Tax effective investments

Individual savings accounts
Individual Savings Accounts (ISAs). If you are aged over 50 your Isa allowance for the present tax year is now £10,200. ISA’s are free from capital gains tax, can be used to provide an annual income and are one of the most tax efficient investments that can be used

Pensions

Pensions are also a tax effective way of planning for retirement. Most people can contribute up to 3,600 gross each tax year and obtain basic rate tax relief on the payment made. Higher rate taxpayers can claim the balance on their self assessment.

Capital Gains Tax Planning

If you have made profit on certain types of investments you may be able to use your annual capital gains tax allowance. This will allow you to make gains up to this threshold without getting a liability to pay tax. In some examples it is also possible to carry forward past year’s losses.

Income Tax Planning

Each individual can receive a personal allowance of £6,475 without acquiring any income tax. For espoused pairs or civil partnerships, where one is a higher rate taxpayer it is worthwhile looking to see who owns the investment and possibly look to transfer assets into the
20% twenty percent taxpayers name.Making gifts is also a means of reducing your liability to income tax.

Inheritance Tax opportunities

Every Person can make an IHT exempt gift each year of up to 3,000 in a tax twelvemonth. Any unused exemption can be carried forward for one year only. If you are able to make gifts out of income without it changing your standard of living you may be allowed to make gifts above the annual exemption limit.

If you believe your estate could be over the Inheritance Tax nil rate band then efficient tax planning can be applied to cut your estates likely IHT liability. This could include a suitably drafted will or instead trust provision.

Consilium Asset Management are Financial Advisors based in Bristol, South Gloucestershire.

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