Reducing Tax Payments
The new tax year will soon be with us so it’s a good time to get organised. If you pay less tax, that means there is more money for you!
Tax payments come in many disguises. Most of us expect our to be earnings taxed or to pay VAT on goods and services. But did you know that there are some of the taxes can legitimately reduced or even completely erased?
Planning for the future
A good example of this is putting surplus funds, held ‘for a rainy day’ in an ISA, where the interest earned is paid tax free. Or, if saving a lump sum for a later date, a pension might be even more tax efficient because, for every £100 paid into a pension, you only have to pay £80 (as a basic rate taxpayer). While there are limits to contributions you might find that, if your employer makes the payment through your payroll, you don’t have to pay National Insurance on those contributions either.
If you run your own business, have you considered whether changing to a limited company could save you money? A limited liability company may also protect you in the event of legal action against you.
There are many aspects to consider – it’s always a good idea to get your accountant and independent financial adviser to speak to each other.
Inheritance Tax
Families might have created wealth over their working lives or inherited some along the way. If your estate is worth over £325,000 there might have an Inheritance Tax (IHT) issue for your beneficiaries to sort out. The obvious starting point is to ensure your Wills are up to date and valid. A couple could have two IHT allowances to use, provided the executors make an appropriate application.
If your estate is likely to exceed £650,000 and if you own your main residence, you really should get some professional advice while there is time to make plans. This will help to ensure access to the assets you might require later and safeguarding other assets to ensure your chosen beneficiaries get more than the tax man!
Pensions can provide up to 25% of the fund value as a tax free lump sum, the remaining fund generating an income that is taxed. If you cash in more than the 25% tax free allowance, that lump sum is taxable and, if you are not careful, this could be as much as 40% or even 45%. However, a well-structured approach, can reduce exposure to taxation and tax payments so there is more to spend on your retirement.
Free Initial Review
If you have financial concerns and you are looking for some advice, why not arrange a free, initial consultation?
For financial planning advice on investments, retirement and estate planning, seek out an Independent Financial Adviser, with a good record of delivering simple financial advice that works.