Business Update

Business Update - July

Price Mann • July 7, 2021

Families hit with big bills after believing gifts would not be taxed

Almost 2,000 people who thought they’d reduced the values of their estates by making gifts have seen an inheritance tax break stripped away.

Inheritance tax is charged at 40% on individual estates worth more than £325,000, and this can double for married couples.

Other allowances and exemptions are available to increase this threshold or taper the inheritance tax rate down from 40%.

One such relief is the seven-year rule, which sees people give away assets to reduce the value of their estates and ensure more wealth is passed on.

But a Freedom of Information request from the Telegraph found that since 2016, 1,830 gifts worth £624 million have been deemed taxable at 40%.

Most of these ‘gifts gone wrong’ related to property, 13% were cash gifts, while shares and securities accounted for 8%. The rest were classed as “other assets”.

If HMRC discovers an individual continues to benefit from an asset they’d given away, it’s known as a ‘gift with reservation of benefit’.

The best example is where someone continues to live in, and therefore benefit from, a property they’d gifted to a descendant.

When this happens and HMRC finds out, no tax break applies and the gift’s value forms part of the gift-giver’s estate.

There are other options for giving some of your property or money away to reduce the value of your estate.

Speak to us about inheritance tax.

Sweeping VAT reforms in the EU will affect the UK’s online retailers

Retailers that heavily rely on online sales to EU consumers need to comply with VAT reforms, which were introduced on 1 July 2021.

The new rules were originally designed to stop an estimated €7 billion in annual VAT fraud by non-EU ecommerce sellers, mainly those in China.

But after the UK left the EU at the start of the year, around 26,000 small and medium-sized ecommerce businesses in the UK also need to comply.

Those who export goods to EU customers face the biggest upheaval, with VAT exemptions for SMEs and shipments of €22 or less being removed.

James Sibley, head of international affairs at the Federation of Small Businesses, said: “UK small firms will lose exemptions for small consignments, while those within the bloc making cross-border sales under €10,000 a year will continue to enjoy [tax] breaks.”

Exporters who use online platforms, such as Amazon or eBay, can now register for VAT in the country where they sell most of their goods, which the European Commission estimates will cost up to €8,000.

Alternatively, it’s possible to subcontract VAT to the online platforms they use to sell their goods, or ask the postal service to handle VAT.

Small businesses could claim up to £2,000 each through the Brexit Support Fund, which closed on 30 June 2021.

Contact us if this VAT reform affects your business.

OTS considers bringing the end of the tax year forward

The Office of Tax Simplification (OTS) is to explore changing the end of the tax year from 5 April to either 31 March or the end of the calendar year.

The OTS published a document last month setting out the scope of a review into the benefits, costs and wider implications of changing the date.

It said 31 March was both the end of a calendar quarter and the nearest month-end date to the end of the current tax year on 5 April.

It is also the UK financial year-end date, to which the Government makes up its own accounts, and by reference to which UK corporation tax rates apply.

The other option under consideration by the OTS is to run future tax years to 31 December, similar to the regimes in place in the United States, France and Germany.

Should this be pursued, a transitional tax year could in theory run from 6 April to 31 December – three months and six days shorter than the typical tax year.

The OTS said: “For historical reasons, the UK’s tax year for individuals runs from 6 April to the following 5 April. This has been the case for hundreds of years and the UK’s modern tax system and infrastructure has been developed around this date. By contrast, accounting systems used by businesses have been developed around month and quarter-ends. Across businesses and internationally, it is common to account to a month-end date. The UK financial year for government accounting and for companies runs from 1 April to 31 March. While primarily addressing tax simplification issues, the review will also take account of the implications of any change in other areas, such as in relation to tax credits and benefits.”

Self-employed individuals currently have to balance different deadlines for income tax and potentially UK VAT, adding to administrative pressures they face.

Talk to us about your tax obligations.

UK tax incentive ‘fails to deliver extra R&D spending’

The UK’s research and development (R&D) tax credit system is failing to prompt companies to increase spending and could prove a “costly failure”, a report claims.

The Centre for Business Research (CBR) said aggregate business expenditure on R&D in the UK is as much as 15% lower than it was before the scheme was introduced in 2000.

As a result, the Government looks set to fall considerably short of meeting its R&D target for spending to reach 2.4% of UK GDP by 2027.

The R&D tax credit scheme, which either reduces corporation tax or generates a cash credit, is now used by 60,000 companies and costs the Treasury £7.3 billion a year.

David Connell, senior research associate at the CBR, said: “The theory behind R&D tax credits, namely that a reduction in the cost of R&D will lead to an additional increase in a company’s R&D expenditure, is flawed.”

The report was published around the same time as the Treasury started a consultation on modernising the R&D tax relief schemes.

This will consider all aspects to ensure reliefs “continue to be fit for purpose” and deliver good value for money for the taxpayer.

The most recent estimate put the UK’s overall R&D spending at 1.7% of GDP in 2018, a marginal increase from 1.6% in 2000.

The report also put the spotlight on the Treasury’s £1.1bn-a-year patent box scheme, which offers a lower corporation tax rate of 10%.

Greg Clark, chair of the House of Commons select committee for science and technology, said the report made “a powerful case for looking again at R&D tax credits and the patent box”.

Get in touch to discuss corporation tax.

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Managing risk in your investment portfolio

By Price Mann • September 17, 2025

Managing risk in your investment portfolio Tips for a balanced investment approach. Investment markets rise and fall, yet the goals that matter to you – retirement security, children’s education, a comfortable buffer against the unexpected – remain constant. Managing risk means giving each goal the best chance of success while avoiding avoidable shocks. You can do that by holding the right mix of assets for your timeframe, using tax wrappers efficiently, and controlling costs and emotions. The 2025/26 UK tax year brings unchanged ISA and pension allowances. This guide explains the key steps, such as diversifying sensibly, rebalancing with discipline, safeguarding cash, and monitoring allowances, so you can stay on track whatever the markets deliver. It is an information resource, not personal advice. Start with a clear plan Define goals and timeframes: Decide what each pot of money is for (for example: house deposit in three years, retirement in 20 years). Time horizon drives how much short-term volatility you can accept. Short-term goals usually need more cash and high-quality bonds; long-term goals can justify more equities. Set your risk level in advance: Ask yourself two questions. Risk capacity: How much loss could you absorb without derailing plans (linked to your time horizon, job security and other assets)? Risk tolerance: How do you feel about market swings? Use a more cautious mix if you are likely to sell in a downturn. Ring-fence cash needs: Keep 3-6 months’ essential spending in easy-access cash before you invest. This reduces the chance of selling investments at a low point to meet bills. Choose simple, diversified building blocks: Broad index funds and exchange-traded funds (ETFs) covering global equities and high-quality bonds provide instant diversification at low cost. Avoid concentration in a single share, sector or theme unless you are comfortable with higher risk. Diversification: Spread risk across assets, regions and issuers Diversification reduces the impact of any single holding. Practical ways to diversify include the following. Assets: Use both growth assets (equities) and defensive assets (investment-grade bonds, some cash). Regions: Combine UK and global holdings. Many UK investors hold too much domestically; global funds spread company and currency risk. Issuers: In bonds, mix UK gilts and investment-grade corporate bonds to diversify credit exposure. Currencies: Equity funds are commonly unhedged (currency moves add volatility but can offset local shocks). For bonds, many investors prefer sterling-hedged funds to lower currency risk. A diversified core helps the portfolio behave more predictably across different market conditions. You can add small “satellite” positions if you wish, but keep any higher-risk ideas to a modest percentage of the whole. Use tax wrappers to reduce avoidable tax and trading frictions Efficient use of ISAs and pensions is one of the most effective risk-management tools because it protects more of your return from tax. ISAs (individual savings accounts) Annual ISA allowance: £20,000 for 2025/26. You can split this across cash, stocks & shares and innovative finance ISAs. Lifetime ISAs (LISAs) are capped at £4,000 within the overall £20,000. Junior ISA (for children under 18): £9,000 for 2025/26 (unchanged). ISAs shield interest, dividends and capital gains from tax. Rebalancing inside an ISA does not create capital gains tax (CGT), which helps you maintain your chosen risk level at lower cost. Note: There has been public discussion about potential ISA reforms, but the current 2025/26 allowance is £20,000. If government policy changes later, we will let you know. Pensions (workplace pension, personal pension/SIPP) Annual allowance: £60,000 for 2025/26 (subject to tapering for higher incomes; see below). You may be able to carry forward unused annual allowance from the three previous years if eligible. Tapered annual allowance: If your adjusted income exceeds £260,000 and threshold income exceeds £200,000, the annual allowance tapers down (to a minimum of £10,000 for 2025/26). Money purchase annual allowance (MPAA): £10,000 for 2025/26 once you’ve flexibly accessed defined contribution benefits (for example, taking taxable drawdown income). Tax-free lump sum limits: The lifetime allowance has been replaced. From 6 April 2024, the lump sum allowance (LSA) caps total tax-free pension lump sums at £268,275 for most people, and the lump sum and death benefit allowance (LSDBA) is £1,073,100. Pensions are long-term wrappers designed for retirement. Contributions usually attract tax relief and investments grow free of UK income tax and capital gains tax while inside the pension. Personal savings: Interest allowances Personal savings allowance (PSA): Basic-rate taxpayers can earn up to £1,000 of bank/building society interest tax free; higher-rate taxpayers up to £500; additional-rate taxpayers do not receive a PSA. Starting rate for savings: Up to £5,000 of interest may be taxable at 0% if your other taxable non-savings income is below a set threshold. For 2025/26, that threshold is £17,570 (personal allowance of £12,570 plus the £5,000 starting rate band). Dividends and capital gains outside ISAs/pensions Dividend allowance: £500 for 2025/26 (unchanged from 2024/25). Dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional-rate bands, respectively. The annual capital gains tax (CGT) exempt amount , £3,000 for individuals (£1,500 for most trusts). CGT rates from 6 April 2025: For individuals, 18% within the basic-rate band and 24% above it, on gains from both residential property and other chargeable assets (carried interest has its rate). HMRC examples confirm the £37,700 basic-rate band figure used in CGT calculations for 2025/26. CGT reporting reminder: UK residents disposing of UK residential property with CGT to pay must report and pay within 60 days of completion. Other gains are reported via self assessment (online filing deadline is 31 January following the tax year; if you want HMRC to collect through your PAYE code, file online by 30 December; payments on account remain due 31 January and 31 July). Why this matters for risk: Using ISAs and pensions lowers the drag from tax, allowing you to rebalance and compound returns more effectively. Outside wrappers, plan disposals to use the £3,000 CGT allowance and each holder’s tax bands and consider transfer to a spouse/civil partner (no CGT on gifts between spouses) before selling where suitable. Bonds and cash: Interest-rate and inflation considerations Interest rates: The Bank of England reduced the Bank Rate to 4% at its August 2025 meeting. Bond prices can move meaningfully when rates are high or changing, especially for longer-dated bonds. Consider the duration of bond funds and whether a mix of short- and intermediate-duration exposure suits your time horizon. Inflation: Headline Consumer Price Index (CPI) inflation was 3.6% in the 12 months to June 2025, while the CPI including owner occupiers’ housing costs (CPIH) rose by 4.1%. Inflation affects the real value of cash and bond coupons, and can influence central bank policy, affecting bond prices. Review whether your mix of cash, index-linked gilts and conventional bonds remains appropriate as inflation and interest-rate expectations evolve. Cash strategy: For short-term needs, spread deposits to respect Financial Services Compensation Scheme (FSCS) limits. For longer-term goals, excessive cash can increase the risk of falling behind inflation. Control costs and product risk Keep fees low: Ongoing charges figures (OCFs), platform fees and trading costs compound over time. Favour straightforward funds and avoid unnecessary expenses. Understand the product: Structured products, highly concentrated thematic funds or complex alternatives can behave unpredictably. If you use them, size them modestly within a diversified core. Use disciplined trading rules: Avoid frequent tinkering. Set rebalancing points (see below) and resist acting on short-term news. Rebalancing: Why, when and how Markets move at different speeds. Without rebalancing, a portfolio can “drift” to a higher or lower risk level than you intended. Follow this simple rebalancing framework. Invest in something that will rebalance automatically (i.e. certain ETFs) Frequency: Review at least annually. Thresholds: Rebalance when an asset class is 5 percentage points away from target (absolute) or 20% away (relative). Tax-aware execution: I prefer to rebalance inside ISAs and pensions. Outside wrappers, use new cash or dividends where possible; then consider selling gains up to the £3,000 CGT allowance and factoring in dividend and savings allowances. Implementation tip: If markets are volatile, use staged trades (for example, three equal tranches a few days apart) rather than one large order. Safeguard cash and investments with the right protections FSCS protection (cash deposits): Up to £85,000 per person, per authorised bank/building society group is protected. Temporary high balances from specific life events can be covered up to £1m for six months. The Prudential Regulation Authority has consulted on raising the standard deposit limit to £110,000 and the temporary high balance limit to £1.4m from 1 December 2025 (proposal stage at the time of writing). FSCS protection (investments): If a regulated investment firm fails and your assets are missing or there is a valid claim for bad advice/arranging, compensation may be available up to £85,000 per person, per firm. This does not protect you against normal market falls. Operational risk checks: Use Financial Conduct Authority authorised providers, check how your assets are held (client money and custody), enable multi-factor authentication, and keep beneficiary and contact details up to date. Currency risk: When to hedge For equities, many long-term investors accept currency fluctuations as part of the growth engine, since sterling often weakens when global equities are stressed, partly offsetting losses. For bonds, many prefer sterling-hedged funds to keep defensive holdings aligned with sterling cashflow needs. A blended approach works: unhedged global equities plus mostly hedged bonds. Behavioural risks: Keep decisions steady Common pitfalls include chasing recent winners, selling after falls or holding too much cash after a downturn. Tactics to keep you on track include: automate contributions (regular monthly investing), which spreads entry points write down rules (what you will do if markets fall 10%, 20%, 30%) separate spending cash from investments so you do not sell at weak prices to fund short-term needs use portfolio “buckets” in retirement. Retirement planning: Sequence-of-returns risk and withdrawals If you are drawing an income from investments consider the following. Hold a cash buffer (for example, 12–24 months of planned withdrawals) to avoid forced sales during sharp market falls. Be flexible with withdrawals: Pausing inflation-indexing or trimming withdrawals after a poor market year can help portfolios last longer. Use tax bands efficiently: Consider the order of withdrawals (pension, ISA, general investment account) to make use of personal allowance, PSA, dividend allowance and the CGT annual exempt amount. Take care around the MPAA if you are still contributing to pensions after accessing them. Putting it together: A repeatable checklist Confirm goals and time horizons. Check emergency cash (3-6 months). Map your target asset allocation. Use wrappers first: Fill ISAs and workplace/personal pensions as appropriate. Keep costs low: Prefer broad index funds/ETFs. Set rebalancing rules: Annual review + thresholds. Document tax items: Monitor dividend/CGT use; note 60-day property CGT rule; plan for 31 January/31 July self assessment dates if relevant. Review protection limits: Spread larger cash balances across institutions in line with FSCS; note proposed changes for late 2025. Schedule an annual review to update assumptions for interest rates, inflation and any rule changes. Get in touch if: you are unsure how to set or maintain an asset allocation you plan to draw income and want to coordinate wrappers and tax bands you expect large one-off gains or dividends and want to plan disposals or contributions you have concentrated positions (employer shares, single funds) and want to reduce single-asset risk tax-efficiently you are considering more complex investments. Wrapping up Risk management is not a one-off task but an ongoing discipline. By defining clear objectives, spreading investments across regions and asset classes, using ISAs and pensions to shelter returns, and reviewing allocations at least annually, you create a framework that limits surprises and keeps decisions rational. Document key dates – self assessment payments on 31 January and 31 July, the 60-day CGT rule for property, and the annual ISA reset on 6 April – so tax never forces a sale at the wrong time. Check deposit limits and platform safeguards for peace of mind, and keep a written record of your rebalancing rules to prevent knee-jerk trades. If life events or regulations change, revisit your plan promptly. A measured, systematic approach lets your portfolio work harder while you stay focused on the goals that matter most. Important information This guide is information only and does not account for your personal circumstances. Past performance is not a guide to future returns. The value of investments and income from them can fall as well as rise, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. If you need personalised advice, please contact a regulated financial adviser. If you’d like advice on managing your portfolio, get in touch.