As Halloween approaches, we’re halfway through the tax year. It’s been a difficult year for many, for many different reasons, but as autumn nears and the nights start to draw in, now is a great time to refocus.

Here are three scary mistakes that could haunt you into the new year and beyond, and how to avoid them.

1. Not giving enough thought to your retirement

As a business owner, you’ve likely had a tough year. The UK-wide lockdown affected every business in some way and local lockdowns and restrictions in the hospitality and recreation sectors look set to continue into the spring.

Keeping on top of changing government rules can be difficult but it’s important to keep an eye on the long term too.

If you’re approaching retirement, is your pension on track? Have you researched your options? Are you on course to make full use of your Annual Allowance for the tax year?

• Are your pensions on track?

Through understanding your current financial situation and your aspirations for retirement, we can help you understand if you’re on track. We can also help you make up a shortfall if you’re not.

Acknowledging and addressing a shortfall early gives you the best chance of bridging the gap and getting back on course.

• Do you know your options?

It’s also never too early to think about your retirement options.

Pension Freedoms have given you much more flexibility beyond the traditional Annuity, but you could find yourself with more responsibility for your own budgeting too. Thinking about your aspirations for retirement now will allow you to focus on the best retirement option to realise your dream.

Travel plans or house renovations might make a lump sum attractive. If you’re still paying off a mortgage maybe a combination of a lump sum and regular Drawdown makes sense? Start thinking about your retirement now and we can help you choose the best option for you.

• Know your allowances

Finally, remember that pensions are tax-efficient. If you can afford to top-up your pension, do. But be clear about the allowance that applies to you.

The Annual Allowance allows you to contribute £40,000 a year into your pension and still receive tax relief. If you’ve already accessed some pension benefits flexibly, or if you are a high earner, different allowances might apply so speak to us if you’re unsure.

2. Not making full use of IHT gifting allowances

If your estate will be liable for Inheritance Tax (IHT), you might worry about the size of your liability and what that will mean for those you leave behind.

Making use of gifting allowances now can lower your IHT liability, meaning there is less tax to pay when you’re gone.

You have an annual IHT exemption of £3,000 a year. You can gift up to this amount in a tax year and it won’t be considered part of your estate for IHT purposes. What’s more, the £3,000 a year is per individual and any unused amount can also be carried forward for one year, meaning as a couple, you might be able to gift £12,000 before April.

You might also consider making gifts from ‘surplus’ income if you can afford to. This could be in the form of a life insurance premium for your spouse or a regular, living inheritance to a grandchild.

Taking money out of your estate regularly is a good way to lower your liability in the long term but estate planning can be complicated. Speak to us if you want to strike the right balance between living the lifestyle you want to now, without leaving a large IHT liability for later.

3. Not maximising your children’s savings

The Bank of Mum and Dad lent more than £6 billion in 2019. Maximising your child’s savings now could lessen the impact later on.

Paying into a Junior ISA (JISA) is a great way to build a fund that can go towards school fees or a house deposit when your child grows up.

Open a JISA and you manage the account, holding it on behalf of your child. When they reach aged 18, your child has control of the fund. If they choose to keep the money invested, it converts to an adult ISA.

The JISA Allowance for the 2020/21 tax year is £9,000.

It’s also never too early to start paying into a pension on behalf of your child. They will only be able to access the money once they reach retirement but investment over such a long term has the potential for meaningful returns.

Not only is the Bank of Mum and Dad lending large amounts of money, but parents are also leaving themselves worse off by doing so. This is Money reported back in 2018 that the cost could be £18,000 on average and almost one in five surveyed said they had sacrificed their standard of living to help their children.

Start putting money aside as early as possible, as part of a long-term financial plan, and give yourself the best chance of providing the help your children need without financial detriment to yourself.

• ‘Bonus mistake’ – Forgetting the importance of a good work-life balance

In honour of this month’s Work-Life Week (12-16 October), while it’s been a difficult year for employers and employees, concentrating on your own health is crucial.

Maintaining a good work-life balance is more important than ever, and also – with the massive increase in homeworking – harder than ever.

Try your best to set clear working boundaries, prioritise your health, and make time for the things outside of work that you enjoy.

Get in touch

If you’d like to discuss any aspect of your long-term financial plans, please contact us today.

Please note:

The value of your investment 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.

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