Tax Planning / Guidance

Taxation is the money which we pay to the UK government on items such as our income, capital gains, property, businesses, inheritances and more.

There are many reasons why we must pay tax, and there are also products and means by which we can reduce the final amount of tax that we pay.

Tax planning can cover a vast number of different areas and involves making the best possible use of tax allowances and tax-free schemes. Our tax planning includes certain products, allowances and guidelines to ensure your money is working its hardest and to ensure the tax you pay is both fair and as low as possible.

Whilst we do not provide tax returns or accountancy services directly, we aim to build a tax-efficient portfolio that is unique to you.

Our financial planning process involves careful consideration of income tax, capital gains tax, corporation tax and inheritance tax. We will also consider tax reliefs available such as income tax relief on pension contributions.

The Tax Planning process

Taxes either direct, such as income tax, or indirect such as VAT, are a part of everyday life. Tax is an important factor for consideration when we design your financial plan and the impact of poor tax planning should not be underestimated.

Our Step By Step Process

Circumstances & Objectives

When we work with you, we always start with your current circumstance and objectives in mind. These are the key foundations for our advice and allow us to tailor our services to you.

We take time to understand your circumstances and current financial position to ascertain your tax position in relation to income, capital gains and inheritance tax.

First and foremost, any recommendations need to be suitable for your circumstances, taking into account timescales and attitude to risk amongst other things.

Allowances

Many of the valuable tax allowances which we can utilise are refreshed each year, so we ensure you are continuously making the best use of what is available to you. This includes your Capital Gains Tax (CGT) allowance, your personal income tax allowance, ISA and pension allowances, and your annual exemption for gifts. Of course, for business owners, we also take into account any business property relief and other potential allowances.

Review

We will conduct a regular review of your financial plan, taking account of any changes in tax and legislation, in addition to your objectives and financial circumstances. We believe that a detailed review on a regular basis is the cornerstone of a robust financial plan. Many allowances are renewed on an annual basis and we will work with you to ensure you continue to make the most of any appropriate allowances.

Investments and Tax

Some investments are tax free within certain limits (such as ISA’s) whereas most forms of investment will result in some tax being paid – usually income tax or capital gains tax. By understanding your present circumstances and projecting your future position, our experts can ensure you are as tax-efficient as possible.

For example, if you are a higher rate tax-payer but have had no capital gains, it may be more appropriate to utilise investment funds that attract CGT (such as Open Ended Investment companies or OEICS) rather than Investment Bonds that are subject to income tax.

Many people don’t realise that many assets such as second properties are subject to capital gains tax on profits made. This can amount to a large bill as the sale of a single asset such as a property cannot be split over multiple tax years.

We consider all options that will meet your circumstances and objectives to minimise the exposure to tax.

Inheritance tax planning

Many people think inheritance tax only influences wealthy families, but often this is not the case. If you own a home or have large amounts of savings you could be affected. Even pensions can, in some circumstances, form part of an estate and create an inheritance tax liability.

Do you want 40% of your estate that you have worked hard to build up to be given to the Government?

Many people also believe they can just ‘give away’ most of their money or assets to avoid inheritance tax. Sadly, this is simply not the case and careful planning in advance is needed to ensure beneficiaries are not left with a nasty surprise.

We can help with a comprehensive strategy, which could include gifting, insurance and vital planning, such as the use of trusts, to protect your estate for your family.

Please click here to see our section on estate planning for more information.

Specialist pension tax planning

Pensions can be complicated and, whilst most are tax-efficient, there can be some traps that are easy to fall into, particularly with pensions set up before the pensions freedom act in 2015.

When reviewing your pension provision, we can consider whether you or your family are likely to be affected by any of these traps.

For example, in the event of death before 75 many pensions will pay out the entire remaining fund as a tax-free lump sum. Whilst this sounds good, if the entire amount is left to your spouse, it will form part of their estate and, upon the second death, could be subject to inheritance tax. Furthermore, if death occurs after the age of 75, the lump sum is subject to income tax at the recipient’s marginal rate. This could mean a tax charge of 40% or even 45% if the lump sum takes the beneficiary into the higher or additional rate tax bracket for that year.

Older pensions also may not have much flexibility around how income is taken which can lead to paying more income tax than is needed.

Because the amount of benefits that can be accrued in pensions is now limited, many people will also become subject to a lifetime allowance tax charge on their pension pot at some point. Careful planning is required to ensure the charge is either avoided or kept to a minimum. For example, by taking benefits as an income which is charged at 25% rather than a lump sum which could be charged at 55%!

If you’d like to speak to one of our tax planning specialists, click here.

Please Note: The Financial Conduct Authority does not regulate tax advice