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As we come to the end of the tax year we are busily making last minute payments to:
• Use ISA allowances
• Use capital gains tax exemptions if necessary
• Make last minute pension contributions
These are all standard pieces of financial planning; the ‘hygiene factors’ that are necessary to keep things ticking over in as optimal a manner as possible.
Capital gains taxes we have to do towards the end of the year and for some people, pensions payments can only been made when we know their bonuses (note to company leaders: make your bonuses in February tax the latest, not March. Or even April so they have the whole tax year! You’re hamstringing your employees and making them poorer as they can’t plan well). We should be doing ISAs as soon as we can and certainly at our annual review!
For most people, the reason things are left until the last minute is because you couldn’t make your mind up... which, is okaaay I suppose. But as we will see, it is likely costing you money.
All these payments need to be registered with your investment providers probably by the 1st of April. And you’ll be the fool on April Fools Day if you don’t. Due to Easter falling over the end of tax year, you can’t leave it until the 5th of April.
He said that there was death and taxes, and taxes was worse, because at least death didn’t happen to you every year.
‘Rachel Reeves grave robber’, ‘Rachel from accounts’ and all the other tropes that have been bandied about our Chancellor of The Exchequer in the last year or so (unfairly I think; the country is saddled with a massive debt burden and we are under productive - which is down to pretty much all of us in some way) seem to lay the blame on, or hint at unhappiness of, the tax rises that have been put in or are planned to be implemented.
Here are some of them:
Personal and Investor Tax Increases
- Dividends: Basic and higher rates will increase by 2 percentage points to 10.75% and 35.75% respectively, effective 6 April 2026.
- Capital Gains Tax (CGT): The rate for Business Asset Disposal Relief (BADR) or Investors’ Relief (IR) rises from 14% to 18% from 6 April 2026.
- VCTs: Upfront income tax relief on Venture Capital Trust subscriptions reduces from 30% to 20%.
Inheritance Tax (IHT) Reforms (from 6 April 2026)
- Relief Cap: A £2.5 million cap on 100% relief for Agricultural (APR) and Business (BPR) property, with excess value only receiving 50% relief (20% IHT rate).
- AIM Shares: Relief for Alternative Investment Market shares is reduced to 50%.
- Transfers: The £2.5m allowance is transferable between spouses
But what can we do about it? Not much, or not very quickly at least. We can get our head down in the community and try to join a political party, get elected, have real influence over the country and seek to change the economic status of the UK so we can boost the productivity of each and every worker, increase tax receipts to satisfy international bond holders to reduce debt repayment rate and then in turn with extra economic headroom reduce tax rates to further boost growth. Or alternatively run on policies to cut expenses dramatically and reduce the level of services available to us all, thus meaning we can reduce taxes to kick start growth. Both work. But, if you’re not prepared to do that, after all you’ve got stuff to do, and it would be time consuming, then we need to look at some other options.
For example, we can take a look at ourselves and what we are doing. Where are we able to reduce our ‘personal taxes’? Because believe you me, you are taxing yourself potentially a lot more than dear old Rachel is, but you can’t see it.
Examples I am seeing going on right now in new prospects to join Lucent’s service:
Inheritance tax: 9 months ago recommended a life insurance policy to cover inheritance tax bill. Not implemented due to ‘deciding’ and ‘thinking about it’ and horribly… since been diagnosed with a terminal illness. Horrible. Absolutely awful. The time as ever was ‘now’ and not to wait and see. That has cost their family £1 million.
Income tax on redundancy: approached us in the last few weeks when could have in the summer. Now. The pressure is on to make the decision (admittedly it’s complicated) to get a £40k tax saving and they do not feel there’s enough time to do so. They had that time, but it was wasted thinking about whether to come see us! They’re not prepared to do the quick thinking and work so will lose that money. It’s £40k!!! All due to inertia.
Ignoring advice: don’t think we don’t know when you’re stringing us along! We notice when you are making these errors. We try to stop them but the thought processes you have are deeply ingrained and if you don’t recognise them when we point them out then you will suffer the consequences! These are known as behavioural biases. And here are a few that are costing you more money than taxes are paying.
Status quo you know, is Latin, for the mess we are in
Status Quo Bias
“Let’s just leave things as they are for now.”
Humans massively overvalue the current situation. Richard Shotton, who appeared on our podcast Juggling Mind and Money, episode 33 recently, often talks about how doing nothing feels safer than doing something, even when change is objectively better. The brain treats change as a loss – and losses feel painful.
In financial planning, this shows up as:
- Keeping old pensions or shares you hold “because they’ve always been there”
If you wouldn’t buy them now, then why are you keeping them. It’s the same decision but reversed and this helps shine a light on your thinking. - Delaying portfolio changes during market uncertainty
3 out of 4 years, shares rise. The odds are on your side to do it now. - Sticking with outdated investment strategies long after they’ve stopped making sense
Recognise new evidence and incorporate into your plans. If you went to see a Doctor and they recommended leeches then that tells you they haven’t been updating their treatments with the evidence!
The cost:
- Missed compounding: a massive wealth builder is ignored
- Poor diversification: Meaning your portfolio suffers from higher risk
- Higher fees lingering in the background: paying more than you have to also means less returns as less money to be compounded
Behavioural tax effect:
Procrastination is opportunity’s assassin
Doing nothing feels free – but it’s often the most expensive decision over time.
Present Bias
“I know it’s sensible… but it doesn’t feel urgent.”
Present bias is our tendency to prioritise immediate comfort over future benefit.
Research repeatedly shows that future rewards are heavily discounted by the brain, even when they’re large and meaningful.
In advice terms, this looks like:
- Not increasing contributions because it affects today’s cashflow
Why not try ‘half for current me, half for future me’? - Putting off estate planning because “it’s a problem for later”
How much later though? You won’t know and you won’t be able to look back and think ‘great decisions!’ because you are no longer with us! - Delaying tax planning because the payoff feels abstract
You may not fully understand or comprehend why a tax reclaim can be made by moving money around. But, it can! And you won’t understand until you see that money hit your account.
The cost:
- Lost years of compounding on the tax savings you could have made
- Unused allowances that can never be reclaimed – you then pay more tax for forever!
- Higher future tax bills that were entirely avoidable – But you will rarely, if ever, look back and put your finger on why. You will blame Rachel / future Chancellor / HMRC.
Behavioural tax effect:
You pay today’s comfort with tomorrow’s regret.
Overconfidence
We are generally overconfident in our opinions and impressions and judgments
“I understand it – I’ll implement it myself.”
One of the most expensive biases of all.
People confuse understanding with action. Just because something makes sense intellectually doesn’t mean it happens behaviourally.
In real life:
- Advice is agreed… but paperwork sits unsigned
- Investment changes are delayed until “a better moment”
- Plans exist, but execution never quite catches up
- DIY investors miss a few of the important points that make the rest of it redundant. A highly engineered super car is pointless if you forget the key
The cost:
- Advice not acted on delivers zero value
- Market timing mistakes creep in – You fear making a mistake so don’t do it
- Good intentions replace real outcomes
Behavioural tax effect:
Half implemented advice is often worse than none – because it creates a false sense of security.
Why good advice is really behaviour design
The biggest value of a good financial adviser isn’t spreadsheets, or the investments. Although that is what people generally think. It’s making you do the right things consistently. You will not be right 100% of the time. But, we need to get the probabilities on your side and try to do this by:
- Reducing friction
- Creating momentum
- Turning good intentions into default actions
- Making the right decision the easy one
As Richard Shotton’s work repeatedly shows, behaviour changes when environments change, not when people are simply told to “try harder”.
At Lucent, that’s why our focus isn’t just on what you should do – but on helping you actually do it.
Stop thinking, start saying yes to us more
We want to know about your life and the things you want to do, and we will adjust your money to suit. We need you to implement and you do too!
The real return on advice
Avoiding behavioural mistakes doesn’t feel dramatic.
There’s no headline number.
No single moment of genius.
But over 10, 20 or 30 years?
Avoiding these biases can be worth far more than shaving a bit off your tax rate.
And unlike tax… this is one cost you really can reduce.
So the next time you moan about your taxes, or have a little dig at Rachel, perhaps you should stop yourself and sit down and think “what am I doing, or not doing, that is impacting my finances?”
Over to you, what are you doing about it?
We can tell you the best answer, but we need to work together to get there and when we do the results are amazing!
Disclaimer: This article does not constitutefinancial advice. We recommend that you speak to a qualified financial plannerfor advice tailored to your individual circumstances and goals. Financialmarkets may go up or down, and you are not guaranteed a return on yourinvestment. Past performance is not necessarily a guide to future performance.
Exciting things coming up - Juggling Mind and Money Podcast
We have a great line up of people on the podcast and I am super excited about it! Here are some highlights:
Last week, Richard Shotton discussed behavioural biases and how they affect you. Take a listen on Spotify / Apple Podcasts, or watch on YouTube
Coming up soon:
Ian Archbold - our client, who talks about retirement worries, and why he uses an adviser even though he is super financially literate
Vicky Reynal - money psychotherapist on the Sunday times
Greg Davies - where behavioural finance meets financial well-being
We are looking for people that want to come on our podcast that have experienced our service! We are also going to launch something called ‘Pint with a Pensioner’ where we discuss what people get up to in retirement and review some beers!
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