As the tax year-end fast approaches, we understand that your clients may be worried about finding that last-minute liquidity. It may be that they are struggling to re-imburse a flexi-ISA, or maybe they are considering their CGT allowances to optimise gains realisation. As an adviser, you are no doubt trying to balance longer-term investment strategies with your client’s potential desire for knee-jerk reactions.
There are traditional approaches to tax year-end conversations that may already be in progress, but while many clients have sufficient wealth, they may have insufficient liquidity at the right moment. For others, the range of options available to maximise tax benefits may not be immediately obvious and warrant more in-depth conversations.
As more clients desire a more flexible approach to their wealth planning, what part can liquidity management, in the form of Lombard loans, play?
What is your client’s focus as they approach tax year-end?
There tend to be 3 main focus areas as tax year-end conversations take place.
- Maximising allowances
- IHT planning
- CGT planning for the upcoming tax year
1. Maximising Allowances
Maximising allowances are a key part of tax year end planning. With pensions less and less in vogue on the back of recent IHT changes, the focus this year is on ensuring ISA top-ups are taken advantage of and any utilisation of Flexi-ISAs is reimbursed. Year-end planning can now often centre on ensuring clients have sufficient liquidity to get funds back in those tax-free wrappers before the 5th April.
As we are all aware, HMRC rules state that every individual has an ISA allowance of £20,000 per tax year, which would be up to £40,000 for spouses. The fact that this allowance cannot be carried forward results in a “use it or lose it” situation that can result in a desire for knee-jerk liquidation.
Even with the best intentions, some couples may find themselves unable to stump up the cash to contribute the full £40k tax-free allowance before the tax year-end deadline.
The harder challenge for many is reimbursing a flexi-ISA that some clients may have utilised in the last tax year to meet liquidity needs. As the 5th April deadline looms, maybe a tax bill repayment hasn’t yet arrived, or a planned liquidity event hasn’t crystallised.
Your client now must face the possibility of losing out on not only their full tax year allowance but also a wholesale reduction in their ISA value. This can be a frustrating situation, especially if there were plans in place to avoid this very scenario that couldn’t be realised.
The alternative could be borrowing against that portfolio to access liquidity or, indeed, borrowing against what is left of the ISA that needs topping up or reimbursing.
2. IHT planning
Inheritance tax planning is always high up the agenda for many HNW clients. Most are trying to achieve the same thing: pass on as much wealth as possible, sensibly and efficiently, without leaving themselves exposed later in life. The balancing act between generosity and security is becoming more complex, particularly as allowances have remained static (or been removed!) while asset values have continued to grow.
The core framework is familiar, but worth revisiting. The nil-rate band remains at £325,000 and the residence nil-rate band at £175,000, with both frozen through 2026/27. For clients leaving a main residence to direct descendants, the additional £175,000 can be valuable, but only if the estate remains below the £2 million taper threshold. Once the net estate exceeds £2 million, the residence nil-rate band is reduced by £1 for every £2 over that figure, disappearing entirely at £2.35 million. In practice, that taper often becomes the quiet driver of more sophisticated estate conversations.
On lifetime transfers, the options are also increasingly constrained. The £3,000 annual exemption (with one-year carry forward) and the £250 small gift allowance still have their place, but they rarely move the dial for HNW estates. Larger outright gifts fall into the Potentially Exempt Transfer (PET) regime: survive seven years and they fall out of account; die within that period and they can become chargeable, with taper relief applying on gifts made between three and seven years before death (32%, 24%, 16%, 8%), once cumulative gifts exceed the nil-rate band.
3. CGT planning of the upcoming tax year
The current CGT allowance in the UK is now down to £3000 per individual, per tax year, which makes conversations about how to minimise exposure and phase asset disposal over multiple years to maximise that tax-free exemption much harder than before
The desire to crystallise gains can be triggered for various reasons; it’s the right time in the market, a need for liquidity, or a change in investment strategy, all valid but all need to be planned for carefully.
While allowances are there to be used, they often fall woefully short of the full gains investors want to realise. Similarly, spreading dispersals over tax years could be impractical if the client is seeking liquidity sooner rather than later.
Planning ahead, and using a Lombard loan to bridge any liquidity gaps caused by the staged discharge of assets, ensures that allowances are utilised to the fullest extent and supports long-term CGT management rather than forced crystallisation.
Lombard lending, a more elegant solution
As you initiate these conversations with your clients, we have provided a handy table that shows, at a glance, where Lombard lending may provide a more elegant solution than simply selling assets or finding alternative liquidity.
| Planning Need | Sell Assets | Use Cash | Lombard Loan |
| ISA Top-Up | CGT risk | Liquidity drain | Assets remain invested |
| Flexi-ISA Reimbursement | Timing pressure | Often unavailable | Temporary funding |
| CGT Planning | Crystallises tax | Not Applicable | Phased management |
| IHT Gifting | CGT trigger or lose access to the assets | Often impractical | Enables liquidity to gift without losing access to the assets |
Lombard lending works best when a client is asset-rich but lacks access to ready cash when required. The loan acts like a revolving line of credit, or overdraft, across tax years, supporting investors in making the most of allowances on offer and granting liquidity without the need to sell assets or disrupt long term investment strategies.
However, it is important to note that Lombard lending is not suitable for all clients and introduces borrowing risk.
The facility is secured against a client’s portfolio, which could be liquidated in the event of a margin call, which, whilst designed to only occur at unprecedented falls in markets, clients must understand that this could happen.
Changes in interest rates would also impact a client’s repayment obligations, and, if using a tax-efficient wrapper as collateral, tax benefits could also be invalidated in the event of a margin call. An ISA’s status is potentially invalidated if a lender needs to take enforcement action, and considerations like top-slicing relief or splitting across tax years will not be taken into account if there is a need to redeem assets.
Tax year-end planning is about enablement
In conclusion, tax year-end planning is where advisers have a real opportunity to add value and expand the options available to their clients.
Smart liquidity management is increasingly central to ISA maximisation, estate planning and CGT strategy, all of which benefit from early conversations to avoid last-minute decision making.
As the role of a financial adviser becomes ever trickier in a world of “self-serve” investment and AI, the real differentiator will come with access to tools like Lombard lending that enable clients to have their cake and eat it – maximise allowances, plan for the future and retain long-term gain potential.
The tax year doesn’t reward urgency; it rewards preparation.
Disclaimer: This article is for information only and does not constitute tax or investment advice. Tax treatment depends on individual circumstances and may change.
