Imogen BennettLiam Lawson has told Formula 1 reporters this week that he would sign a 2027 Racing Bulls contract today if Red Bull let him — but the parent company prefers to keep its options open. The 24-year-old New Zealander, who was demoted from the senior Red Bull team only fourteen months ago, sits 10th in the 2026 drivers' standings with 10 points, two behind Max Verstappen, and is reportedly the top internal candidate to replace Verstappen if the four-time champion leaves Red Bull at the end of the season.
For UK readers, the temptation is to file this under "Formula 1 gossip." The financial planning lens is more interesting — because Lawson's situation is a near-perfect illustration of the four problems that derail young athletes and high-earning professionals in the UK every year.
The short-career, short-contract trap
Lawson's Racing Bulls contract expires on 31 December 2026. He is paid an estimated $1 million base salary plus performance bonuses for 2026 — modest by F1 standards but more than most UK 24-year-olds will earn across an entire decade. His position is unstable in a specific way: his employer (Red Bull) prefers short-term deals on its junior team to preserve flexibility, and his entire 2027 income could be either Racing Bulls money, Red Bull Racing money at a step-change higher, or zero.
UK financial planners describe this as a "spike-and-cliff" income profile. It applies to F1 drivers, but also to professional footballers in the Championship and below, jockeys, golfers outside the top 50, and a meaningful share of young City traders whose bonuses dwarf their basic salary. The reflex among most clients is to spend against the spike. The correct planning response is to build the cliff into the cash-flow model from day one.
A wealth manager working with a Lawson-equivalent UK client typically structures the year's earnings around three buckets: a current-year tax reserve held in an instant-access account, a long-term retirement contribution sized to the historical average earnings, and a contingency pool of 18 to 36 months of fixed living costs invested at the agreed risk level. The exact split depends on whether the contract has any termination protection, which Lawson's reportedly does not.
UK tax for young high earners — the parts that catch them out
For UK-resident athletes, several HMRC rules generate avoidable bills.
Image rights are treated separately from playing or driving income. A properly structured image-rights company can hold sponsorship, endorsement and merchandising revenue and pay corporation tax at the prevailing main rate rather than the 45% additional-rate income-tax band. HMRC's Statement of Practice 3 (1987) sets out the criteria the structure must meet, and the substance test is strict — sham arrangements are routinely unwound on enquiry.
Non-resident competitor rules apply when athletes domiciled abroad earn money for events held in the UK. Foreign Entertainers Unit guidance under HMRC's published procedures requires withholding at 20% on gross UK-source income from sporting events. Drivers, golfers and tennis players competing at UK Grand Prix or Open events fall inside this net even if they spend only days a year in the country.
Pension annual allowance is the single most overlooked planning lever. According to gov.uk's published pension annual allowance guidance, the standard allowance for 2025/26 is £60,000, but the tapered allowance reduces it to as little as £10,000 for adjusted incomes above £260,000. A driver with a strong points-bonus year can blow past the taper threshold without realising it, then face a chargeable excess on the otherwise-tax-free contribution.
Capital gains tax changes effective from 30 October 2024 set the higher rate at 24% for non-residential gains. For a driver realising a one-off image-rights buyout or a property sale during a high-earnings year, the timing of the disposal matters more than ever.
The contract structure question
Beyond tax, the contract itself is where the most expensive mistakes happen. Lawson's situation foregrounds three clauses worth asking about on any short-term high-earning sports contract:
- Termination on demotion or non-selection. Lawson was demoted from Red Bull to Racing Bulls in March 2025. Did the contract pay out the balance, reduce the basic accordingly, or restructure the bonuses? In UK football's standard employment contracts, demotion clauses can convert a player's six-figure weekly wage into the relegated-club salary band with no top-up.
- Image rights ownership on transfer. When a driver moves between teams within a parent group, image rights can stay with the parent, the team, or the driver. Each option produces a different tax outcome.
- Sponsor-conflict clauses. Personal sponsorship deals signed before joining a team can become void or trigger compensation if the team's commercial partners overlap. The drafting is rarely symmetrical — a strong agent gets the driver named as a "permitted exception" in the team's later sponsor agreements.
A specialist sports-law solicitor reviews these clauses before signature, not after. The going rate for a senior contract review in 2026 is between £3,000 and £8,000 and almost always pays for itself — a pattern that mirrors what specialist counsel found earlier this year when reviewing the five most-disputed clauses in Formula 2 driver contracts.
What this means for UK families with high-earning young athletes
Most UK households reading about Lawson will not be planning a Formula 1 career. But the underlying questions — short-career income, image rights, pension taper, contract structure — apply to the children of around 28,000 UK families currently involved in academy systems across the major team sports, plus an estimated 4,000 households with professional individual-sport competitors aged 16 to 28.
National governing bodies address the welfare side of the equation through their academy safeguarding rules. The financial side is the family's responsibility, and a chartered wealth manager regulated by the FCA can model the lifetime cash position before the first significant contract is signed.
For Lawson, the 2027 question will be settled by Red Bull's boardroom. For UK families starting earlier in the curve, the equivalent decision is the one that protects the post-career cliff — and that is the conversation worth having before the first big cheque arrives, not after.
