Despite ups and downs throughout the year, 2025 proved to be a great year for the FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange.

According to the Guardian (31 December 2025), the FTSE 100 increased in value by a fifth in 2025, marking the strongest annual gain since 2009. When markets closed on New Year’s Eve 2025, the index was up 21.5% compared to where it was at the start of 2025.

The index got off to a positive start in 2026 as well. The BBC reported (2 January 2026) that the FTSE 100 climbed above 10,000 for the first time when markets reopened in the new year.

So, what investment lessons can you learn from the performance of the FTSE 100?

1. Look beyond the headlines

If you only looked at the headlines of 2025 and tried to predict how markets had performed, you might expect a very different outcome.

The headlines were often sensational and may have led investors to fear that the value of their investments would fall significantly. For instance, when the US introduced trade tariffs and threatened to impose others, this created attention-grabbing headlines that often suggested a negative impact.

Understandably, these headlines may have triggered an emotional response in some investors. However, those who acted on this fear by selling assets may have missed out on potential gains.

While it’s impossible to avoid the news completely, looking beyond the headlines and taking a long-term view may be useful. It could help you focus on your long-term strategy rather than current events that might cause short-term market volatility.

2. Markets typically recover from downturns

It’s important to note that all investments carry some risk, and performance cannot be guaranteed. However, historically, markets have recovered from downturns over the long term.

When you look at the dips the FTSE 100 experienced in 2025, it’s clear that it recovered in the months that followed.

For example, the Guardian reported that the FTSE 100 was down on 7 April 2025 after the US announced it would not consider pausing trade tariffs. While this may have been a cause of concern for some investors, the FTSE 100 made gains in the following weeks as the outlook changed.

If you’re tempted to react to market volatility, remembering that markets have historically recovered from downturns could help you hold your nerve and stick to your long-term investment strategy.

3. Diversification could help manage investment volatility

The performance of the FTSE 100 highlights the value of diversifying your portfolio.

Rather than investing in a few companies, choosing to invest in a wide range of assets, regions, and sectors can help spread investment risk. While one area of your portfolio might fall, other areas may help offset these losses.

Diversification doesn’t remove investment risk, but it could help you manage investment volatility.

The FTSE 100 includes companies working across a broad range of sectors, from mining to advertising. Some of these sectors have experienced significant gains in 2025, which helped balance out losses in others.

While the FTSE 100 is made up of the largest companies listed on the London Stock Exchange, many of them are multinationals.

According to data from LSEG (5 March 2024), more than four-fifths of the sales of the FTSE 100 come from outside the UK. So, even when investing in an index tied to the London Stock Exchange, investments may be more global than you expect.

Investing in companies around the world can help balance your portfolio. For example, if external factors led to the retail sector dipping in the UK, this might be offset by rising sales in other countries.

One way to diversify your portfolio is to invest in a fund. An investment fund pools your money with that of other investors to invest in a wide range of opportunities. So, you can diversify your portfolio without having to make lots of individual investment decisions.

Your financial planner can help you assess which investments, including funds, might be right for you.

Get in touch

If you’d like to review the performance of your investments or have questions about your investment strategy, please get in touch. We’re here to help you understand how your investments could support your long-term goals.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Retirement is the perfect time to add some little indulgences into your life, your reward for navigating the challenges of a lifelong career.

They don’t need to be particularly expensive or over the top. But things that will enhance your life, boost your wellbeing, and add a sense of fulfilment to your retirement can all make a big difference.

While luxuries will be very individual to you, here are five small steps you could take to elevate your retirement lifestyle.

1. Support your sleep with high-quality bedding

Getting a good night’s rest is vital for your overall health, as it allows your brain and body to carry out restorative processes that help you function at your best the next day.

Some people find that their sleep becomes less deep as they get older, or they wake more often during the night.

According to Age UK, sleep is vital for cognitive function, and sleeping an average of seven to eight hours a night is related to better brain health, as well as better physical health in older people.

All good reasons to make sure your bed and bedding are as comfortable as possible.

Investing in a quality mattress can make all the difference. The right mattress is one that supports your spine, promotes comfort, and keeps you at a comfortable temperature, meaning what’s “right” varies across individuals.

According to Healthline, research suggests that a medium-firm mattress can promote comfort, correct spinal alignment, and quality sleep.

If you struggle with aches and pains, a memory foam mattress could help. But if you find the “sinking” feeling associated with these uncomfortable, then try a latex foam version, as this puts less pressure on your body.

Choosing some high-quality bedding can also make a big difference and improve the quality of your sleep.

• Egyptian cotton is a big favourite and for good reason. Its long fibres and strong durability make it a long-term investment, while its breathability and luxurious feel make it a good all-rounder.
• Bamboo is naturally moisture-wicking and has antibacterial and hypoallergenic qualities, so it is ideal if you struggle with sensitive skin. Plus, it helps to regulate your body’s temperature, keeping you warm in winter and cool in summer.
• Good-quality linen is also an excellent choice for temperature regulation and has a clean, cool feel.

2. Take out a gym membership to keep active and boost your wellness

A little daily exercise can help reduce your risk of heart disease and stroke and help keep you active and mobile.

The NHS suggests adults over 65 should have 150 minutes of moderate-intensity activity a week, 75 minutes of vigorous-intensity activity, or a combination of both. It also recommends activities that improve strength, balance, and flexibility at least two days a week.

Taking out a gym membership can help you get in your exercise quota, as most offer a full range of equipment and classes.

You can ask the staff to tailor a workout for your fitness levels; many also offer off-peak memberships, meaning you can go during quieter times.

Choose a gym with a pool, and you can enjoy an invigorating swim, too. Plus, many facilities now have an inclusive spa for an extra boost of wellness, as you can relax in the saunas and steam rooms.

3. Join a club or take up a new hobby to meet new people

Expanding your social horizons can also help you stay busy and active during retirement. Plus, according to Age UK, research suggests that participating in meaningful activities and having close ties to friends and family could also slow cognitive decline.

This could be in the shape of something you already enjoy, such as painting or cookery. Retirement is also a great opportunity to try something new, perhaps something you’ve always wished you could master, like learning to dance or taking golf lessons.

Alternatively, you could opt for studying, maybe learning a new language or trying a subject that’s always taken your fancy.

These are all good ways to add meaning and fulfilment to your days, keeping you motivated and interested, and expanding your social circle in the process.

4. Treat yourself to experiences that you love

An experience you enjoy creates a valuable, lasting memory. Now could be the right time to treat yourself to a season ticket for your football team or follow your favourite band if they’re on a live tour.

Retirement also means you can enjoy a matinee at the theatre, which can often be both cheaper and less busy, or indulge yourself with regular cinema trips.

While it’s nice to do things you know you’ll enjoy, there are also significant benefits associated with trying something new. According to Psychology Today, it can help build flexible thinking, improve your mental wellbeing, and trigger your brain to release dopamine, which improves your mood.

5. Use technology to add extra comfort to your home

Think about what you could introduce into your home to make life a little more comfortable and convenient. For example, an Amazon Echo device, which pairs with the virtual assistant Alexa, can perform all kinds of activities, from switching on your lights to answering questions and playing music.

You could also invest in an e-reader to enjoy a range of books, often discounted or on special offer. If you don’t already own one, a tablet can also be a great technological addition to your home. Watch your favourite media, read the news, check social media, and search the web, much like you may do on your phone, but in a more user-friendly way.

After a year filled with uncertainty and rising trade tensions, markets were calmer in December 2025. Find out what may have affected the performance of your portfolio at the end of the year.

Market volatility eased in December 2025

Markets were downbeat at the start of the month. Most European markets were in the red on 1 December, including Germany’s DAX (-1.2%), France’s CAC 40 (-0.55%), and the UK’s FTSE 100 (-0.13%).

The Bank of England (BoE) carried out stress tests on 2 December, which all major banks involved passed. This led to bank stocks rising, including Lloyds (1%), Barclays (0.95%), and HSBC (0.7%).

American technology firm Oracle Corporation missed its revenue forecast and hiked expenditure plans by $15 billion (£11.3 billion). This led to the company’s shares dropping by 15.7% when trading started on 11 December – knocking almost £100 billion off the company’s market capitalisation.

The news dragged down other AI stocks as well, including Nvidia, which became the biggest faller on the Dow Jones Industrial Average index after it tumbled 2.7%.

Despite the concerns about AI, the Dow Jones Industrial Average hit a record high after rising 0.95% on 11 December following news that US interest rates had fallen.

On 17 December, the FTSE 100 was up 1.6% following a bigger-than-expected drop in inflation, leading gains in European markets.

With Christmas nearing, festive optimism swept through London. On 19 December, the FTSE 100 closed at an almost record high, with leading firms including Rolls-Royce (2.7%) and precious metal producers Endeavour Mining (3.1%) and Fresnillo (2.8%). However, housebuilders and retailers suffered falls.

UK

UK inflation slowed to 3.2% in the 12 months to November 2025, according to the Office for National Statistics. The news led the BoE’s Monetary Policy Committee to vote to cut the base interest rate from 4% to 3.75%, with further cuts anticipated in 2026.

The headline GDP figure was weak in the UK. The economy unexpectedly shrank by 0.1% in October, according to official data.

In addition, UK unemployment hit a four-year high of 5.1% in the three months to October. This could signal a weakening economy.

However, forecasts suggest the economy could pick up in 2026. The Organisation for Economic Co-operation and Development (OECD) expects the UK to be the third fastest-growing economy among G7 members in 2026, falling behind only the US and Canada.

This view is supported by a return to growth in the manufacturing sector.

According to S&P Global’s Purchasing Managers’ Index, manufacturing grew for the first time in a year. The reading came ahead of the Budget, when uncertainty was likely to have been playing on the minds of businesses, so the improvement is particularly encouraging.

Sadly, it’s a different picture for retail.

The Confederation of British Industry (CBI) reported that retail volumes fell at an accelerated pace in December despite the festive season, and firms don’t expect any relief in the opening months of 2026.

Europe

The European Central Bank (ECB) opted to hold its interest rates in December as it noted that it’s on track for inflation to settle around its 2% target.

The ECB also raised its growth forecast for the economic bloc, driven by rising domestic demand. The bank now expects GDP to rise by 1.4% in 2025 and 1.2% in 2026.

An industrial recovery is likely to play a crucial role in the higher GDP forecasts. According to Eurostat data, industrial output increased by 0.8% in October as businesses benefited from trade uncertainty fading and falling energy costs.

However, not every part of the region is as optimistic.

The German Ifo Institute’s business climate index fell in December, despite analysts predicting a rise. The gloomy outlook is linked to two years of economic contraction in manufacturing, confidence in the service sector falling, and unhappy retailers facing lower-than-expected sales in the lead-up to Christmas.

US

US inflation unexpectedly fell to 2.7% in the 12 months to November 2025. Experts had predicted inflation would be 3.1%.

While falling inflation is good news for struggling families, rising unemployment could suggest further difficulties ahead. The unemployment rate hit 4.6%, amid apprehension about the strength of the US economy.

However, job growth was higher than anticipated in November. A total of 64,000 jobs were added, against the predicted 40,000.

The economic news led to the Federal Reserve cutting the base interest rate by a quarter of a percentage point. The base rate is now at its lowest point since 2022.

President Donald Trump permitted technology giant Nvidia to ship H200 chips to China in exchange for a 25% surcharge for the US. The move could allow Nvidia to win back billions of dollars in lost revenue, which led to its shares rising by 2.3% on 9 December.

While good news for Nvidia, the move has been criticised for being an “economic and national security failure” by some Democratic senators.

Asia

The International Monetary Fund (IMF) raised its growth forecast for China. The organisation now expects the country’s economy to grow by 5% in 2025 and 4.5% in 2026, thanks to lower-than-expected tariffs on Chinese exports.

However, the IMF also urged China to fix “significant” imbalances in its economy, primarily by shifting from export-led growth to domestic consumption.

The positive news from the IMF was supported by official trade data.

China’s trade surplus hit $1 trillion (£0.74 trillion) for the first time in November 2025, as the economy appeared to shrug off concerns about the impact of trade with the US. Exports grew by 5.9% year-on-year in November following a 1.1% contraction in October.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

When you’re building a business, you might have little time to think about other aspects of your long-term finances. However, overlooking your pension in favour of your business could leave you in a difficult situation when you want to retire.

According to a survey carried out by think tank the Social Market Foundation (12 August 2025), just 20% of self-employed workers save into a pension, compared to 78% of employees. While not all self-employed workers will be business owners, the data points to a wider trend of underestimating the importance of retirement savings.

Why relying solely on your business as a retirement plan could be risky

Your business might be one of the largest assets you hold, and your focus may be on increasing its value. As a result, planning to sell your business to release funds to support you throughout retirement can seem like a straightforward option.

However, some risks could harm your retirement plans if you haven’t taken other steps to create a retirement income, such as contributing to a pension.

Whether you plan to sell your business to a family member or a third party, you’ll need the sale to go through to access the money you’ve earmarked for retirement. This presents a degree of uncertainty – what if the sale takes longer than you expect, or it’s difficult to find a buyer?

You could find yourself in a position where you’re ready to give up work, but are unable to until you find a buyer.

In some circumstances, delaying your retirement might be manageable. However, in some situations, delaying retirement could be harmful. For example, you might need to retire earlier than expected due to ill health, and a delay could place unnecessary pressure on you.

In addition to the challenge of finding a buyer, it’s worth considering how the value of your business could change. Factors outside of your control could mean your business doesn’t sell for the price you hoped, which could have a knock-on effect on your retirement income.

These challenges don’t mean your business exit strategy shouldn’t form part of your overall retirement plan. However, if your retirement plan only includes your business, it might be beneficial to carry out a financial review that considers pensions and other options alongside it.

3 practical reasons pensions can be valuable for business owners

1. Pensions are a tax-efficient way to invest

A pension provides a tax-efficient way to invest for your retirement for two key reasons.

First, you’ll benefit from tax relief when you contribute to your pension. Assuming your contributions don’t exceed the Annual Allowance, which, in 2025/26 for most people, is £60,000 or 100% of your annual earnings, whichever is lower, you’ll receive tax relief at your marginal rate of Income Tax, providing an instant boost to your pot.

Second, the money held in your pension can be invested in a range of assets with the aim of generating long-term returns. Returns on pension investments aren’t liable for Capital Gains Tax, so all the returns can be reinvested to benefit from the compounding effect. 

2. Contributing to your pension could be tax-efficient for your business

Pension contributions may also be tax-efficient for your business.

Pension contributions are an allowable business expense. As a result, you can deduct your pension contributions from your business’s profits before Corporation Tax is calculated, which may directly lower your firm’s tax bill.

In addition, employer pension contributions are not subject to National Insurance contributions for either the employer or employee.

3. You may use your pension to purchase business property

If you have a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS), you can use your pension to buy commercial property.

In effect, this could mean your pension owns your business premises and receives rent from your business. So, rather than paying a third-party landlord, your business’s rental costs will boost your pension.

The rules and tax relief around commercial property and pensions can be complex. Seeking tailored financial advice can help you assess if this is an option that might be right for you.

We can help business owners plan their retirement

As a business owner, your retirement finances might be more complex. We can help you create a retirement plan and exit strategy that complement one another. Please get in touch to talk to one of our team about your needs.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

You might already know that salary sacrifice can be a practical way for your employees to bolster their retirement funds, while reducing their tax liability.

However, in the 2025 Autumn Budget, the government announced changes to how salary sacrifice is treated for National Insurance (NI) purposes.

From April 2029, a new cap will be introduced, limiting the portion of pension contributions exempt from NI to £2,000 a year.

While 2029 might seem a long way off, this is the ideal time to think carefully about how you and your business might be affected so you can be prepared.

Continue reading to discover exactly how the salary sacrifice pension cap will work, and what it means for your business’s retirement planning.

Salary sacrifice is a way for your employees to exchange a portion of their income for benefits

Salary sacrifice involves an employer and employee agreeing to a reduction in gross pay in exchange for non-cash benefits.

These might include:

• Employer-provided healthcare
• Gym memberships
• Financial advice
• Company cars (especially electric vehicles).

Perhaps the most popular non-cash benefit is pension contributions. For many other non-cash benefits (known as “benefits in kind”), tax might still be due. However, pension contributions made via salary sacrifice are typically exempt from both Income Tax and NI.

Furthermore, when your employees sacrifice a portion of their salary, you might then decide to contribute the equivalent amount to their pension. Currently, this allows you to significantly boost their retirement fund.

Moreover, as an employer, you currently benefit from not paying Class 1 secondary National Insurance contributions (NICs) – 15% in 2025/26 – on the amount sacrificed by your employee. This results in a tax saving.

However, from April 2029, the government will limit the NI efficiency on these contributions. While your employees won’t pay Income Tax on your contributions, any amount sacrificed into a pension above £2,000 a year will attract NI.

For the portion exceeding the cap, employees will pay Class 1 NICs, while you will be liable for the 15% rate.

If you’re a business owner, you might want to review your pension strategy

As a business owner, these changes to the salary sacrifice regime can affect your company’s finances and your personal tax situation.

If you pay directly into your pension from your business, or do the same for your employees, nothing will change.

However, if you currently have salary sacrifice arrangements with your employees, or use salary sacrifice to fortify your own pension, the 2029 cap means that making pension contributions will become more expensive.

As an example, every £1,000 sacrificed over the £2,000 limit by you or your employees could see your business face a £150 NI charge.

Furthermore, if you currently share the employer NIC savings with employees to top up their pots, you may need to assess how the new NI charge might affect you.

Otherwise, if your business encourages higher pension savings, you might find your company costs rise significantly in 2029.

As such, it’s worth reviewing any existing salary sacrifice arrangements and employment contracts, and then modelling how contributions exceeding £2,000 might impact your business.

After building this model, you should confirm whether contributions are through salary sacrifice or as standard employer contributions. It might even be prudent to assess your remuneration approach for any key members of staff.

While April 2029 might seem like a long time in the future, taking steps to prepare your business now could help you soften any potential blows later down the line.

It’s useful to understand how the cap might affect your employees

While your own planning is important, it’s also a good idea to consider the impact the change could have on your employees, such as seeing their take-home pay drop as their NI bills rise.

For example, an employee earning £60,000 a year and contributing 6% of their salary into their pension through salary sacrifice would have annual contributions of £3,600. Since this would exceed the £2,000 cap by £1,600, they would pay NI on this amount.

Despite the cap, it may be worth informing your employees that salary sacrifice can still be a practical way to manage their tax liability.

Indeed, the higher-rate band for Income Tax starts at £50,271 as of 2025/26. If an employee earns £50,000 and receives a 5% pay rise to £52,500, they would normally be pushed into the 40% bracket.

They could, however, sacrifice that £2,500 into their pension to remain in the basic-rate band.

Even though they would now pay NI on the £500 of the contribution above the cap (assuming they make no other pension contributions), the Income Tax savings could still make this approach financially beneficial.

It’s is important to note that if salary sacrifice is a popular perk in your business, your company might seem less attractive to the talent you wish to hire from 2029 onwards.

A capped NI benefit might deter higher-level talent, turning them towards competitors who offer a higher base salary or more generous direct pension contributions.

To stay competitive, you may want to consider paying more into your employees’ pensions rather than offering a higher salary.

Get in touch

We could help you deal with some of the tax complexities of the new salary sacrifice rules well ahead of the deadline.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pensions Regulator.

The Financial Conduct Authority does not regulate tax planning.

In the Autumn Budget 2025, the chancellor announced that Inheritance Tax (IHT) thresholds would remain frozen for a further year, until 2031.

Upcoming changes will also see unused pensions included in an estate for IHT purposes for the first time from April 2027.

These measures could see estates facing a larger IHT liability, or coming into the scope of IHT when they may previously have been exempt.

Research has suggested that families concerned about being caught in the IHT net are taking steps to mitigate their bills. According to MoneyAge (6 October 2025), 23% of people are planning to give away money to reduce their IHT bill, with 8% saying they would even give away their home.

While gifting can help to lower your IHT liability, it’s not always a simple or straightforward solution.

Read on to discover five things you need to know before you consider gifting as part of your financial strategy.

Understanding the current Inheritance Tax landscape can help you clarify whether your estate is likely to incur any liability

There are a number of rules surrounding IHT, and having a grasp of them can help you decide whether gifting could be a beneficial option.

The current nil-rate band, the amount you can pass on free from IHT, is set at £325,000 (now frozen until 2031). This means that anything above £325,000 will be taxed at 40%.

However, the residence nil-rate band offers an extra allowance of £175,000 if you leave your main residence to your children or grandchildren (this can include those you’ve adopted or fostered, or stepchildren).

Together, these two thresholds mean that you could have an estate worth £500,000 free from IHT.

In most cases, anything you leave to your spouse or civil partner, even above the threshold, is free from IHT.

You can also transfer your allowances to your spouse or civil partner when you die, or they can do the same for you. This means that, in some cases, a couple could have a £1 million estate they can leave without generating an IHT bill.

Gifting is a popular way to reduce the value of an estate to bring it below these thresholds.

However, it’s not as simple as just giving your money away, and the government has introduced rules to prevent people from simply offloading their wealth to avoid IHT.

1. Gifts aren’t automatically exempt from Inheritance Tax

You can gift up to £3,000 annually free from IHT, and you can also make smaller one-off gifts of up to £250 per person. Gifts of any amount to your spouse or civil partner are also IHT-free.

Gifts above £3,000 are usually known as potentially exempt transfers (PETs), which means they only become fully exempt from IHT after seven years.

In some cases, PETs can be eligible for taper relief over the seven years, with the level of IHT applied dropping incrementally until it reaches 0%.

Another option is to make regular gifts, as opposed to lump sums, out of your everyday income. These can be tax-free if they meet three specific criteria.

• They are regular, forming part of your normal expenditure.
• Gifts are made from your income, such as pension, rental, or dividend income.
• You can still maintain your usual standard of living after making the gift.

Talk to us to find out if making any of these gifts could help to lower your IHT liability.

2. Gifting could potentially affect your long-term finances

You need to give careful consideration to how much you’re gifting, so that your generosity doesn’t leave you short in later years.

The rising cost of living means you may need to factor in an increased income to cover your everyday expenditure and household bills.

Health and care costs are another significant later-life consideration. It’s impossible to know if you’ll need care, or to what extent, but care costs in particular can really whittle away your wealth.

According to the UK Care Guide (1 October 2025), the average cost of a live-in home carer ranges from £650 to £1,500 per week, while average care home fees range from £27,000 to £39,000 per year, with costs rising further if you need nursing care.

It’s always a good idea to talk to your financial planner before gifting, to ensure your strategy is robust enough to withstand inflation and potential care costs.

3. There could be challenges associated with gifting certain assets

While gifting your home may seem both extremely generous and a logical way to mitigate IHT, there can be some complications you need to navigate.

If you plan to continue living in your home, this will be considered a “gift with reservation of benefit” and will still count as part of your estate for IHT purposes.

However, if you pay full market rent (not just a nominal amount), this can remove the property from your estate, but you need to be willing and able to make rental payments.

4. Is the gift right for your loved ones?

While gifting is a generous gesture, it’s always worth checking that it won’t backfire. For example, if you make large gifts to your adult children, they could potentially push them into a higher tax bracket or make them no longer eligible for benefits.

If you gift them your property, as well as the issues outlined earlier, they could face a Capital Gains Tax (CGT) bill if it isn’t their main residence and they sell it.

Doing some due diligence before making any gifts can ensure they’re beneficial for the intended recipient.

5. Could there be a more tax-efficient way to pass on your wealth?

Gifting isn’t always the most tax-efficient way to pass on your wealth, either. In some cases, putting some of your wealth into a trust can be an option to remove it from your estate.

You could also take out a life insurance policy, which is then written in trust. The policy would then pay directly to the trustees, rather than your estate, and can be used to pay an IHT bill.

Trusts can be extremely complex, and we’d always urge you to take financial advice before proceeding.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, or trusts.