In this world nothing can be said to be certain except death and taxes. - Benjamin Franklin

Tax may well be certain and also be one of your largest expenses, but to a considerable extent, particularly for those with high levels of income or wealth, will be largely determined by the way you legitimately arrange your financial affairs.

The UK tax system is not only very complex, but is constantly evolving and changing with new legislation, usually introduced via the chancellor’s annual budget statement. Therefore, navigating the tax rules and ensuring our income and assets are structured appropriately to minimise the tax take, is an ongoing process, and forms part of our annual reviews with our clients.

The Role of Life Centred Planning

An integral part of our Life Centred Planning process, is to build lifetime cash flow models. These help to provide a clear view of your personal balance sheet showing assets and liabilities, as well as your income and expenditure both currently and forecast into the future, based on variable scenarios.

Included in your expenditure will be all taxation that is or will become due, throughout your life, and on death, based on the assumptions incorporated. The visual aspects of our cash flow software highlight the quantum of the tax you could pay on income (Income tax, national insurance, corporation tax), when purchasing assets (stamp duty, VAT), when you sell assets (Capital Gains Tax) and ultimately on the value of your estate when you die (Inheritance tax).

Where planning opportunities are identified, it is possible to demonstrate how these taxes can be reduced or in some cases eliminated and provide a positive effect on your and your families cash flow and consequently your lives.

The Tax Planning Service

One of the main objectives of our Tax Planning Service is to ensure that you do not pay more tax than you need to so that your financial resources can stretch further to support your chosen lifestyle.

We run through various steps to maximise any tax planning opportunities:

Make use of Available Allowances

The starting point for this is to ensure where possible, the various available tax allowances are utilised. There are numerous annual allowances that cover the three main personal taxes of income tax, capital gains tax and inheritance tax.

Typically, these allowances are a tax-free element, for example the Personal Allowance for income tax, is the first part of your income that is taxed at 0% up to the annual threshold. Naturally it is generally a sensible approach to align your finances to take advantage of as many of these allowances as possible.

Consider the Appropriate Tax Wrapper and Structure

Having identified the allowances that you can utilise, we look at the available tax wrappers and structures, in which we might consider holding your assets, savings and investments. The common ones include bank accounts, ISAs, pensions, general investment accounts, and trusts but many more can be considered.

Equalise Income and Wealth Between Married Couples

If it is appropriate to move assets into different structures or tax wrappers, it is also worth exploring for married couples whether income and assets are aligned in the most efficient way. The available allowances are per individual so, if circumstances allow, your financial wealth can be attributed as evenly as possible. This will often be more efficient compared to one individual having the majority in their name.

Keep One Eye on the Future

The same would apply not only whilst you are working but also once retirement arrives. If all your household income in retirement is derived from one parties’ pension, that will restrict the planning opportunities.

Therefore, long ahead of retirement it might be prudent to decide where future regular savings for retirement are deposited, in which tax wrapper and in whose name so that personal taxation pre and post retirement can be minimised.

Finally, as different assets and tax wrappers have different tax treatment, some might be more valuable than others at different phases in your life, as your objectives change. For example, if you are working, we might focus more on protecting income and assets from income tax and capital gains tax, but later on in life the focus may switch towards inheritance tax, which may bring about the need for a change in strategy.

Changes in your personal circumstances or as a result new legislation can alter both the impact of taxation and the effectiveness of existing strategies, so our ongoing review is a vital component for ensuring your approach is kept up to date and relevant for your current circumstances.

To explore how Strategic Wealth Management can help you and your family or to arrange an informal coffee and chat, please get in touch.

Strategic Wealth Management Ltd, authorised and regulated by the Financial Conduct Authority (FCA). Registered in England and Wales no. 2205890.

The FCA does not regulate tax advice, trusts or wills.

1 East Point | Seal, Kent TN15 0EG | T. 01732 760 000 | F. 01732 763 816 | E. info@strategic.uk.net