How We Model
This page explains how FutureClear's simulation engine works. We've written it for people who want to understand what's happening under the hood before they trust the numbers.
The year-by-year loop
The engine simulates your entire financial timeline from today until life expectancy. It processes each year individually in an 18-step pipeline, then carries the results forward. Every year depends on what happened in the year before it — tax in retirement is path-dependent.
Collect income
Employment, pensions, rental, dividends, state pension
Process life events
Retirement, downsizing, starting a pension, one-off expenses
Deduct spending
All committed spending for the year
Generate withdrawals
From your assets in your chosen order, if spending exceeds cash
Apply growth
Investment returns on remaining balances
Calculate tax
Full UK tax bill for each partner
Carry forward
Everything feeds into the next year
This is a simplification — the actual pipeline has 18 steps covering contributions, crystallisation, surplus sweep, mortgage payments, and capital gains tracking. But the core idea holds: a single formula can't capture path-dependent tax. Each year's output feeds the next.
Tax calculation
The engine calculates UK tax for each partner, for each year. All thresholds use published HMRC figures for 2026/27 — £12,570 Personal Allowance, £50,270 basic rate band, £125,140 higher rate threshold. These are the actual numbers, not approximations.
Income tax
All taxable income aggregated and run through the standard bands. The Personal Allowance taper above £100,000 is modelled precisely — the notorious 60% effective rate.
National Insurance
Class 1 employee contributions on employment income, ceasing automatically at State Pension age.
Dividend tax
Dividend income from GIA holdings, stacked on top of other income. Included in adjusted net income for the Personal Allowance taper — a detail many calculators miss.
Capital gains tax
Gains from GIA disposals and Bed-and-ISA transfers. Annual CGT allowance applied, rate determined by total income including dividends.
Marriage Allowance
Automatic transfer of unused Personal Allowance between partners where eligible, re-evaluated each year as circumstances change.
Section 24 mortgage interest
20% tax credit on buy-to-let mortgage interest, offsetting the tax bill for landlord investors.
Tax timing: The engine calculates each year's tax bill at year-end but deducts it from cash at the start of the next year, mirroring how self-assessment works. Your year-end cash includes money you'll owe HMRC.
For a detailed walkthrough with worked examples, see How We Calculate UK Tax Year-by-Year.
Monte Carlo simulation
A single projection assumes investment returns are the same every year. They aren't. Some years markets return 15%, some years they lose 10%, and the order matters — a bad sequence of returns in early retirement can deplete a portfolio that would have survived under average conditions.
Monte Carlo simulation runs the same scenario a thousand times, each with a different randomised sequence of annual returns drawn from a realistic distribution. The output is a set of percentile bands — 10th, 25th, 50th, 75th, 90th — showing how wide the range of possible outcomes actually is.
Single projection
One line on a chart. Assumes the same return every year. Tells you almost nothing about the range of things that could happen.
Monte Carlo
A thousand runs. Randomised returns drawn from a realistic distribution. Shows the spread of outcomes and how sensitive your plan is to market variability.
Withdrawal ordering
When your spending exceeds your income in a given year, the engine draws from your accounts in the order you've specified. It works down the priority list: ISA withdrawals are tax-free, SIPP withdrawals are taxable income, GIA withdrawals may trigger capital gains. The tax implications of each withdrawal feed back into that year's tax calculation.
The order you choose can substantially affect your lifetime tax bill. FutureClear shows you the consequences of different orders — it doesn't tell you which order to use.
Data sources
Where there's a published source, we use it. Where we've made an assumption, we tell you what it is and let you change it.
Tax rates and thresholds
HMRC published rates, updated annually
State Pension
£12,548 (2026/27), triple lock assumptions visible and adjustable
Mortality
ONS national life tables — you can override with any age
Investment returns
Consistent with UK financial planning defaults — adjustable per scenario
Inflation
User-configurable, long-term default visible and changeable
What we don't model
Every model makes simplifications. We'd rather be upfront about these gaps than pretend the model is more comprehensive than it is.
Cost basis tracking
GIA capital gains use a static cost basis ratio, not per-contribution tracking. Reasonable for long-term planning, won't match exact CGT in any given year.
Self-employed NI
Class 1 employee NI only. Class 2 and Class 4 are not yet included.
Salary sacrifice
Not modelled as a distinct mechanism. Approximate by adjusting pension contribution amounts.
DB pension specifics
Modelled as fixed annual income at a specified age. Commutation options and early retirement reductions are not modelled.
Inheritance tax
Not currently modelled. On the roadmap.
Benefits and means testing
State benefits, pension credit, and means-tested entitlements are not modelled.
Over time, we're working to close the gaps that matter most. If a simplification is likely to affect your projection materially, the tool should tell you.
Verify it yourself
Every tax constant in the engine references the current HMRC published figure. The year-by-year results table shows the full breakdown for each year — income, tax, withdrawals, balances — so you can check individual years against your own calculations or against HMRC's income tax calculator.
If you find something that looks wrong, we want to know. Email info@futureclear.co.uk and we'll investigate.
FutureClear is a modelling tool, not a financial adviser. Projections are based on user-defined assumptions and published data sources. Your actual financial outcomes will depend on your individual circumstances, future tax legislation, and market conditions. If in doubt, consult a qualified financial adviser or tax professional.