You might expect that if tax rates have not gone up, the amount of tax you pay should feel broadly the same. This is not always the case.
Across quite a few clients, tax bills have been creeping up over time, even where income, investments or pensions have not changed in any dramatic way. It is rarely one big shift causing it either, more a gradual drift that builds in the background.
A lot of it can be down to fiscal drag. Fiscal drag is when rising incomes or inflation push you into paying more tax (or into higher tax bands) because tax thresholds have not increased, even though tax rates have remained constant. It is one of those terms that does not get much attention, but over a number of years, fiscal drag can start to make a difference.
For many people in their late 50s or 60s, this tends to be where earnings are still reasonably strong. Portfolios have had time to grow, pensions are starting to feel more real, and there is often a decent amount held outside tax wrappers that has built up over time. Values have increased, but the allowances that used to soften the tax impact have not kept pace. In some cases, they have reduced.
Dividend income is the clearest example: £5,000 in the 2016/17 tax year and £500 now. Not that long ago, you could take a comfortable level of income from a portfolio without too much tax to worry about. Now, with a smaller allowance, it does not take a great deal before tax becomes payable. What used to feel straightforward often needs a bit more thought.
Capital gains tax follows a similar pattern. With a lower annual exemption (currently £3,000 in the 2026/27 tax year), it is easier for long-held investments to end up paying CGT when changes are made. And those changes tend to happen naturally anyway, particularly as retirement comes into view or when you are adjusting income or risk. The growth itself is not the problem; it is just that more of it is now exposed to tax.
It is becoming less about what you are invested in, and more about how everything is structured around it. The products, tax wrappers and the overall positioning are starting to matter just as much as the investments themselves.
Sometimes that is about making better use of ISAs. Other times it might mean revisiting assets held outside of wrappers, or bringing products like investment bonds back into the mix, where appropriate.
If your investments have done well over recent years, or you are starting to think more seriously about how you will draw income in retirement, it is worth pausing and looking at the bigger picture. Not because anything is necessarily wrong, but because slight changes to the way things are structured can add up over time. At Wingate, that is where regular reviews and cash flow planning come into their own, giving you a clear, joined-up view of how everything fits together and allowing us to make relevant adjustments to reflect legislative changes.
