PFS What's new bulletin - October I

TAXATION AND TRUSTS

 

Gig workers and the 5 October tax deadline

(AF1, RO3)

 

The Low Incomes Tax Reform Group (LITRG)’s reminder that gig workers and side hustlers need to check if they need to complete a self-assessment tax return for the 2024/25 tax year and register with HMRC by the 5 October deadline, if necessary.

 

The LITRG says that people selling goods and services online should check how much they made in 2024/25. If an individual earned more than £1,000 before expenses, and they are not already in self-assessment, then they should register via GOV.UK by the 5 October deadline. There is an annual £1,000 trading allowance for all income from trading, casual and miscellaneous income, and a similar property income allowance of £1,000. 

 

Clearly, there is already a requirement to declare such income. However, HMRC is now able to access more information from businesses, banks and other sources that it can use to work out how much money someone has been making and if they have been paying the correct amount of tax.

 

Please note that ‘selling goods’ in this context does not include selling off unwanted personal items, which would not normally be subject to income tax

.

Once registered, individuals have until 31 January 2026 to complete and submit their online tax return and pay any tax due. Alternatively, those needing to file on paper can do so within three months of registering.

 

(The normal filing deadline for an online tax return is 31 January or within three months of receiving a notice to file – whichever is later. The normal filing deadline for a paper tax return is either 31 October or within three months of receiving the notice to file – whichever is later.)

 

If an individual is not already in self-assessment, then, by registering by 5 October, they will be protecting themselves from being charged ‘failure to notify’ penalties. by 31 January 2026.

 

 

 

 

 

 

INVESTMENT PLANNING

 

Latest annual savings statistics

(FA5)

 

HMRC statistics on Individual Savings Accounts, Child Trust Funds and Help to Save accounts

HMRC has issued annual savings statistics on Individual Savings Accounts (ISAs), including Junior ISAs and the Lifetime ISA (LISA), Child Trust Fund (CTF) and Help to Save accounts.

 

ISAs

 

The figures show that around 15 million Adult ISA accounts were subscribed to in 2023/24, up from 12.4 million in 2022/23. This upward trend is largely attributable to the significant increase in the number of cash (2.1 million), stocks and shares (283,000) and LISAs (209,000) subscribed to. Meanwhile, the number of Innovative Finance ISAs subscribed to decreased by 23.5%. The share of accounts subscribed to in cash rose to 66.2%, a 3% growth from 2022/23. 

 

Around £103 billion was subscribed to adult ISAs in 2023/24, an increase of £31.4 billion compared to 2022/23. This increase was driven by the rise in cash ISA and LISA subscriptions, which grew by 67% (£27.9 billion) and 43.1% (£0.7 billion), respectively. Stocks and shares ISA subscriptions followed with a 10.9% increase (£3.1 billion) and LISA subscriptions with a 25.3% increase (£474 million). The large increase in cash ISA subscriptions can be explained by the Bank of England bank rate and the interest swap rates which were at the highest during the 2023/24 tax year. Increased returns to savings are likely to have increased the attractiveness of ISAs as a means to reduce savings income tax liabilities.

 

At the end of 2023 /24, the market value of adult ISA holdings stood at £872 billion. This is a 20.1% increase compared to the value at the end of 2022/23. This was in line with the increase in subscriptions amount. There was a 22.3% increase in the market value of funds held in cash ISAs, and 18.7% increase for stocks and shares ISAs. Cash ISAs accounted for 41.3% of the market value, an increase from 40.5% in 2022/23. Meanwhile, stocks and shares ISA holdings accounted for 58.6% of the market value of ISA funds, a decrease from 59.3% in 2022/23.

 

The lowest number of ISA holders was in the youngest category (under 25), but approximately 66.3% of this group were active savers in 2022/23. The greatest number of ISA holders was in the 65 and over group. However, a large portion of this group (59.5%) were not active savers in 2022/23.

 

Of the 21.3 million adult ISA holders analysed by income band for the year 2022/23, the median ISA holder (by income) had annual income of between £20,000 and £29,999. The average ISA market value of this income group was £31,536, representing a 1.7% increase in comparison to 2021/22. At higher earnings levels, the number of ISA holders declined (due to fewer people in higher income bands), but was accompanied by a large increase in average ISA savings values. For ISA holders with incomes of £150,000 or more, the average market value was £94,894. The number of ISA holders in 2022/23 has fallen to 21.3 million, from 22.3 million in 2021/22. Due to the calibration done to equalise the individual and aggregate ISA returns received from providers, the reported number of ISA holders can fluctuate due to differences between these two datasets.

 

Around 1.37 million Junior ISA accounts were subscribed to in 2023/24, the twelfth full financial year since the scheme was launched, up from 1.25 million in 2022/23. And £1.8 billion was subscribed to Junior ISAs in 2023/24, around 36.4% of which was in cash. The average subscription in 2023/24 increased to £1,347, an increase of 10.4% on the 2022/23 figure.

 

Around 87,250 account holders withdrew from their LISA in order to purchase a first-time property in 2024/25, an increase of around 30,500 on the previous tax year. The average withdrawal value for a house purchase was £15,782 for tax year 2024/25. The average value of withdrawal for a house purchase increased by approximately £857 since the 2023/24 tax year.

 

CTFs

 

As of 5 April 2025, there were around 3.5 million open CTF accounts, of which around 758,000 were matured accounts continuing as CTF accounts. Around a further 415,000 accounts matured during the tax year 2024/25 and were claimed or automatically transferred to an ISA. The number of open CTFs is decreasing, mainly due to matured accounts being claimed or transferred to ISAs, and accounts that have not yet matured being transferred to Junior ISAs. The oldest children on the scheme turned 18 in September 2020. Between then and April 2025, around 3,043,000 accounts matured in total, of which around 2,285,000 were claimed or automatically transferred to an ISA as of April 2025.

 

The average market value of a CTF in April 2025 was £2,242. This was up from £2,212 in April 2024. The average market value of stakeholder and non-stakeholder accounts as of April 2025 were £2,050 and £2,737, respectively. The average market value of a matured account that was claimed or automatically transferred to an ISA in 2024/25 was £3,203. The average market value of a matured account that was continuing as a CTF as of April 2025 was £1,980.

 

In 2024/25, as subscription amount increased, the number of individuals subscribing decreased. The majority of CTF subscriptions were in the £0.01 to £249 band, with 278,000 accounts having £0.01 to £249 subscribed to them in the tax year 2024/25. The average subscription to stakeholder accounts was £536, whilst the average subscription to non-stakeholder accounts was £700. The average subscription across all CTFs was £572.

 

Help to Save

 

The total number of open Help to Save accounts was 282,700, as of April 2025. The number of open accounts has been steadily decreasing since May 2024. This is because there had been a sharp increase in the number of people opening a Help to Save account in the tax year 2020/21. The average number of accounts opened per month was at 9,000 as compared to between 5,000 and 7,500 in other tax years. These accounts have now reached maturity and are no longer active. Since the start of the scheme, 575,200 Help to Save accounts have been opened in total, as of April 2025.

 

PENSIONS

 

HMRC Pension Scheme Newsletter 173 - September 2025

(AF8, FA2, JO5, RO4)

 

Pension Scheme Newsletter 173 covers the following:

 

1. Returning tax-free lump sums
2. Qualifying recognised overseas pension schemes
3. Abolition of the lifetime allowance update
4. Pension scheme return — submission deadline reminder
5. Relief at source

 

Areas of particular interest:

 

Returning tax-free lump sums and tax treatment of cancellation rights 

 

HMRC statement: Tax treatment of tax-free lump sums paid back into a registered pension scheme

 

Following the article in pension schemes newsletter 165 — December 2024 on the tax treatment of tax-free lump sums paid back into a registered pension scheme, and requests for further detail on its position, HMRC is now issuing a statement in parallel with the Financial Conduct Authority (FCA) which sets out the interactions between cancellation rights and the tax treatment.

 

If an action has resulted in a tax consequence, and an attempt is made to reverse the action, normally the resulting tax consequences cannot be reversed. The tax consequences will normally stand. 

 

Where a transaction falls within the FCA rules that require a cancellation right to be provided then the tax consequences can be reversed, for example the cancellation within 30 days of a contract to transfer a pension. This reversal is limited to actions that are expressly referred to in the FCA rules. 

 

Under the FCA’s Conduct of Business Sourcebook (COBS) 15.2.1 rules, a cancellation right arises when a consumer enters into certain specified contracts. Where cancellation rights arise in respect of these contracts, there will be no tax consequences for the consumer who exercises that right, but only with regard to the transactions that fall within the scope of the rules set out in the FCA’s Conduct of Business Sourcebook 15.2.1.

 

As a contract allowing a person to take a pension commencement lump sum or uncrystallised funds pension lump sum is not listed as a cancellable contract in COBS 15.2, cancellation rights do not arise with regard to paying these lump sums. Once lump sums are paid, the associated tax consequences (including the use of the individual’s lump sum allowance and lump sum death benefit allowance) cannot be undone, even if the payment is returned or cancellation rights are exercised.

 

This does not prevent a registered pension scheme from offering cancellation rights for the lump sum elements of cancellable contracts. However, where registered pension schemes choose to do so, it is essential that they ensure customers understand that, once paid, the tax consequences of these lump sums (including any use of the individual’s lump sum allowance and lump sum death benefit allowance) will not be reversed, even if the payment is subsequently returned or cancelled. This includes where the exercise of a cancellation right under FCA’s COBS 15.2 has the effect of cancelling the entire contract, including the pension commencement lump sum or uncrystallised funds pension lump sum, or where schemes voluntarily choose to offer cancellation rights for pension commencement lump sum or uncrystallised funds pension lump sum.

 

The conditions as set out in tax legislation will need to be met in order for the pension commencement lump sum or uncrystallised funds pension lump sum to remain an authorised payment if cancellation rights are chosen to be provided and those rights are exercised.

 

Check the conditions for a pension commencement lump sum.

Check the conditions for an uncrystallised funds lump sum.

 

HMRC says that registered pension schemes should therefore take care to ensure that appropriate arrangements are in place to mitigate any adverse tax outcomes. And, when offering cancellation rights, registered pension schemes should continue to ensure that members are aware of the tax consequences if those rights are exercised.

 

Qualifying recognised overseas pension schemes

 

APSS262 form

 

In pension schemes newsletter 170 — May 2025 HMRC said it would be introducing a new feature later in the year that will allow a transfer to a qualifying recognised overseas pension scheme (QROPS) to be reported on the managing pension schemes service. This will replace the current APSS262 form.

Pension schemes with a Pension Scheme Tax Reference (PSTR) beginning with 0, will need to be migrated to the managing pension schemes service to use this functionality, if they haven’t been already.

 

User research

 

HMRC is inviting pension scheme administrators and pension scheme practitioners to take part in user research to support the next stage of the ‘Report a transfer to a QROPS’ project. The purpose of these sessions is to gather feedback on the new digital service which will replace the APSS262 form. By joining the research panel, participants may be invited to choose to:

 

• take part in short surveys, interviews, or usability tests;
• provide feedback on how the service and guidance content is presented; or
• contribute to improvements that make it easier to meet required obligations.

 

Please email laura.klonowska@digital.hmrc.gov.uk to sign up.

 

Abolition of the lifetime allowance update

HMRC is preparing some further minor technical amendments to the legislation. These changes are designed to clarify certain provisions, correct minor drafting inconsistencies and support smoother implementation. HMRC says that, whilst important, they will not affect the vast majority of pension savers. The regulations will be made in early 2026 and, when introduced, will have retrospective effect from 6 April 2024. The key amendments are intended to ensure:

 

• lump sums paid from an overseas pension scheme to a UK resident (that are equivalent to a lump sum paid from a registered pension scheme that would be tax-free or have a tax-free element) continue to be treated similarly to such payments;
• the valuation of a member’s relevant crystallised pension rights for trivial commutation lump sums is consistent with the rules in place prior to April 2024;
• the calculation for individuals with scheme-specific pension commencement lump sum operates as intended;
• provisions are put in place for stand-alone lump sum values to be transferred to a receiving scheme;
• the treatment of enhancement factors is consistent with the rules in place prior to April 2024; and
• drafting inconsistencies are corrected.

 

There may be further minor changes following consultation with industry, which will take place later this year. HMRC says it will share instructions on how to provide feedback on the draft regulations in future newsletters.

 

 

FCA: Retirement income market interactive analysis

(AF8, FA2, JO5, RO4)

 

The FCA’s webpage, Retirement income market interactive analysis 2024/25, provides interactive dashboards of the retirement income market, based on 2024/25 data. The data shows that withdrawals from pensions rose sharply in 2024/25, with total money taken increasing by 35.9% to £70.9bn, driven largely by a 25.5% surge in drawdown sales. However, the use of regulated financial advice slightly declined, raising concerns about long-term retirement planning and sustainability. Please see Retirement income market data 2024/25.