The Carbon Compass: monthly news insight

Our new regular news round-up is intended to provide a Carbon view on topical news articles. Should you wish to discuss further, please reach out to your financial planner or contact us on 0131 220 0000 or enquiries@carbonfinancial.co.uk

As we head into the final quarter of 2025, news coverage has covered the following topics.

Easier way to pay the high income child benefit charge

If you or your partner earns over £60,000 and receives Child Benefit, you may be liable for the High Income Child Benefit Charge (HICBC). Until now, this often meant completing a full Self-Assessment tax return, even if you didn’t need one otherwise.

What’s new?
HMRC now allows you to pay the charge through your PAYE tax code, making the process simpler and more efficient.

Planning tip:
You can reduce your taxable income (known as Adjusted Net Income) through:

• Personal pension contributions
• Gift Aid donations
• Salary sacrifice schemes (e.g. childcare vouchers, cycle-to-work)

Why it matters:
HMRC is currently contacting affected taxpayers via a letter campaign running until 18 November 2025 so please look out for this coming through the post.

Important:
Even if you’re affected by the charge, it’s still worth claiming Child Benefit to protect your National Insurance record and ensure your child receives their NI number automatically at age 16.

Dividend income: declare it or amend It

HMRC is writing to taxpayers who may have under-reported dividend income for the 2023/24 tax year. If you’ve received dividends, especially from your own company, it’s important to ensure they’re correctly declared.

New rules from April 2025 require you to:

• Separate dividends from your own company from other sources
• Report your shareholding percentage and company details

What to do:
If you think you’ve made an error, you can amend your tax return by 31 January 2026 or contact HMRC directly. We can point you in the right direction of an accountant who can help with this should you need.

Child trust funds: don’t miss out

If you or your children are aged 18–23, there may be a matured Child Trust Fund (CTF) waiting to be claimed. These accounts were set up for children born between September 2002 and January 2011, with an initial government deposit of at least £250.

The average account value is over £2,200, and around 758,000 young people have yet to access theirs.

How to claim:

• Use HMRC’s free online tool with the young person’s NI number and date of birth
• Most people hear back within three weeks

If you’d like help locating a CTF or deciding what to do with the funds, we’re here to guide you.

Pension lump sums: no undo button

There are several rumoured Autumn budget changes making headlines from limits on tax free cash, flat rate pension tax relief and changes to ISA limits. Any discussion about the impact of these potential changes should be tailored to each person. Making concrete decisions based on rumour is not recommended, especially if it is simply to combat any future rule changes. One loophole that has been closed completely after quite a bit of confusion last Autumn is the cooling off rules and tax-free cash.

HMRC and the FCA have clarified that Pension Commencement Lump Sums (PCLS) cannot usually be reversed, even if your pension provider offers cancellation rights.

Why this matters:

• Making changes based on plans that you have need to be well thought through but making changes just to combat a potential change in the budget is not recommended.
• Tax consequences (such as using up your lump sum allowance) are permanent and could leave you in a much worse off position.
• Some schemes may offer cancellation rights, but these cannot usually be used for PCLS payments.

Planning tip:
Before taking a lump sum, it’s important to consider how it fits into your overall retirement strategy rather than to combat future rule changes. We can help you assess the pros and cons based on your long-term goals.

Let’s Talk

These updates are a timely reminder of how small changes can have a big impact on your financial wellbeing. If you’d like to discuss how any of these points affect your personal situation, please don’t hesitate to get in touch.