to changes to mortgage interest relief and stamp duty rates. Now there will be a separate property income tax that will apply from April 2027 which is 2 per cent higher than current income tax rates. The basic, higher and additional rates will increase to 22, 42 and 47 per cent respectively.

The good news is that mortgage rates could be on a downward trajectory as many economists cite a likely interest rate reduction from 4 to 3.75 per cent at the December meeting of the Bank of England.

If you need any assistance with your mortgage queries, please contact Beulah Antonin at Charterhouse Mortgages & Protection via beulah@chmap.co.uk or telephone 020 3764 5295.

+ Introduction to Joseph Awaritefe

Joseph Awaritefe is a chartered ﬁnancial planner and has worked at Medical Family Finance since 2017.

How did you get into the ﬁnancial services industry?

I studied business and economics at university and from there fell into recruitment. I carried on for three years and while I gained a lot of skills in that role, I knew I wanted to move into ﬁnance. After much research, I decided to become a ﬁnancial adviser. I worked for a large national banking group which allowed me to gain vital client-facing experience and while there, I funded my own adviser exams.

There was no direct route into wealth management but when an opportunity for a role opened up in that team, I was considered simply because the manager was impressed I had completed and funded extra exams myself. Many of the other candidates for the role were at a higher level within the organisation but hadn’t got the qualiﬁcations I had worked hard to gain.

Did you have a mentor?

At that time in my career, a manager told me that if I wanted to stand out from my colleagues and progress, I should say yes to everything. He told me this would positively change my career and open opportunities. I took his advice and can honestly say it really helped. While working in the bank, I was based in central London near UCL when the new students were arriving one September. The branch asked staff if they would stay late to process the applications from students for new bank accounts. Everyone said no, and I said yes. A month later, when they assessed the ﬁgures for the whole region, I had opened the highest number of accounts. This stood me in great stead when a promotion later became available – I was considered on the basis of my ﬁgures and that came from saying yes that day.

You have seen amazing growth in the company since starting at Medical Family Finance… It has been incredible. We had maybe 7 members of staff when I started and now closer to 30. We enjoy low staff turnover so I think people enjoy staying with us – certainly we always strive to create a friendly working environment. We also champion

development and support colleagues progressing with qualiﬁcations.

As exciting as it has been to witness that dynamic growth, we have always retained the small company feel. Everyone knows their colleagues and our clients know who is supporting them.

In that time, we have also seen the change since pre-pandemic days when we all worked in one office five days a week. Now clients can choose to meet us online or in person and we fit in around their lives. This is how our entire service runs – we support clients whenever they need us, whatever challenge or life milestone they might be facing.

What is the most rewarding part of your job?

I love getting to know our clients. I have been advising some of them for eight years and in that time, their lives and my life have evolved. When we meet, it is like catching up with good friends and we continue from where we last left off. We discuss families, jobs, holidays and it’s wonderful to share their lives in that way.

We also see people ease into the retirement we have been planning for a few years. Some clients might believe they are far away from stepping back and then we help them to retire conﬁdently in their early 50s. It’s great to see people pay off mortgages or take pension beneﬁts – that’s a real highlight.

When we have been working with people for years and they are able to help their children or grandchildren too, that’s a privilege.

Some of the children were young teenagers when we ﬁrst met their parents and now we see them moving into young adulthood. We are happy to meet them properly and advise on the most important things they might wish to do ﬁnancially such as paying into workplace pensions. Some clients also bring their parents to meet us, say if they need estate planning advice. It’s a real family affair which is lovely.

And the most important part of your role?

Coaching good investment behaviour is always critical. I enjoy the psychology involved in managing money. Everyone has different feelings about wealth based on many elements including upbringing, education, status etc. They may also have emotional feelings about wealth which could impede their decision making.

Sometimes the thing that is best financially is not always the best outcome personally. An example is someone choosing to pay off a very low-interest mortgage in order to say they’ve done it, but forgetting they have a higher-interest loan they should repay first. Our job is to guide people with sensible, unbiased advice that allows them to make solid decisions. Money can be life-changing but so can financial mistakes, so our support and guidance can prove invaluable.

+ Protection for savings to increase

The amount of protection you will receive if your UKregulated bank or building society fails will be increased in December 2025 by the Financial Services Compensation Scheme (FSCS). The standard amount covered will automatically rise from £85,000 to £120,000 per person, per bank. If you have a joint account, you and your fellow account holder will be protected up to £240,000.

The ‘temporary high balance’ protection from the FSCS which covers one-off large sums in your account eg from selling a property, receiving an inheritance or an insurance payout will also be increased from £1 to £1.4m.

The rate of protection for UK-regulated investments is not increasing and will remain covered by the FSCS up to £85,000 per person.

+ Financial know-how for your family

Many thanks for all the positive feedback regarding our ﬁnancial education webinars for your young relatives. We are delighted to be helping your adult offspring learn some of the basic foundations to building ﬁnancial success in later life.

The latest presentation in our Financial Education Series will look at understanding how investing works and the difference between passive and active investments. Thomas Popplewell, associate ﬁnancial planner, will examine the pros and cons of different types of

investments as well as the various platforms that are used. Importantly, Tom will take a look at the fees applicable to investing and how these can impact your returns.

If you would like to watch the presentation, or believe your family might benefit from learning more about the fundamentals of finance, please register here Financial Education Series | Medical Family Finance to be notified when Tom’s webinar is released. You can also watch previous webinars in the series here too.

+ Reviews for our services mean so much

Many thanks to all our clients who have helped our business by leaving feedback on review website VouchedFor. We are particularly proud of our rating as now more than ever, we know medical professionals will need support from financial planners that they trust to deliver specialist advice. As well as having complicated finances, they are likely to need a helping hand to navigate challenging financial positions in the current climate.

We would also like to increase the number of reviews that we

receive on Google so as an added incentive, we will be donating £10 to the London Air Ambulance charity for every client review we receive on the search engine before the end of the year.

To write a Google review, log in to your Google account, search for Medical Family Finance in the Google search bar and you will see our company details appear on the right hand side of your screen. Click on ‘Google reviews’ under our company name and a new dialogue box will appear. Simply click on ‘Write a review’.

Season’s Greetings from the full team at Medical Family Finance Christmas opening hours: Our team will be working as usual between Christmas and New Year. We will be closed from 1pm on Wednesday 24 December and will reopen at 9am on Monday 29 December.