Protecting Your Assets: A Guide for 2025

We don’t know what will happen in the future, and our plans rarely work out exactly as we expect.

Building wealth is an important part of financial planning, but it is not the only consideration. You also need to consider protecting what you have and mitigating risk as much as possible.

In this guide, we examine the risks to your financial plan and provide recommendations for safeguarding your assets.

Manage Your Budget

Although inflation is under more control than in 2023 and 2024, many households are still facing a more expensive 2025. This could lead people to overspend and reduce their savings and pension contributions.

It’s worth reviewing your monthly spending to determine if there’s any room to cut back without affecting your lifestyle.

For example, shopping around for the best insurance deals, cancelling unused subscriptions or switching to cheaper brands.

If you haven’t already done so, you should consider building an emergency fund of at least six months’ worth of expenses. This means that if you are faced with an unexpected bill or can’t work for a short period, your costs will be covered.

Making some small changes now can help you avoid dipping into your long-term savings or getting into debt.

Protect What Matters

Financial protection can provide a safety net in the event that things go wrong. Types of protection you should consider are:

• Life insurance to help towards clearing your mortgage if you die.
• Additional life insurance to provide your family with financial security.
• Critical illness cover to provide a lump sum if you are diagnosed with a serious medical condition.
• Income protection to replace lost earnings if you have longer-term health problems.

Insurance can’t solve every problem, but it can help to avoid financial hardship at difficult times.

Invest Sensibly

When you invest, you want to grow your money, but it is equally important to protect it. Below are some tips for sensible investing:

• Take an appropriate amount of risk. This will depend on your personal attitude, as well as your goals, investment timescale, and how much you can afford to lose.
• Diversify your investments across a range of asset classes, world regions and sectors. This helps to spread the risk.
• Avoid taking an emotional approach to investing. Staying invested for the long term is the key to a successful investment plan.
• Keep an eye on costs.
• Avoid hot stock tips or anything that seems too good to be true.

Reduce Tax

Avoiding tax altogether is unlikely to be an option, but there are several allowances and exemptions you can use to reduce your tax bill:

• The Personal Allowance, dividend allowance, and savings allowances can all help to reduce the amount of income tax you pay. If you have your own business or receive an income from investments, you can arrange your affairs to make the best use of these allowances.
• Marriage allowance means that lower earners can pass some of their unused Personal Allowance to a spouse, provided the spouse is a basic rate taxpayer. The limit is £1,260, which can save households up to £252 per year.
• If you have children and earn under £100,000 per year, you may qualify for tax-free childcare
• Contributing to an ISA and making regular use of your capital gains exemption can help to potentially reduce the amount of tax payable on your investments.

These are just some examples. It’s a good idea to seek advice if you want to protect your assets from excessive taxation.

Create a Legacy

When you have spent your life working to create financial security, you want to make sure that your wealth is passed to the people that matter most.

To protect your assets, both during your lifetime and beyond, you may want to consider the following:

• Make a Will to help ensure your estate is distributed according to your wishes, and that the process is managed by someone you trust.
• You should also look into Powers of Attorney. This allows you to appoint someone to make financial and medical decisions on your behalf if you are no longer able to.
• Consider making gifts during your lifetime. This can help reduce the value of your estate, while allowing your family to benefit from the gift when they need it most.
• Think about setting up trusts. A trust can help to ring-fence assets for your beneficiaries while protecting the fund in the event of divorce, bankruptcy, or financial mismanagement. Trusts can also help to mitigate Inheritance Tax (IHT). This is a complex area with potential tax consequences.
• Investing in small companies can offer exemptions from IHT in the form of business relief. This can apply to your own business, unlisted shares, Alternative Investment Market (AIM) shares, or Enterprise Investment Schemes (EIS). In some cases, you can pass the shares on to your beneficiaries without an immediate capital gains tax liability. This can be a high-risk area, and the tax relief is not guaranteed.
• A family investment company can allow you to invest in shares and property while efficiently passing wealth to your family, without giving up full control.
• Rather than reducing IHT, you could also set up an insurance policy to pay the tax. If the benefits are paid into a suitable trust, this can bypass probate procedures and be paid to your trustees/executors more quickly.

Estate planning can be complicated, and many of the strategies have risks and potential tax implications. It’s worth seeking advice if you are considering any of these options.

Please don’t hesitate to contact a member of the team if you would like to find out more about the topics covered.

The value of your investments and pensions (and any income from them) can go down as well as up which would have an impact on the level of benefits available