A recent week in Crete, lazing about in the sun, proved to be very taxing for me. It was hot, you know! Doing very little also didn’t help my waistline!
As I now shift my thoughts away from a relatively lazy week, I cast my mind back to how busy I’d been in the three weeks before going away. I thought about the people I’d seen in those previous weeks and out of eight new enquiries, I identified seven where I could help them save a significant amount of tax.
A variety of situations presented themselves; one where it was very evident that a husband and wife needed to set up a limited company rather than pay tax on the sole trader earnings from their personal arrangements. The limited company could act as a ‘parking lot’ for some of their earnings, enabling them to be in greater control of how and when tax is paid down the line.
On three occasions, pension contributions were hampered by the tapering of the allowance when earnings exceed £150,000. The people in question were all paying 45% tax on the ‘compensation money’ going into their bank accounts. We explained how tax relief could be reclaimed when investing, with the additional benefit of tax-free dividends on the amount invested.
One client wanted to stop any more contributions into pensions forthwith for fear of breaching the lifetime allowance on his pension pots. Planning with Blue Sky will show how best to accumulate and take benefits in the most tax efficient ways, whilst exploring other possibilities of reclaiming tax relief.
Two further potential clients were worried about paying too much inheritance tax. Comprehensive Financial Planning with us will show them their likely potential liability at various stages of their lives. It will also highlight when they will be able to pass money down the family line – in the right way and at the right time. One particular lady wanted to see her children benefit whilst she, as the parent, was still very much alive and kicking! Another prospect was well travelled and having lived in different parts of the world, needed some international tax expertise. This we have duly arranged.
Whilst there is lots of variety here, the common denominator is that each enquiry, highlighted to us as financial planners, that they were paying more tax than they need.
Of course, it’s important to ensure that the ‘tax tail isn’t wagging the advice dog’ when seeking ways of minimising tax but it’s also important not to be complacent.
Doing nothing can be extremely taxing! So, don’t let inertia cost you money!
Gary Neild B.Sc.Hons. DipIP PFA