Salary sacrifice

What is salary sacrifice?

Salary sacrifice is a government-backed scheme designed to help employers and their employees save money on tax payments. If an employee opts for salary sacrifice alongside their employer, they will give up part of their pre-taxed salary in exchange for non-cash benefits.

Essentially, salary sacrifice is a relatively simple way to reduce your tax, often by keeping earnings below income tax thresholds and being rewarded for your work in other ways. 

41% of all UK SMEs and 85% of very large organisations offer some form of salary sacrifice, according to the Chartered Institute of Personnel Development.

Salary sacrifice

My employer offers salary sacrifice. Should I opt in?

By giving up part of your salary in return for non-cash benefits, the money you’re paid every month is reduced, meaning that you and your employer will pay less in national insurance contributions, saving both parties money.

Salary sacrifice can also be an excellent way to reduce your taxable income if you’re paid more than the higher or additional rates of income tax (£50,270 or £125,140). It’s common for would-be higher earners to cap their pay below these thresholds and instead have their additional earnings paid in other means.

For example, salary sacrifice benefits might include increased contributions paid directly into your pension scheme (normally for equivalent value), as well as access to company car or cycle to work schemes. As the employer has to perform the majority of the administration involved in salary sacrifice, it is relatively hassle-free from an employee’s perspective.

If you are above 55, or close to retirement age, salary sacrifice will enable you to increase your pension sum by a considerable amount, while knowing that this money will soon become readily available.

What are the downsides of salary sacrifice?

While there aren’t many downsides of salary sacrifice, there are still some things to be aware of before you opt into the scheme as an employee, or before you offer the scheme as an employer. 

As an employer, implementing a salary sacrifice scheme is likely to come with some administration costs, including updating payroll, amending contracts, and submitting an additional compliance check. Although there may be some upfront costs, you’ll likely find that you’ll make this back relatively quickly through national insurance savings alone.

There are also some potential implications to be aware of as an employee if you're thinking of opting in to salary sacrifice. As it will effectively lower your overall income, this may have a knock-on effect on other aspects - such as life insurance, credit card borrowing limits, mortgage borrowing and statutory maternity pay.

Are there any alternatives to salary sacrifice?

Yes, there are - and these are definitely something to consider before opting into salary sacrifice, because it’s important to review all options carefully before making any decisions.

One alternative is to set up an easily accessible savings account, such as an ISA. While ISAs cannot help to reduce the national insurance you pay, they will not impact your affordability like salary sacrifice can, which can be preferable depending on your individual circumstances. 

Or, you could also consider paying into a separate personal pension, claiming back tax while receiving preferential tax codes for future tax years.

The best way to be completely sure that you’re making the right decision is by speaking with your financial adviser. We will review your financial situation and consider all potential factors that may be affected, before making our recommendations.

With our help, you can rest assured that you’re making the right decision for both you and your family’s future - simply get in touch today for a free consultation.

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How to use ISAs most effectively

ISA stands for ‘Individual savings account’, and it is something that every UK resident over the age of 18 (or 16 for cash ISAs) can access, and deposit up to £20,000 per tax year. Junior ISAs are also available for children.

The limit of depositing £20,000 per year can either be used for a singular ISA, or split across multiple accounts. It’s worth noting that you can only pay into one of each type of ISA in a single tax year.

Here are the four types of ISA available:

  • Cash ISA
  • Stocks and shares ISA
  • Innovative finance ISA
  • Lifetime ISA

Which ISA is the best option for me?

Most banks will typically offer a cash ISA, which is similar to a traditional savings account, with interest being paid on savings. However, the main benefit of a cash ISA is that you will not pay any tax on your earnings.

Stocks and shares ISAs are the main alternative to cash ISAs, but more beneficial. They allow you to invest money in the stock market, with the potential to make a lot of growth on your funds. There are different levels of risk that come with a stocks and shares ISA, meaning that you can choose what level you’re comfortable with, depending on your life stage and circumstances.

As financial advisers, we wouldn’t recommend taking out a cash ISA, due to the low returns. By investing in a stocks and shares ISA, we can utilise our bespoke model portfolio service to find the best investment for you. With five models at differing risk levels, our models have been designed to incorporate a selection of between 10-20 funds, with tailored percentage allocations to best suit your requirements.

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What is a lifetime ISA?

A lifetime ISA is typically used by younger people looking to purchase their first home, but can also be used to save for later life.

You can put in up to £4,000 per year into a lifetime ISA, until you’re 50, and must have made the first payment by the age of 40. The government will then add a 25% uplift to your savings, to a maximum of £1,000 per year. You can hold cash or stocks and shares in a lifetime ISA, or a mixture of both. 

Be careful though, as money can only be withdrawn from a lifetime ISA without penalty if you’re buying a first home, aged 60 or over, or are terminally ill with less than 12 months to live.

When should I take out an ISA?

ISAs are very popular, and as such, there is no set age or time in life that we’d recommend taking one out, as they can suit most individual circumstances. 

If you’re heading towards retirement, this is still a great time to take out an ISA, but usually we’d recommend choosing funds with a lower risk. This will reduce the chances of large losses, which could affect you more once you stop earning and need access to the money.

ISA vs pension fund. Which one is best?

Both ISAs and pension funds generate solid returns, with the latter typically generating more - as when you contribute, you also receive more investable money due to automatic tax relief. However, the issue with investing heavily in a pension fund is that you’ll have no access to that money without severe penalties until later on.

Pensions provide generous tax relief when you put money in, and you’d be able to take out up to 25% of your pension fund tax-free once you reach the age of 55. 

We advise our clients to use a combination of both pension and ISA investments to ensure that they still have some money that is easily accessible without heavy penalties - which is where an ISA comes into play.

If you can overpay into your pension comfortably, then it’s definitely worth doing, as you’ll receive the best growth on this fund. Make sure to keep some of your spare cash back however, and invest this into an ISA. If something were to happen where you need quick access to your money, then you can withdraw money from your ISA within roughly two weeks of requesting it without a big penalty. 


Are you thinking about investing into an ISA? We can help - get in touch with our team of financial advisers today! 

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What could Inheritance Tax reforms mean for me?

An exploration of ‘imminent’ reforms to Inheritance Tax

With speculation that the government is to make substantial changes to Inheritance Tax rules ahead of the next general election, Matthew Pescott Frost explores the issue - and what this means for succession planning in 2023.

What could Inheritance Tax reforms mean for me? Matthew Douglas

With the Conservative Party Conference just days away, I’m hopeful that we’ll all gain some much-needed clarity on the contentious issue of Inheritance Tax. As it stands, reform is absolutely essential if the Conservatives hope to win the next general election due to the widespread unpopularity of the tax.

Fiscal drag drives disproportionate IHT payments

Inheritance Tax, or death duties, are hugely distorting the market right now. We’re seeing growing numbers of people sitting on properties they simply don’t need, all due to taxation.

With reports that the number of people liable to pay Inheritance Tax is set to soar due to the compounding effects of fiscal drag, the debate shows no signs of abating. HMRC’s thinktank IFS has claimed that scrapping the levy would effectively cost the economy almost £15 billion a year by 2032, so it’s unlikely that it will be abolished entirely - but significant reforms may well be in the pipeline and could well be imminent.

However, it’s important to note that any announced changes may not come to fruition or indeed may be reversed entirely if the party is removed from office in the next general election.

For the time-being, we can only go on what we know to be true based on current legislation.

Put money in your pension pot

If in any doubt, I’d recommend putting your money in your pension pot if this is viable for you, as this is not subject to Inheritance Tax once you pass away. However, that isn’t your only option.

Make a Will and monitor your assets’ value

It may sound obvious, but failure to make a Will and show a clear intent of how and amongst whom you’d like your assets to be divided can leave you open to the rules of intestacy - meaning you’re liable to pay entirely avoidable fees.

Make a clear Will and ensure you’re aware of the precise value of your estates and assets. This way, you’ll know exactly how much, if any, Inheritance Tax they would be subject to. The nil-rate band is currently set at £325,000 until 2026, but if you’re a married couple and your spouse passes away, you are entitled to absorb your partner’s allowance. This means you could inherit up to £650,000 worth of assets without paying any Inheritance Tax.

Invest in a Trust to remove them as taxable assets

If you place your assets into a Trust, this means that they will not form part of your estate upon your death and makes them immune to being subject to Inheritance Tax. This can still earn you income in some circumstances (such as an ‘interest in possession Trust’) so this is definitely something worth looking into if you want to safeguard your assets and your loved ones in the future.

Don’t bank on reforms happening soon

Whatever the announcement surrounding potential reforms to Inheritance Tax, there is likely to be no advantage in delaying succession planning based solely on speculation. 

For now, the rules as they stand are crystal clear but not always easy to navigate alone, so it’s essential that you seek expert advice to minimise any hidden costs or surprises that may crop up.

Get in touch with our team today to discuss the options open to you.

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How to save for your retirement

A decade-by-decade guide

Planning for retirement is essential to ensure you have the financial security to enjoy your golden years. As retirement can be a long way off, it’s essential to start saving for retirement as early as possible.

To help you on your journey, here is a decade-by-decade guide to saving for retirement.

In your 20s: Getting started
Being in your 20s can feel like an exciting time to be alive but also daunting. It’s never too early to start thinking about your financial future and setting yourself up for success.

With the proper knowledge and planning, you can easily create good savings habits that will set you on the path towards financial security. Start by setting realistic and achievable goals; whether they include buying a house, starting a business or taking out investments, having objectives in mind will help motivate you to save money now.

Creating a budget is also vital to staying on top of your finances. Knowing what expenses you have each month will help keep you organised and make sure there’s enough left over to put aside for savings. Ensure you know about upcoming bills and other costs to build those into your budget.
At the same time, remember to enjoy life too! Set money aside to do things you love, such as travel or hobbies. By taking a balanced approach to saving, you’ll be able to get the most out of your 20s while still investing in your future financial security.

Develop good savings habits early in life.
Budget for saving rather than saving what’s left at the end of the month.
Take advantage of tax-efficient ISAs and Lifetime ISAs.
Participate in workplace pension schemes.

In your 30s and 40s: Dialling up focus
Another way to make the most of your 30s and 40s in the UK is to take advantage of salary sacrifice. This is an excellent way to increase your pension contributions while reducing your tax bill. You can redirect this money into your pension pot by agreeing to accept a lower salary each month. This means that while you will be contributing more to your pension, it could leave you with an increased take-home pay as you’ll be paying less National Insurance Contributions (NICs).

Salary sacrifice offers plenty of potential benefits, from reducing NICs payments, pushing back when it comes to paying higher rate tax and helping to maximise employer contributions. Additionally, if you have opted out of an employer pension scheme, you can opt back in and reap the benefits of salary sacrifice.

Obtain professional financial advice for more information on getting the most out of salary sacrifice in your 30s and 40s. We’ll help guide you through any potential tax implications too.

Consider salary sacrifice to maximise pension payments.
Redirect bonus payments into your pension for a tax-efficient boost.
Seek financial advice to ensure you’re on track for a comfortable retirement.

In your 50s and 60s: The last stretch
As you enter your 50s and 60s, retirement becomes a reality. It is essential to consider the best time for you to retire and how much money you will need to do so. Remember that individuals aged 55 or over can start taking money from their pension. Starting from April 6, 2028, the average minimum pension age will increase to 57. This change may affect you differently depending on your birthdate.

It is worth considering whether taking money at this stage is necessary for your circumstances, as it may impact any tax implications. Ultimately, careful planning and consideration throughout life will help ensure that you have enough money saved when the right time comes to retire.

You should also ensure that you are up to date with any changes in the law or regulations that may affect your retirement and pension savings. As well as seeking professional financial advice, it is a good idea to keep an eye on government announcements and stay informed about news related to pensions and retirement. This can help ensure you receive the best returns for your investments when it comes time to retire.

Determine your retirement goals and assess your progress using online tools and calculators.
Be cautious about taking money from your pension too early, as there could be tax implications.
Use the Government’s free State Pension forecast tool to understand your expected state pension.
Top up your pension as much as possible before stopping regular income.

Remember, it’s never too early to start saving for retirement. By following this decade-by-decade guide, you can work towards a secure and enjoyable retirement that you can look forward to. And don’t forget, a ‘flexi-retirement’ approach is becoming more common, with many people continuing to work in some form during their retirement years.




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The normal pension age is changing

Essential information for your retirement planning

A significant change is on the horizon that may affect when you can access your pension money. We’ll guide you through this change and its potential implications, so you can confidently prepare for retirement.


The current normal minimum pension age (NMPA) is 55, which means you can start taking your pension savings once you reach that age. Some exceptions exist, such as if you’re experiencing ill health or have a lower protected pension age. However, the general rule applies to most people.
Starting from April 6, 2028, the NMPA will increase to 57. This change may affect you differently depending on your birthdate.What does this mean for me?

What actions should I take?

If you were born after April 5, 1973:
It’s a good idea to review any existing plans to determine if the change will affect them. You may need to plan for another couple of years of saving, which could alter your retirement income. No action is required if you didn’t intend to access your pension savings before turning 57.
Regularly reviewing your retirement plans is a smart habit, especially as you approach the age when you’d like to start accessing your pension savings.

If you were born after April 6, 1971, but before April 6, 1973:
You have two options – carefully consider which one best suits your circumstances.

Option 1: Access your pension savings before the deadline
If you don’t want to wait until you’re 57 to access your pension savings, you’ll need to begin withdrawing funds between turning 55 and April 6, 2028. Remember that you can access your pension savings without taking large or regular amounts; you can decide what’s right for you. However, obtaining professional financial advice before making any decisions is essential.

Remember that leaving your pension savings invested longer allows for potential growth. Also, note that taking taxable money from your plan (anything exceeding your tax-free entitlement) may reduce the amount you can contribute to your plan due to the money purchase annual allowance. Learn more about this on our website.

Option 2: Wait until you turn 57
No action is needed if you weren’t planning to access your pension savings before age 57. You can access your pension savings at any time after turning 57. However, if you withdraw funds before April 6, 2028, you’ll retain the opportunity to do so before age 57.

If you were born on or before April 6, 1971:
No action is required, as you will already be 57 when the change takes effect, and your retirement plans won’t be impacted.

Not retired yet? Review your retirement date
Even if you can no longer access your money at 55, your retirement date may still be set to your 55th birthday. It’s worth checking it now.
You can change your retirement date anytime, but the chosen date can affect your plan. For example, if you’ve invested in a lifestyle profile, your pension investments are designed to transition to lower-risk investments as you approach your retirement date. This helps reduce the impact of market fluctuations on your pot’s value.

If your retirement date is set to your 55th birthday, but you don’t plan to access your money until 65, your investments won’t align with your plans, potentially affecting your pension savings’ value when you’re ready to withdraw them.



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The price of adulthood

Price of adulthood

Financial responsibilities increase significantly after 25

Paying essentials like utilities and council tax becomes a reality as young adults transition from student life to the workforce. The reality of financial responsibilities often accompanies the excitement of newfound independence during one’s mid-twenties.

According to research, young workers may find their first salaries insufficient to cover necessities like utilities and council tax. The study reveals that the number of people making regular payments significantly increases among those aged 25 to 34 compared to those aged 18 to 24[1].
The data highlights that only 34% of 18 to 24-year-olds currently pay utility bills, but this figure doubles to 68% among 25 to 34-year-olds. Similarly, internet usage payments rise from 45% for 18 to 24-year-olds to 70% for 25 to 34-year-olds.

Tips for managing regular payments
By following these tips and taking control of their financial responsibilities, young adults can ease the transition from student life to the workforce and set themselves up for a more secure financial future.

Create or review your budget
A household budget can help you afford essential costs and identify potential savings. It can give you peace of mind about whether you can afford your essential expenses and have money left over for any non-essentials. If you already have a budget, it’s worth checking to see if it’s still working for you, especially as many costs have risen over the last few months.

Looking closer at your current and past spending habits, you might find ways to cut costs in the future – freeing up some money to put elsewhere. Budgeting apps can analyse your spending and categorise expenses, making finding areas where you can cut costs easier.

Check for savings
Find opportunities to cut costs by switching providers or finding better phone contracts or utility bill deals. It’s always worth seeing if you can cut costs by changing providers or shopping around to see if you can get a better deal on your phone contract or utility bills, for example.
Nowadays, switching providers is a relatively seamless process, and it can save you substantial amounts. As you age, you should check for any discounts or benefits you’re entitled to.

Set goals and consider ways of saving
Establish clear savings goals and explore options to manage your finances better. Even if you don’t have the money to set aside right now, analysing your options will help you better manage your finances. If you can save, first try to build up a ‘rainy day fund’ for those unexpected expenses that can tip monthly budgets over the edge, like an appliance or car repairs.

Consider long-term savings and retirement planning
Saving into a pension plan offers tax relief on payments, and employers often contribute as well. They offer tax relief on your payments, so putting money into one can cost less than you think. If you have a workplace pension plan, your employer will typically pay into this – usually making a minimum payment of 3% of your earnings.

In comparison, your minimum personal contribution generally is 5%, with some employers willing to pay more. Some even match the employee payments up to a certain amount – meaning if you can put in more, they will too. It might be worth checking to see what’s possible, as this is a great way to boost your pension savings. Starting contributions early can significantly impact your total retirement fund.

Source data:
[1] Boxclever conducted research among 6,000 UK adults. Fieldwork was conducted 6th Sept – 16th October 2022. Data was weighted post-fieldwork to ensure the data remained nationally representative on key demographics.