How to Protect Your Wealth from Inflation

Inflation isn’t grabbing the headlines like it did in 2022, but at 3.4% (May 2025 CPI), it’s still quietly eating away at the value of every pound you hold.

Think of it this way: something that costs £1,000 today could cost around £1,034 this time next year. That “silent loss” affects your personal savings, your business reserves, and your long-term plans.

The good news? There are practical ways to fight back. By using tax allowances properly, making smart use of ISAs and pensions, and putting cash where it works hardest, you can protect — and even grow — your purchasing power.

Know Your Numbers

Inflation chips away at spending power, but tax reliefs can do a lot of the heavy lifting when you use them fully.

Here are the key 2025/26 allowances to keep in mind:

• Personal allowance – £12,570: tax-free income up to this level.
• Dividend allowance – £500: best used for higher-yielding shares or investment trusts.
• Capital gains tax (CGT) exempt amount – £3,000: each spouse gets their own allowance.
• Personal savings allowance – £1,000 for basic rate, £500 for higher rate, £0 for additional rate: at today’s savings rates, that’s a decent tax-free buffer.
• ISA subscription limit – £20,000: cash, stocks & shares, innovative-finance and lifetime ISAs all included.
• Lifetime ISA sub-limit – £4,000: plus a 25% government bonus if used for a first home or retirement.
• Pension annual allowance – £60,000 (with tapering possible): carry forward unused reliefs from the last three years.
• Marriage allowance – worth up to £252 if one spouse earns under the personal allowance.

Used together, these shelters can add up. For some families, it means over £80,000 under protection before you’ve even touched taxable investing.

Make Tax Wrappers Work Harder

• ISAs: Contributing early in the tax year means more time for growth. Over five years, that timing difference alone can add up to hundreds of pounds.

• Pensions: Salary sacrifice and carry-forward allowances can deliver big tax savings while building an inflation-proof income for later life.

• Cash: Shop around — easy-access rates are sitting at 5% in places, but many banks still pay next to nothing.

For business owners, tools like corporate treasury platforms let you spread deposits across banks while keeping FSCS protection intact.

Beyond Cash – Hedging Against Inflation

• Index-linked gilts and corporate bonds: These directly adjust with inflation.

• Equities: Over time, global shares have consistently outpaced inflation. A balanced portfolio can provide both growth and income.

• Real assets: Property, infrastructure, and commodities can all play a role — but be mindful of tax changes, especially for buy-to-let investors.

Keep Your Plan on Track

The strategies only work if they’re maintained.

That means:

• Automating contributions.
• Tracking key dates like the new tax year.
• Rebalancing investments when markets move.
• Reviewing your borrowing to make sure it isn’t costing more than necessary.

Final Thoughts

At 3–4%, inflation might not feel dramatic — but over a decade it can halve the value of your money if you don’t plan ahead.

With the right mix of tax wrappers, cash strategies, and inflation-linked assets, you can protect your wealth and keep your long-term plans on track.

If you’d like a review of your current set-up or tailored projections for your situation, let’s have a chat.