Tax Planning
Sadly most people suffer tax on their income. Many with investments
are charged tax on their capital gains. We can even pay tax when
we die, based on the value of the estate on our death. It is important
to take independent advice to try to ensure your financial planning
is as tax efficient as possible. The FSA do not regulate some forms
of Tax Planning.
Income
Tax - Anyone earning income above the relevant tax allowance for
the prevailing fiscal year will have to pay income tax. Higher earners,
earning above the higher tax threshold, may pay an even percentage
of their income to the tax man. In the case of married couples, if
one spouse is a tax payer and the other is not, it may be worth considering
switching some investments, to maximise unused tax allowances. A similar
exercise could be explored if one spouse is a higher rate tax payer
and the other not.
Capital
Gains Tax (CGT) - This tax is charged, as the name implies, on
gains made from investments. If the gains in any fiscal year exceed
the CGT allowance for that year, this tax is charged on the amount
above the allowance figure: further allowance is made to take into
account the length of time the assets have been held. Remember that
proceeds from ISAs are Capital Gains Tax free. It is important to
use up your ISA allowance each fiscal year, to maximise tax efficiency.
Inheritance
Tax (IHT) - The potential for Inheritance Tax is effecting
more people each year, mainly due to increasing values in residential
properties. If you die and leave an estate worth more than the
prevailing IHT threshold, and you have no spouse, the beneficiaries
of your estate will suffer IHT on the balance. Even if you do
have a spouse, IHT will ultimately be payable, when he or she
should pass away. It is sensible to consider this potential
with a tax adviser, to help you decide whether it would be appropriate
to make arrangements to mitigate future IHT liability.
MJR Financial Services are not authorised to advise on Inheritance
Tax Planning, but we can put you in touch with a reputable adviser,
who would be able to advise you appropriately.
