The Pension Triple Whammy: How Inheritance Tax Could Hit Your Family in 2027

Transcript

speaker-0 (00:00.014)

There's a date on the board, the 6th of April 2027. This comes in, whether you're ready or not. The pension now fully sits inside the taxable estate. Previously the pension wasn't included in that. Now it's right in the middle of that mix, which for some people who've done a really good and diligent job of building their pension wealth, they're gonna have a really nasty shot because there could be tens and in some cases hundreds of thousands of pounds of additional tax payable somewhere down the line by their loved ones.

You need a plan. People are just sleepwalking into this.

speaker-1 (00:33.87)

Hello and welcome to this episode of Wealth Talk, the podcast that helps you create, build, protect, and of course, increasingly now with inheritance tax due to ravage everybody in April 27th, more of that in a minute, pass on your wealth to the next generation. I'm joined today by co-director, well, loosely I might call him a friend on one day, but Paul Brooks.

And we're just going to chew the fat about a few things because one of the observations that I want to make is I don't know about what you're hearing, Paul, but we talk to business owners every day of our life and everybody's miserable. What's going on?

It's interesting time, isn't it? You know, we just learned today, literally not too many hours ago, that the the base rate has been put up and you know, pressures on business owners and, you know, mortgages and all sorts of things happening. And, you know, off the back of a budget that was a bit of a damp squib as well. It's it's just a funny time, isn't it? Really, really strange environment to be in as a business owner and thinking about building wealth.

Were you impressed by the breathing space Paul?

Yeah, i i it all seemed like a lot of bluster and hot air, didn't it, without much substance. We'll see, I suppose.

speaker-1 (01:54.542)

I that's probably true of most budgets, but I don't ever get too hung up on budgets. are always lots of speculation, always. And then later on, lots of sleight of hand. And we saw that big style. Well, let's why don't we touch on the very brief sleight of hand. got, do you know what, Paul? I actually, for a moment, it's only a fleeting one, I actually got excited. That budget.

Never done that before. I can't remember the last time I went, hang on, something interesting here. The chancellor said, given the amount of risks and the enterprise that business owners take, it's appropriate we should reward them for their hard work. I'm going to introduce Founders Relief. And I thought, my goodness, Entrepreneurs Relief is coming back. Something good is actually happening.

The government have recognized us business owners. Yes. You were saying, you did an episode or a webinar recently, didn't you, with Jeremy Harbour, who is an overall good guy. And he said the founders relief, which is essentially a new relief of up to 10 million pounds worth of relief at 10%, which is where the entrepreneurs relief used to be go back 2008.

2009, which got devastated to half a million in a fell swoop and starting next April. So how many business owners can sell their business in six months? Not many. But what did Jeremy say about the number of business who would have qualified for this founder's relief?

Yeah, it was really interesting. He, you know, with with the advent of AI, you can do lots of research in a short space of time. And he said that he and his team scoured companies' house and scoured databases looking at businesses that had sold to see just how many would actually get the benefit. And it was a big fat zero. Not a single one.

speaker-1 (04:02.606)

Yeah, so all that bluster, founders relief for just a few people. mean, one of the few things I've picked up, one is you've got to be in the same business at the beginning as you have at the end. Businesses pivot all the time. They have to. The very nature of business and entrepreneurs is they change. Can't do that. There's a head count target with AI giving more and more scope to be able to do work without needing a person to do the work.

Don't know why that's coming in. seems counterintuitive. 25 % growth year on year. I felt like you'd have to go to a casino and pull the old one arm bandit and get the three bells or the three cherries or the three bloody no chances consecutively for this to work. It's not going to work. And you have to get R &D, research and development accredited and paid for one and a half million quid's worth.

It's just not going to work. anyway, should we, should we rant over?

Yes, why don't we move on to the topic of the day?

Well, the topic of the day and the topic of my day for sure, and the biggest thing that I'm bleating about right now, but in a really positive way, because I think awareness of many things and budgets we talked about and we laughed a bit about, you can't really do much about the budget, but you can react and you can choose what you want to do. And there's something coming down the track, which has got devastating consequences that people just haven't woken up to.

speaker-1 (05:36.226)

And I think business owners, property business owners and employed people are sleepwalking into this. And I call it the, the pensions tax triple whammy or the triple whammy as we call it. And, and it all starts with, well, speed, you know, one of the things we talked about, about the BADR or the, you know, the being able to sell your business is it starts really quickly in April, 2027.

What we've noticed about budgets is they'll announce something a long time before it's due and hope that people forget about it by the time it's due. Well, it's due. We're five months away from the pension triple whammy hitting. And so why don't we talk about that? So the first triple whammy is inheritance tax being charged on pensions pretty much for the first time, as far as I can recall. I've been around a lot longer than you. What on earth does that mean, Paul?

What does inheritance tax on pensions mean and why have they suddenly decided to do that?

Well, I think the why is is a result of an ever growing black hole in the in the UK economy and you know, the spiralling costs of of servicing the debt that we need to to to fill that hole. And and a government and s you know, for some years governments that have been looking to to push death taxes up across the board, push tax take up across the board and

You know, the seeping of pensions into the inheritance tax net now is going to have an enormous impact on so many families because people for years have been using pensions as a deliberate mechanism to do a good job of building wealth today in the safety and the security of knowing that what they pass on when they're no longer here goes on to their loved ones without any tax. So business owners and people in employment have been pushing.

speaker-0 (07:35.414)

lots and lots of hard earned money into their pensions now gonna find all that hard work is gonna come to bite them because now all of those pensions, certainly the ones that are, you know, in in some way linked to the stock market or or not, don't have a guaranteed income attached to them.

is most unless of course you work in Whitehall or the civil service.

Absolutely. So, you know, the the pension now fully sits inside the taxable estate, which means everything you own less everything you owe. Previously the pension wasn't included in that. Now it's right in the middle of that mix, which for some people who've done a really good and diligent job of building their pension wealth, can have a really nasty shock because there could be tens and in some cases hundreds of thousands of pounds of additional tax payable.

somewhere down the line by their loved ones, which, you know, up until twenty twenty four wasn't a concern for.

people. Yeah, it's an interesting one because if you think about two things really, one in 2015, they brought in pension simplification to allow us all to have as much freedom of choice about how we deal with their pensions and just over 10 years later, basically withdrawn the whole thing. to punish people for taking advantage of rules that were made for their benefit, it seems to me to be hugely punitive and frankly unfair.

speaker-1 (09:01.758)

And the other thing to mention is pensions are a matter of legal obligation now. So there's a legal obligation to have one, so there's a legal obligation possibly to pay tax on it, which is another one. And I think speaking personally, those who know my story, Paul, know that my father died early at age 46, and that kind of shaped the financial decisions I made in my life. And one of those that prompted me to

pile money into my pension, an insubstantial pension by any means, north of seven figures, means that, and if you take a simple, simple number and I'll use a round number, like, you know, somebody's worked really hard and built up a pension and call it a million quid for the sake of an argument, then if they lose 40 % of that, which is inheritance tax 40%, that's 400,000. So if I've got three grownup kids and that's 600 grand for them and 400 grand to the government,

My favorite son or daughter is now HMRC. It's just a joke. I'm sorry. I'm ranting, but I feel very strongly about it. And I think other people who perhaps thought they had the freedom of choice don't. And that's only whammy number one, which is the pension gets caught in the inheritance tax net. So even people who perhaps weren't in the inheritance tax net before the pension gets added to their estate. So it's going to drag some people in.

when they didn't even know they were going to be in. And if you link that to the fact that the amount of money you can leave before you pay inheritance tax, in simple terms anyway, is $325,000 per person, $650,000 for a couple, and that hasn't changed since 2009.

Isn't set to change again until two thousand thirty one at the very earliest.

speaker-1 (10:55.566)

So, know, best part of what's that 20 years and you know, over 20 years, if you imagine didn't get pay wise for 20 years, it'd be a few strikes, wouldn't it? So the squeezing of the allowance and the adding of pensions and that's not the end of it. We're just at the start. That's, we said it's the triple whammy. That's whammy number one, which is the punch in the face on inheritance tax. I think it was Mike Tyson, wasn't it?

You say everybody's got a plan until they get punched in the face. I don't think people are aware they're going to get whacked in the face here, The financial face, of course. No, but I've not met anybody who's really aware of what's happening and it's round the corner.

Lot of people still kind of feeling like this is is this really happening? You know, is this is just speculation, this is just it's still in consultancy, it's it's you know, it's coming. There's a date on the board, the sixth of April twenty twenty seven. This comes in whether you're ready or not, you know. So unless you're planning on dying before April next year, which I suspect most of the people listening hopefully won't Yeah. Okay. I thought so. You know, you need a plan. People are just sleepwalking into this.

I'm planning to leave, thanks.

speaker-1 (12:07.372)

All right, well, let's deal with whammy number two, which kind of relates to the age thing. And again, something that I feel is fundamentally unfair because it's outdated. Average life expectancy now for people is kind of mid-80s. Yet there is a very curious rule, Paul, where there's a double taxation on a pension if somebody dies after age 75.

And the pension, no inheritance tax to pay between spouses. So let's imagine that's fine. But then the pension gets transferred to the children who say, well, yeah, that's fine. Dad left me money and mom didn't spend it. So I'm going to take it. What's the consequence of this? What's whammy number two?

Well sadly, whummy number two is anyone who receives a pension from a deceased parent.

Is gonna pay income tax on anything they draw at their marginal rate forever, if the person who passed it on to them dies age seventy-five or older. And given, as you said, you know, we should be expecting with healthcare and medicine and all the other things of of modern living, people I mean, reality is it's that age is gonna keep going up. It's mid eighties now, but you know, in

a generation or two generations, it's probably going to be closer to ninety and maybe even longer than that. I think you've said for a long time that there's a lot of statistical evidence that said, you know, this generation could realistically expect to live to a hundred.

speaker-1 (13:45.762)

Yeah, absolutely. Statistically, it's there. It's embedded now in national statistics, which is why there's a rumor. Not that I'm a rumor monger, I'm not. There was a post by Steve Webb, the ex-pensions minister, basically saying he thinks that state pension will be wiped out for wealthier people, whatever wealthier means. And I don't know what that means, but there's so much

pressure on pensions, but the pressure to pay income tax on top of inheritance tax. It's not one or the other, it's both. And the average, the kind of net impact of that, so if you take the pension, lose 40%, and then the children get that money, decide they'll draw it, they'll pay, say, 40%. So the combination of the two isn't 80, but it's 64%, because

you're paying tax on the small amount that's left. So 64 % tax, I don't watch the TV that much, but if I did, I've heard there's a program called Family Fortunes. I know this is the opposite of Family Fortunes, it's family losing a fortune. But on Family Fortunes, it says something like, of 100 people surveyed, how many people would be able to identify that the highest rate of tax in the UK on income

is now 64%. Also, they said, wouldn't get it, would they? Because people think the highest rate tax 45. So 64%. And it's worse still, isn't it? Now this one, well, I mean, three, Paul, it's a bit more complex. So we need to kind of slow it down and help people understand the context. So I'll give the context.

you explain the detail. All right. We know that I mentioned a moment ago that there are allowances against inheritance tax, just like there are income tax allowances. And for a typical couple, let's make it simple. The allowance of 3.25 per person is 6.50. But the government did introduce a concept which has got a funny name, but we'll come back to that.

speaker-1 (16:08.792)

which is why I think some people get confused because the language bit clunky, isn't it? We'll describe, you can describe what the language is in a minute. I'll do the simple stuff. There is an allowance that if you've got a home you live in, like me, and you want to leave that to your children after your spouse, you get an extra allowance, which is 175,000 pounds per person. So add two lots of that, 350, add 350 to the

two lots of 325 which is 650, you get a million. So most people believe that as long as their estate is worth a million or less, there will be zero inheritance tax. But that may not be true. Explain.

If you've done a great job of building your wealth, however you might have done it, and actually sometimes even if you haven't been super proactive in building your wealth, you just happen to have bought a house in an area where house prices have you know skyrocketed over the last three or four decades, you could quite easily be sitting on one property and some reasonably modest assets that would put you in a position where you breach a threshold.

of value in all of the things that you own. And that threshold is two million pounds.

Which sounds a lot, right? So in fairness, it's large sum of money. So let's just restate it Paul, if you don't mind. So when we give an example, let's say someone lives in the Southeast, got a million pounds house, no mortgage on it. They're in their sixties or seventies. They've saved well. And with Isis and investments and maybe a property, know, buy it or something.

speaker-1 (17:58.786)

They got another million. Right. So they're going, we've done well. We've got 2 million, but there's a pension and the combined pensions, let's call it 350 per person because you know why I'm doing the maths on that that way. So 700 grands worth of pensions, which today, as we speak in 2026, zero inheritance tax to pay doesn't get counted in the estate. But from April 2027,

It does. So that 700,000 now makes the estate in this very rough example, 2.7 million. They're not worth more because they had the asset in the first place. It's just, it's in the estate now. What's the impact of that?

Well, sadly, the impact is that for every two pound over the two million, you lose one pound of this extra three hundred and fifty thousand allowance that you talked about earlier. And it's the clunky name is the residence nil rate band, in other words, primary residence nil rate band. So a bit like the personal tax allowance that

Lots of people listening will probably be familiar with once you get to £100,000 worth of earnings, you start to lose a pound of the 12,570 pound thousand five 12,570 pound personal allowance, which is the tax-free earning that you can have in the UK. For every two pound over the 100,000 limit, you lose a pound of that. Well, this is exactly the same principle. For every two pound over the two million, you lose a pound of this extra allowance. So

The net effect is at the two point seven that we're using in this example, you've fully lost the three hundred and fifty thousand pounds worth of extra tax free assets you can pass on to your children. And so there's an immediate forty percent additional tax to pay on that. Which

speaker-1 (20:03.086)

rough just quickly totting up 350 at 40 % is what 140. So there's 140 grands worth of extra tax on top of the 40 % tax and on top of the income tax provided this, you know, because the tax assessment or the resident nil rate band is assessed at the start. It's not assessed after the income. So the combined effect could well be over 80 being the pound, you know, so

I don't think people know this is happening, Paul. And therefore the recommendation we're making is understand where your pensions are, get a feeling for what your assets are. I think we can do in the show notes a link to our inheritance tax calculator, because what we normally find when people have a look and just put approximate numbers in, it's not about being accurate, approximate numbers, they always get a shock.

And when they get a shock, means they'll do something about it. The problem I find is people don't know what's going on. There's no shock. And as there's no shock and the accountant is doing their corporation tax return or their self-assessment return, who's doing an inheritance tax return? Have ever heard of such a thing?

Nobody, nobody's doing it. And this is again the biggest problem, isn't it? It's the lack of understanding, the lack of visibility. And I think also, Kevin, I don't know whether you'd agree, but because for people, for certain people, this is such a long way away. It's difficult to find the urgency to fix the problem because it's well it's it's a long time away. We've got years to worry about that. But like anything, the sooner you start building a really solid plan.

The more time you have, the more effective the plan is, and the more you can make a significant dent in this inheritance tax bill that that will come. You know, there's no getting away from this. No government, I suspect, is going to scrap inheritance tax. And I can't imagine pensions coming outside of the scope of inheritance tax. Now they're literally five months away from being in. So, you know.

speaker-0 (22:12.15)

It might feel like if you're in your 40s and 50s and you've done a great job of building your wealth or you've got ambitious targets and you're on track, this is something that you shouldn't worry about. And in fact, I even heard someone say to me the other day that their IFA had said to them, you don't need to worry about inheritance tax. That's a long way away. Which for me is just nuts because that's like saying you don't need to worry about building a pension, you're years away from retirement. Don't bother about putting any money away in a pension or don't worry about investing in something. You know, the sooner you do this work,

The more you can do, the more you can save and frankly the the more of a security net you're building for your family as well at the same time. Well

look, I won't comment on the idiocy of an IFA who says something like that because we know that awareness is everything. Then once you've got awareness, you can make a decision about what you want to do, whether you want to ignore it, do something small about it or do something big about it. And the bigger the problem, the more you need to think about it. So that's what we're doing here is bringing an awareness, but we haven't finished yet. We've done the triple whammy. So

The inheritance tax at 40%, the income tax at 40 or 45%, and the loss of the resident ill rate bound at 40%, totaling a massive potential tax take. In certain cases, we're not scaremongering here, we're not saying everybody's going to pay 80p in the pound, we're definitely not saying that, but we are saying get to know your facts, get to know what your situation is. And of course, not all pensions are affected, some are not affected at all, like state pensions, like annuities, like...

final salaries that government ministers get. By the way, just to, just to keep ranting, you know, I always run, but it's with good intention. Yeah, I'm a miserable sod, but, but I'm a consumer champion. want people to know about this because we talk about a society where we want to minimize waste and maximize the benefit for all members of society. And what I learned was every prime minister who is alive.

speaker-1 (24:19.074)

gets a pension of a hundred grand a year, it's actually 115 grand a year, irrespective of how long they were in office, you know, for life. And if you've got 10 ministers, 10 ex-prime ministers living, that's more than a million quid going out of the ex-chequer every year just to reward them for past ministries, whether they were good, bad, indifferent, there's trust. Anyway, shall we talk about?

than the quasi economics, but let's not talk about that Paul. Let's talk more about, we've done the triple whammy, but there are two fundamental other problems. And then I want you to shed some light at the end of this tunnel with the concept of the SSAS, a reminder of how it works for just this problem. There are two admin nightmares coming. And one of those relates to the point you and I just talked about.

Nobody does an inheritance tax return. So because nobody does one in advance, the only time the inheritance tax return is done is on the death of the second person in a couple. And usually then, the people nominated to do that work are the executors. And the executors are normally the children. Grown up by this time, if people lived a long and happy life,

and they might be in their 40s, 50s or even 60s. But all of a sudden now they've got to become tax experts and they've got to do an inheritance tax return. And in addition to becoming tax experts, they need to be pensions experts because they've got to find, claim and report every pension owned by this family with no knowledge of where these pensions are. In fact, we know this to be the case.

because we know pensions are not everybody's favorite subject and there's 30 billion of pensions just lost and floating around because people have changed jobs, got married, remarried, the company got taken over by insurance companies come and go and merged, don't they? So how is an executor who knows nothing about tax, knows nothing about pensions can do that work?

speaker-0 (26:44.782)

It's gonna be super hard. It's gonna be guesswork for lots of people, isn't it? You know, scrabbling around, trying to find bits of paper, rifling through filing cabinets, serious risk of missing things.

What's a fight in Cabinet, Paul? I don't think I'll get any paper anymore.

No, well, yeah. Getting access to people's emails in the digital world, getting access to bank accounts in the digital world, it's not easy, is it? Really not.

potentially even impossible. All right, so meanwhile, they're scrabbling around and the process of proving a will is known as probate. And probate is the process that allows the executors to take control over the value of the money to distribute that to those people who are the beneficiaries. So if they can't find the pensions and then they've got to report on what they think they are,

then they've got to pay the inheritance tax on everything they think is there before they get access to any money. Who's responsible if there's any mistakes?

speaker-0 (27:48.174)

Well, the somewhat scary answer to that is they are.

The executor is not the dead person.

Of course, the executors who are stepping in, and let's be frank, they're stepping in probably in the wake of someone that was very close to them, sadly passing. So it's not the best time in in a person's life anyway, you know, all the trauma that comes with losing someone close to you, especially if it's a parent. You've got the complexity and the stress that you have to deal with to go through that process, often, you know, for some people really complicated.

things that they're not used to doing in their day-to-day life. And we see it a lot, don't we, that families just don't have robust enough plans that they can share with their loved ones. And, you know, even practical things like getting access to to bank accounts and documentation and so on is is really challenging if if not impossible. But the harsh reality is they are ultimately accountable. These people who aren't getting paid. They're doing it for free. They're doing it because they've got to tidy up

something for someone that they love and they're on the hook for the tax if something is missed and if a straight pension comes up later on down the line that wasn't declared, you know, even ten thousand pounds or twenty thousand pounds, which isn't a huge amount in the context of the sort of figures that we're talking about here, you know, they're on the hook for, you know, four thousand, eight thousand, ten thousand, who knows how much tax.

speaker-1 (29:17.934)

They're personally liable is the point. And that's assuming A, they've made a will in the first place. B, they actually named executors who could do the job. And C, the executors go, hang on a minute, we're on the hook here, we don't want to be executors. You know, so there's a whole nightmare. All right, well, let's park the nightmare and deal with the final piece before we shed a bit of good news here. Where's the money going to come from and pay tax?

Because if the tax has to be paid before any money gets distributed and somebody doesn't know how much they're going to pay, and let's say it's a big tax bill, it's a million pound tax bill.

I'll pay a million quid within six months.

and they've got no money to pay it. Give me some examples of why that might be a worry.

Well, I guess number one, when you're under pressure to pay a tax bill, you don't make the best decisions or you're forced into a situation where you're fire selling assets. And and those are the very assets that ironically, you know, were built to provide you, the loved one, with some financial stability, possibly some recurring income. And you're in a place where possibly you're you're making decisions that are forced or

speaker-0 (30:36.554)

under a stressful situation because you've got a clock ticking down and a tax man knocking on the door wanting the money and and that means people make poor decisions for one reason or another and the very assets that were built to protect them are then sometimes eroded, sometimes decimated, depending on what's been left and the knowledge and the skill of the person who's picking up the reins and he's now becoming the custodian of this family estate.

is is perhaps gonna be forced into a position where they end up detrimenting themselves just to pay the tax bill.

Wow, and can you imagine the stress of being responsible for that? Selling assets that your parents worked hard to build, the blood, sweat and the years they put into it and all of a sudden you're having to sell stuff because you don't know what you're doing. You're not being guided by anyone. You're thrown in at the deep end. You've got to pay the tax. But surely, Paul, the government give people with pensions some installment plan. They can take...

Sadly not, no. Nope. They want their money, they're not for changing. Six months and six months only. So just no, if you've got I mean, we we work with lots of people with SSAS pension and SSAS pensions are entrepreneurial vehicles. And entrepreneurial vehicles often invest in things that you can't quickly turn into cash. You know, if if you've got commercial premises, for example. It isn't

Quick, easy to find a buyer, find the right price, get something sold, turn it into cash, pay the tax. Whether or not they want to is going to be entirely dictated by the kind of assets that are in the estate or in the pension in this example. And, you know, that's that's a problem just waiting to bubble to the surface for lots of people, I think.

speaker-1 (32:20.134)

And I think all the cases, nobody's aware of it now, but the case studies will, the newspapers will be full of those stories post April when people die and the executors who are just devastated and their finances become devastated. So both emotionally and financially devastated when some knowledge and planning can solve that because, you know, we believe that inheritance tax is a voluntary tax, it's a tax.

for the most part paid by the unprepared and that things can be done to reduce, in some cases even eliminate, but certainly mitigate the liquidity so that the next generation can retain and maintain the assets that you as the founder, as we call them, have created and taken so much hard work in years and

intelligence to negotiate and find the best possible deal now to sell or be forced to sell the worst possible deal. mean, businesses get installments, properties get installments, but pensions don't get installments. It's a weird one, that one. All Now, all pensions are affected, Paul. You mentioned that. So personal pensions, SIPs, SSAS, not final salary pensions. But just give us a quick overview.

on, well, what can be done in a SAS that can't be done in a SIP, say, that give people some cause to be able to think, well, hang on a minute, I need to look into that. Give us a couple of examples.

Okay, so there are two really powerful things that a SSAS has an advantage over just over every other type of pension because they're multi-generational. Unlike a SIP or a personal pension or a workplace pension, they allow layers of different family generations to be inside the same vehicle. So you and your parents, potentially even parents, children and their grandchildren can all be in the same vehicle.

speaker-0 (34:26.817)

And what that allows you to do in simple terms is choose which of the assets in that SSAS are assigned to which member. And if you can choose which assets are assigned to which member, that means you can choose how much growth or income or both goes to each member. And that means you could, if IHT was a serious concern for you and you didn't need to focus on building the biggest pension pot you could have to fund your own retirement.

You could choose to absorb as much of the lowest returning assets as possible for you and your spouse, and the highest returning assets for your children. And what that effectively means is you're artificially accelerating how quickly their pot grows, but you're also deliberately stagnating how quickly yours grows. And if you extrapolate that out over many years and even potentially decades, what you end up with is a pot.

that you leave, which is significantly smaller than it otherwise would be, because you forced lots of the additional growth into the younger generation.

Okay, so thanks. You've done it with some simplicity. There is complexity and for those people who love a bit of AI, it's called earmarking, right? So that's one way. But the other way I'll mention by way of background is the fact that inheritance tax on business owners is not the same as inheritance tax on people. So businesses get additional inheritance tax allowance of

in simple terms of two and a half million pounds per person. So if you've got a married couple, you've got five million. This is a trading company, not a property company, not an investment company, a trading company. And many of our members and clients have got trading companies. if they were to, is there a mechanism by which some of the pension money can support and grow the trading company so that more of the wealth

speaker-1 (36:32.778)

is caught in the tax-free 5 million, then erodes the taxable maximum of either 1 million or the 2 million, which is the definite one to avoid, more than 2 million because that affects that resident nil rate band that you and I talked about. Is there anything that can be done in SSAS that can't be done in a SIP?

And it's called a SSAS loanback, which is effectively a unique option that a SSAS brings to allow you to lend money to your own business. It's like having your own bridging company or finance company tacked right onto the side of whatever it is your business does. And unlike going to the banks and having to go through many hoops and pay lots of fees and you know jump through lots of

underwriting loopholes to get money and then end up paying, you know, far more than base rate for the for the privilege of borrowing it. A SSAS allows you to borrow money from yourself, puts you in this unique position where you're both the lender and the borrower. And that means firstly you're far more likely to be willing to lend money to your own company than a bank would. Secondly, the rate of interest

That you have to pay to your own SSAS is significantly lower than most other types of finance. And it's one over base. You know, in today's environment, as we record that, that's five percent. But, you know, the base rate will change, and therefore that rate will change up and down in the future, but it's still probably one of the lowest cost finance options you'll find. And the best bit is it's effectively like cost-free borrowing, because you're borrowing it from yourself and you're paying interest back for yourself.

to yourself. So, you know, whether it's five percent or four or ten, it doesn't matter because the point is you're taking that money and paying it straight back into your SSAS as the lender, which means you're still able to claim the cost of the interest as a tax-deductible expense and save your corporation tax. You're building the value and the wealth in the business, which if it's a trading business is, you know, obviously up to that five million limit can be passed on, as you said. And the returns that go back into the SSAS,

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typically lower than most other returns, deliberately so, and they can be earmarked accordingly, but you're keeping the growth in the trading business, which is the tax free vehicle or at least up to five million tax free, and keeping it out of the taxable environment of the pension.

We've covered a lot of ground. And if we circle back to the budget where we started, know, one of the new announcements that was made by the chancellor was an additional tax on the profits of banks, a 3 % tax surcharge. Well, they're not going to pay that. They're just going to transfer that by way of increased costs and increased profit margins, increased fees, increased exit plans, and so on.

Whereas if you borrow money from a SSAS, you're borrowing from yourself, so you don't have that surcharge. So lots of very interesting things there, Paul, for people to be considering. So let me just summarize then, because we covered a lot of ground, and I'm going to suggest that if you are listening to this, you might want to listen twice, and then kind of start making some notes. And we'll put some ideas in the show notes.

We'll put some guides in here. We'll put some information about SSAS in there. We'll put some information about the triple whammy. The triple whammy is pensions are going to be affected by inheritance tax in 2027. Your pension is going to be subject to potentially inheritance tax at 40%. So you need to be aware of where your pensions are, what they are and what that tax would be added to your whole estate. So use

are free calculated to do that. Your pension is going to be assessed against the residence nil rate band. So you want to make sure your total assets and you understand what that is. And you want to be aware that if you've got, if you live past 75, your children may well pay income tax on top of those other two taxes. Then we've got the double admin nightmare.

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the admin nightmare of your children being executors without the knowledge, without the skill and without the necessary white demeanor because they could be in a state of stress and grief even. And in fact, they're going to have to deal with this. So please leave your affairs in good order. Don't leave a mess. That's a key thing. And then finally, you know, make sure that

You're aware that if there is a tax bill, you've got to find the money to pay it or take some time because you've got hopefully time to find ways and we can help if you resonate with wealth builders to help you reduce, eliminate or mitigate the inheritance tax. And final point then is have a look at us. If you've got a business in your life, you've got a business owner. If you are a business owner,

then this would be something to look at because it can help with some of those issues. And certainly if nothing else, actually give you access to money cheaper than the banks are going to be charging you for given the surcharge on them. Well, that's been a good episode. I think I see that the light is deliberately faded.

Yes. Yeah, I'm I'm standing, but

Winter has set in, but this is not a winter of discontent. This is a winter to get ready because April is round the corner. So when spring comes, spring clean your finances, do the best you can, connect with wealth builders if you want to, or connect to somebody else who can help you so you don't get caught by the triple whammy or the double admin nightmare. thanks for giving us the benefit of your wisdom.

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On today's episode of Weath Talk. Listen, everyone, this is really important, so do share this. And if nothing else, please go to my LinkedIn profile. You'll see me there, Kevin Whelan. I'm posting about this. I'm trying to create a movement for this. Right now it's a campaign of awareness; it's called FAIR. Families Against Inheritance Risk, FAIR. Because, as I've said three or four times now, I think these rules are unfair.

They changed the rules. We're hoping to change the conversation. So join in the conversation, join the campaign and try and help us share the message. Paul, thank you very much to everyone else. Until the next time, see ya.

We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the WealthBuilders membership site to help you create, build and protect your wealth. Head over to wealthbuilders.co.uk slash membership right now for free access. That's wealthbuilders.co.uk slash membership.