Benjamin Franklin said that the only two certainties in life are death and taxes.
However, taxes can be minimised with better organisation, the full use of allowances and taking appropriate professional advice.
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There is a personal income tax allowance of £12,500 and further allowances against income from shares and savings. Those in a marriage or civil partnership can tax plan effectively for income, capital gains and Inheritance Tax by transferring assets between themselves to optimise their respective tax bands.
Most people are also aware that paying into a pension is not only a sensible thing to do for retirement but is also income tax efficient as relief is given on pension contributions.
The rent a room scheme is a useful way to earn up to £7,500 a year tax free.
If you own a business, it pays to take professional advice on the best way to organise your business affairs. The Inland Revenue have sweeping powers to levy penalties for poor record keeping.
Joint owners of capital assets are each entitled to a Capital Gains Tax exemption, currently £12,000. Accordingly, if a second property is sold by joint owners there is a total CGT exemption of £24,000 before tax becomes payable.
Landlords should take advice on the difference between improvements and repairs, which ones are allowable for which taxes and when the relief can be claimed.
For Inheritance Tax everyone is entitled to give away £3,000 each year and carry forward any unused portion for one year. If no gifts were made in the last tax year then £6,000 can be given this year. There are further IHT allowances and exemptions available.
The lifetime Inheritance tax allowance is £325,000 per person. Transfers between spouses or civil partners are exempt so equalisation of assets is sensible planning.
If you wish to pass assets to the next generation but are concerned about security you might consider a Trust, of which there are various types. A Discretionary Trust, where trustees have discretion over distributions from the trust fund, can provide protection of the assets against some of the life problems the beneficiaries may encounter.
Tax need not be a problem, provided you are organised and take good advice.
George Ide can offer help with a range of tax and investment services. Please contact us on 01243 786668 or at [email protected]
John Atkinson. Chartered Wealth Manager
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