How to protect your wealth from inflation

Price Mann • August 20, 2025

How to protect your wealth from inflation

Effective hedging strategies

Inflation may have retreated from the double-digit heights of 2022, but at 3.4% on the CPI measure for May 2025 it still erodes the real value of every pound you hold. Put another way, if prices keep rising at the current pace, an item that costs £1,000 today will set you back about £1,034 this time next year. That silent loss affects personal savings, business reserves and long-term plans alike.

As your accountants, our job is to help you keep more of what you earn and to deploy cash and investments where they work hardest. The good news is that the UK tax code still provides several shelters – ISAs, pensions and targeted allowances – capable of outpacing inflation when used thoughtfully. Add a disciplined approach to cash management and a measured mix of inflation-linked or real-asset investments, and you can preserve, and even grow, purchasing power despite the current backdrop.

This guide sets out practical, tax-year-specific steps so you can act with confidence.

Know the numbers that affect you

Inflation reduces spending power, but tax reliefs can offset a large part of the damage when you use them fully. The table below lists the allowances most readers rely on. We have added two that seldom appear in headline summaries – the personal savings allowance and the marriage allowance – because both can make a material difference to net returns at current interest-rate levels.

Allowance or threshold	2025/26 level	Planning note
Personal allowance	£12,570	Income below this is tax free; taper starts at £100,000 of income.
Dividend allowance	£500	Use it for the highest-yielding shares or investment trusts.
CGT annual exempt amount	£3,000	Realise gains gradually; spouses each have an allowance.
Personal savings allowance	£1,000 basic rate/£500 higher rate/£0 additional rate	At a 5% easy-access rate, a basic-rate taxpayer can hold £20,000 in cash before tax bites.
ISA subscription limit	£20,000	Cash, stocks & shares, innovative-finance and lifetime ISAs all share the same ceiling.
Lifetime ISA sub-limit	£4,000	25% government bonus for first-home purchases or retirement from age 60.
Pension annual allowance	£60,000 (tapering to £10,000)	Carry-forward of unused relief for three earlier years still applies.
Marriage allowance	£1,260 of unused personal allowance can be transferred	Worth up to £252 of tax when one spouse earns below the allowance.

How the allowances interact

A higher-rate taxpayer with spare cash might:

use their own ISA for equity trackers (capital growth sheltered). To help an adult child with their first-home deposit, gift cash into a Lifetime ISA opened in the child’s own name – only the account holder can use the 25% bonus at purchase.
fund a pension up to the £60,000 limit, gaining 40% relief today and tax-free growth thereafter
keep the family’s rainy-day cash efficient. Place deposits in the lower-earning (basic-rate) spouse’s name first to use their £1,000 Personal Savings Allowance. After that, hold up to £500-worth of annual interest in the higher-rate taxpayer’s own name to use their £500 allowance. Any surplus beyond those limits can then move into ISAs or joint accounts to avoid taxable interest altogether. (Note: additional-rate taxpayers have no Personal Savings Allowance, so all interest in their name is taxable).
realise £3,000 of gains each year to bed-and-ISA shares, resetting the capital gains tax (CGT) base cost without paying tax.

Taken together, those moves put £84,260 under shelter before a single pound of normal taxable investing begins.

Make every tax wrapper work harder

ISAs – front-load where possible

Funding the ISA in April rather than March adds 11 months of tax-free growth. At a 4.5% return that timing difference alone is worth about £825 over five years on the maximum £20,000 allowance. Stocks & shares ISAs remain the long-term growth engine, but cash ISAs still suit the following.

Short-term targets: A wedding deposit or school fees due inside three years.
Risk-averse clients: Who would otherwise breach the savings allowance and face tax on interest.

Beware a policy change: media reports suggest ministers are considering capping the cash component of the ISA to £4,000, although no draft legislation yet exists. Monitoring the Autumn Statement will be essential.

Pensions – relief now, inflation-proof income later

Every employee can ask their employer to pay a personal contribution via salary sacrifice. Doing so saves both employee and (usually) employer national insurance (NI); many firms share part of their NI saving, boosting the total invested.

Carry-forward offers a second lever. If you paid only £25,000 into your pension in each of the last three tax years, you have £85,000 of unused relief; add the current £60,000 allowance and, assuming sufficient earnings and no tapering, you could invest up to £145,000 in 2025/26 without breaching the annual allowance rules. That lump sum shelters far more from inflation-driven tax drag than drip-feeding alone.

Lifetime allowance replacement

Since April 2024 the lifetime allowance has been abolished and replaced by two lump-sum limits. That reform removes the fear of an unexpected 55% charge for many savers, so clients who froze contributions earlier can reconsider. We recommend a review for anyone whose fund sat near £1m in 2023/24.

Keep cash competitive

High-street current accounts still pay close to zero, but competition among challenger banks has raised top easy-access rates to 5% AER (Chase saver with boosted rate). Several other providers pay 4.4-4.8%. If you prefer the security of Treasury backing, NS&I’s products remain solid, though the Premium Bond prize-fund rate will trim to 3.60% from August 2025.

A simple three-bucket model works.

Immediate access (1-3 months of spending) – keep this in the highest-paying easy-access or current account.
Known outgoings (3-12 months) – ladder one-year fixed bonds. The best Moneyfacts-listed bonds pay 4.5-4.6% today.
Reserve (1-5 years) – use British Savings Bonds (three-year term now 3.84% AER) or a gilt-backed money-market fund yielding around 4.4%.

Tip for business owners: Corporate treasury portals such as Flagstone and Insignis let limited companies spread deposits across many banks while keeping within the £85,000 FSCS cap.

Add inflation-linked assets

Index-linked gilts

The Debt Management Office issues gilts indexed to the Consumer Prices Index (CPI). Both coupon and principal adjust, so although the running yield is low (-0.3% real on a 2037 linker at the time of writing), the bonds guarantee purchasing-power preservation if held to maturity.

Investors often prefer funds or exchange-traded funds (ETFs) because they:

remove single-bond risk
simplify reinvestment of accrued indexation
qualify for bond-fund exemptions on capital distributions, reducing paperwork outside wrappers.

Remember, indexation lag means gilt cashflows reflect CPI eight months earlier, not the month of payment.

Inflation-linked corporate bonds

National Grid, Network Rail and major utilities have issued bonds linked to the retail prices index (RPI). When held through an inflation-linked corporate bond fund they can improve yield by 0.5-0.8 percentage points versus gilts, but credit risk rises, so keep exposure modest (perhaps 10% of a fixed-income sleeve).

NS&I index-linked savings certificates

These are still the “holy grail” for long-term cash savers thanks to tax-free, RPI-linked returns. No new issues have appeared since 2011, but do not cash in old tranches unless an urgent need arises – any comparable product today sits well below them.

Equities: The long-run inflation hedge

Stocks have beaten UK inflation in 17 of the last 20 rolling 10-year periods. A widely used global all-cap tracker delivered an annualised 6% dividend growth over the past decade, according to MSCI data.

Constructing a resilient share portfolio

Building block	Rationale	Allocation guide
Global developed-markets tracker	Broad base, 1,500+ companies	40-60%
FTSE all-share income fund	3.5% starting yield, franked in UK	15-25%
Global small-cap/emerging-markets ETF	Higher growth but higher volatility	10-20%
Sector satellite (such as healthcare, infrastructure)	Pricing power passes cost rises quickly	0-15%

Investors who dislike day-to-day volatility can split the equity sleeve between accumulation (reinvested dividends) and income share classes. Reinvested income historically accounts for more than half the FTSE 100’s total return.

Real assets: Property, infrastructure and commodities

Property

Despite higher mortgage costs, the UK House Price Index shows average prices 5.3% higher in the year to April 2025. Direct buy-to-let now faces:

20% limit on finance-cost relief
additional 3% stamp duty surcharge
Making Tax Digital quarterly reporting from April 2026.

Shares in a real estate investment trust side-step all three and can sit in an ISA. Look for funds with low loan-to-value ratios and inflation-linked commercial leases.

Infrastructure

Many listed infrastructure trusts own roads, schools or renewable-energy assets on government-style concession agreements that uplift revenue each year by CPI or RPI. Discount volatility has widened – some trade 15% below net asset value – offering a margin of safety to income seekers.

Commodities

Broad-basket exchange-traded commodities give exposure to energy, metals and agriculture in one line. Commodities can spike when inflation shocks appear, but they do not produce cashflow, so keep to a single-digit percentage allocation and rebalance annually.

Business owners: Preserve corporate cash and profits

Shop for better deposit rates: Specialist business accounts now pay up to 4.8% on 95-day notice.
Consider treasury funds: Short-dated gilt and T-bill money-market funds usually qualify as “cash equivalent” on the balance sheet, providing daily liquidity.
Use pension contributions tactically: An employer pension contribution is fully deductible, so it saves corporation tax at the company’s rate – 19% on profits up to £50,000, 26.5% on profits between £50,000 and £250,000, and 25% above £250,000 – plus employer National Insurance.
Salary-dividend mix: Once the £500 dividend allowance is used, compare the net benefit of extra dividends with company-paid pension or a modest salary that triggers NI credits for state pension entitlement.

According to the British Chambers of Commerce Q2 2025 survey, 52% of small and medium-sized enterprises (SMEs) still list inflation as a top concern, confirming that cash-management advice remains highly valued.

Review borrowing strategy

With the Bank Rate currently at 4.25% (as of July 2025), typical five-year fixed residential mortgages hover around 5%. Before fixing, do the following.

Check early-repayment charges – some lenders cap them at 3% in year two, giving flexibility if rates fall.
Stress-test affordability at +3% to protect future cashflow.
Line up overpayment capacity: paying down a 6% unsecured loan is an after-tax “return” that beats many investments.

Keep your plan on track

Automate contributions: Standing orders into ISAs or pensions turn saving into a monthly bill you pay yourself first.
Calendar key dates: Dividend and CGT allowances reset on 6 April; interest on bank accounts may be paid gross at tax year-end.
Rebalance with discipline: Set a ±5% band around target weights. When equities rally, trim back; when they fall, top up using cash or bond proceeds.
Harvest taxable losses: A quick “bed-and-breakfast” sale cannot repurchase the identical holding within 30 days, but buying a similar ETF keeps exposure while resetting the base cost.
Document decisions: A simple spreadsheet noting date, trade, rationale and after-tax return helps if HMRC queries share identification rules and also reinforces good habits.

Final thoughts

Inflation of 3-4% may feel modest beside the price spikes of recent memory, yet over a decade it halves purchasing power if left unchecked. By filling tax-efficient wrappers early, shopping around for competitive savings rates, adding assets with explicit or implicit inflation linkage, and weighing the cost of borrowing against secure debt-repayment “returns”, you can keep the real value of your wealth intact.

The allowances outlined – £20,000 for ISAs, £60,000 for pensions, £500 for dividends and £3,000 for capital gains – form the backbone of an effective hedge. Layered on top, a sensible asset mix and periodic rebalancing provide both resilience and growth potential.

Contact us for personalised projections, a review of your current allocations or guidance before making major contributions or disposals.

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When should I look at moving from a sole trader to a limited company for tax-efficient savings?

By Price Mann • September 24, 2025

When should I look at moving from a sole trader to a limited company for tax-efficient savings?

Managing risk in your investment portfolio

By Price Mann • September 17, 2025

Managing risk in your investment portfolio Tips for a balanced investment approach. Investment markets rise and fall, yet the goals that matter to you – retirement security, children’s education, a comfortable buffer against the unexpected – remain constant. Managing risk means giving each goal the best chance of success while avoiding avoidable shocks. You can do that by holding the right mix of assets for your timeframe, using tax wrappers efficiently, and controlling costs and emotions. The 2025/26 UK tax year brings unchanged ISA and pension allowances. This guide explains the key steps, such as diversifying sensibly, rebalancing with discipline, safeguarding cash, and monitoring allowances, so you can stay on track whatever the markets deliver. It is an information resource, not personal advice. Start with a clear plan Define goals and timeframes: Decide what each pot of money is for (for example: house deposit in three years, retirement in 20 years). Time horizon drives how much short-term volatility you can accept. Short-term goals usually need more cash and high-quality bonds; long-term goals can justify more equities. Set your risk level in advance: Ask yourself two questions. Risk capacity: How much loss could you absorb without derailing plans (linked to your time horizon, job security and other assets)? Risk tolerance: How do you feel about market swings? Use a more cautious mix if you are likely to sell in a downturn. Ring-fence cash needs: Keep 3-6 months’ essential spending in easy-access cash before you invest. This reduces the chance of selling investments at a low point to meet bills. Choose simple, diversified building blocks: Broad index funds and exchange-traded funds (ETFs) covering global equities and high-quality bonds provide instant diversification at low cost. Avoid concentration in a single share, sector or theme unless you are comfortable with higher risk. Diversification: Spread risk across assets, regions and issuers Diversification reduces the impact of any single holding. Practical ways to diversify include the following. Assets: Use both growth assets (equities) and defensive assets (investment-grade bonds, some cash). Regions: Combine UK and global holdings. Many UK investors hold too much domestically; global funds spread company and currency risk. Issuers: In bonds, mix UK gilts and investment-grade corporate bonds to diversify credit exposure. Currencies: Equity funds are commonly unhedged (currency moves add volatility but can offset local shocks). For bonds, many investors prefer sterling-hedged funds to lower currency risk. A diversified core helps the portfolio behave more predictably across different market conditions. You can add small “satellite” positions if you wish, but keep any higher-risk ideas to a modest percentage of the whole. Use tax wrappers to reduce avoidable tax and trading frictions Efficient use of ISAs and pensions is one of the most effective risk-management tools because it protects more of your return from tax. ISAs (individual savings accounts) Annual ISA allowance: £20,000 for 2025/26. You can split this across cash, stocks & shares and innovative finance ISAs. Lifetime ISAs (LISAs) are capped at £4,000 within the overall £20,000. Junior ISA (for children under 18): £9,000 for 2025/26 (unchanged). ISAs shield interest, dividends and capital gains from tax. Rebalancing inside an ISA does not create capital gains tax (CGT), which helps you maintain your chosen risk level at lower cost. Note: There has been public discussion about potential ISA reforms, but the current 2025/26 allowance is £20,000. If government policy changes later, we will let you know. Pensions (workplace pension, personal pension/SIPP) Annual allowance: £60,000 for 2025/26 (subject to tapering for higher incomes; see below). You may be able to carry forward unused annual allowance from the three previous years if eligible. Tapered annual allowance: If your adjusted income exceeds £260,000 and threshold income exceeds £200,000, the annual allowance tapers down (to a minimum of £10,000 for 2025/26). Money purchase annual allowance (MPAA): £10,000 for 2025/26 once you’ve flexibly accessed defined contribution benefits (for example, taking taxable drawdown income). Tax-free lump sum limits: The lifetime allowance has been replaced. From 6 April 2024, the lump sum allowance (LSA) caps total tax-free pension lump sums at £268,275 for most people, and the lump sum and death benefit allowance (LSDBA) is £1,073,100. Pensions are long-term wrappers designed for retirement. Contributions usually attract tax relief and investments grow free of UK income tax and capital gains tax while inside the pension. Personal savings: Interest allowances Personal savings allowance (PSA): Basic-rate taxpayers can earn up to £1,000 of bank/building society interest tax free; higher-rate taxpayers up to £500; additional-rate taxpayers do not receive a PSA. Starting rate for savings: Up to £5,000 of interest may be taxable at 0% if your other taxable non-savings income is below a set threshold. For 2025/26, that threshold is £17,570 (personal allowance of £12,570 plus the £5,000 starting rate band). Dividends and capital gains outside ISAs/pensions Dividend allowance: £500 for 2025/26 (unchanged from 2024/25). Dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional-rate bands, respectively. The annual capital gains tax (CGT) exempt amount , £3,000 for individuals (£1,500 for most trusts). CGT rates from 6 April 2025: For individuals, 18% within the basic-rate band and 24% above it, on gains from both residential property and other chargeable assets (carried interest has its rate). HMRC examples confirm the £37,700 basic-rate band figure used in CGT calculations for 2025/26. CGT reporting reminder: UK residents disposing of UK residential property with CGT to pay must report and pay within 60 days of completion. Other gains are reported via self assessment (online filing deadline is 31 January following the tax year; if you want HMRC to collect through your PAYE code, file online by 30 December; payments on account remain due 31 January and 31 July). Why this matters for risk: Using ISAs and pensions lowers the drag from tax, allowing you to rebalance and compound returns more effectively. Outside wrappers, plan disposals to use the £3,000 CGT allowance and each holder’s tax bands and consider transfer to a spouse/civil partner (no CGT on gifts between spouses) before selling where suitable. Bonds and cash: Interest-rate and inflation considerations Interest rates: The Bank of England reduced the Bank Rate to 4% at its August 2025 meeting. Bond prices can move meaningfully when rates are high or changing, especially for longer-dated bonds. Consider the duration of bond funds and whether a mix of short- and intermediate-duration exposure suits your time horizon. Inflation: Headline Consumer Price Index (CPI) inflation was 3.6% in the 12 months to June 2025, while the CPI including owner occupiers’ housing costs (CPIH) rose by 4.1%. Inflation affects the real value of cash and bond coupons, and can influence central bank policy, affecting bond prices. Review whether your mix of cash, index-linked gilts and conventional bonds remains appropriate as inflation and interest-rate expectations evolve. Cash strategy: For short-term needs, spread deposits to respect Financial Services Compensation Scheme (FSCS) limits. For longer-term goals, excessive cash can increase the risk of falling behind inflation. Control costs and product risk Keep fees low: Ongoing charges figures (OCFs), platform fees and trading costs compound over time. Favour straightforward funds and avoid unnecessary expenses. Understand the product: Structured products, highly concentrated thematic funds or complex alternatives can behave unpredictably. If you use them, size them modestly within a diversified core. Use disciplined trading rules: Avoid frequent tinkering. Set rebalancing points (see below) and resist acting on short-term news. Rebalancing: Why, when and how Markets move at different speeds. Without rebalancing, a portfolio can “drift” to a higher or lower risk level than you intended. Follow this simple rebalancing framework. Invest in something that will rebalance automatically (i.e. certain ETFs) Frequency: Review at least annually. Thresholds: Rebalance when an asset class is 5 percentage points away from target (absolute) or 20% away (relative). Tax-aware execution: I prefer to rebalance inside ISAs and pensions. Outside wrappers, use new cash or dividends where possible; then consider selling gains up to the £3,000 CGT allowance and factoring in dividend and savings allowances. Implementation tip: If markets are volatile, use staged trades (for example, three equal tranches a few days apart) rather than one large order. Safeguard cash and investments with the right protections FSCS protection (cash deposits): Up to £85,000 per person, per authorised bank/building society group is protected. Temporary high balances from specific life events can be covered up to £1m for six months. The Prudential Regulation Authority has consulted on raising the standard deposit limit to £110,000 and the temporary high balance limit to £1.4m from 1 December 2025 (proposal stage at the time of writing). FSCS protection (investments): If a regulated investment firm fails and your assets are missing or there is a valid claim for bad advice/arranging, compensation may be available up to £85,000 per person, per firm. This does not protect you against normal market falls. Operational risk checks: Use Financial Conduct Authority authorised providers, check how your assets are held (client money and custody), enable multi-factor authentication, and keep beneficiary and contact details up to date. Currency risk: When to hedge For equities, many long-term investors accept currency fluctuations as part of the growth engine, since sterling often weakens when global equities are stressed, partly offsetting losses. For bonds, many prefer sterling-hedged funds to keep defensive holdings aligned with sterling cashflow needs. A blended approach works: unhedged global equities plus mostly hedged bonds. Behavioural risks: Keep decisions steady Common pitfalls include chasing recent winners, selling after falls or holding too much cash after a downturn. Tactics to keep you on track include: automate contributions (regular monthly investing), which spreads entry points write down rules (what you will do if markets fall 10%, 20%, 30%) separate spending cash from investments so you do not sell at weak prices to fund short-term needs use portfolio “buckets” in retirement. Retirement planning: Sequence-of-returns risk and withdrawals If you are drawing an income from investments consider the following. Hold a cash buffer (for example, 12–24 months of planned withdrawals) to avoid forced sales during sharp market falls. Be flexible with withdrawals: Pausing inflation-indexing or trimming withdrawals after a poor market year can help portfolios last longer. Use tax bands efficiently: Consider the order of withdrawals (pension, ISA, general investment account) to make use of personal allowance, PSA, dividend allowance and the CGT annual exempt amount. Take care around the MPAA if you are still contributing to pensions after accessing them. Putting it together: A repeatable checklist Confirm goals and time horizons. Check emergency cash (3-6 months). Map your target asset allocation. Use wrappers first: Fill ISAs and workplace/personal pensions as appropriate. Keep costs low: Prefer broad index funds/ETFs. Set rebalancing rules: Annual review + thresholds. Document tax items: Monitor dividend/CGT use; note 60-day property CGT rule; plan for 31 January/31 July self assessment dates if relevant. Review protection limits: Spread larger cash balances across institutions in line with FSCS; note proposed changes for late 2025. Schedule an annual review to update assumptions for interest rates, inflation and any rule changes. Get in touch if: you are unsure how to set or maintain an asset allocation you plan to draw income and want to coordinate wrappers and tax bands you expect large one-off gains or dividends and want to plan disposals or contributions you have concentrated positions (employer shares, single funds) and want to reduce single-asset risk tax-efficiently you are considering more complex investments. Wrapping up Risk management is not a one-off task but an ongoing discipline. By defining clear objectives, spreading investments across regions and asset classes, using ISAs and pensions to shelter returns, and reviewing allocations at least annually, you create a framework that limits surprises and keeps decisions rational. Document key dates – self assessment payments on 31 January and 31 July, the 60-day CGT rule for property, and the annual ISA reset on 6 April – so tax never forces a sale at the wrong time. Check deposit limits and platform safeguards for peace of mind, and keep a written record of your rebalancing rules to prevent knee-jerk trades. If life events or regulations change, revisit your plan promptly. A measured, systematic approach lets your portfolio work harder while you stay focused on the goals that matter most. Important information This guide is information only and does not account for your personal circumstances. Past performance is not a guide to future returns. The value of investments and income from them can fall as well as rise, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. If you need personalised advice, please contact a regulated financial adviser. If you’d like advice on managing your portfolio, get in touch.