Taxation planning

By understanding more about how taxation works and managing your finances well, you could save money in the long run – for you, and for your family.

In the UK, we have a tax year that runs from 6 April through to 5 April. During that time, the Government requires everyone to pay an appropriate level of income tax on their earned income – to help pay for things like education and healthcare. On top of income tax, you could also be liable for Capital Gains Tax (CGT) if you have assets that you have sold. CGT is an amount that’s due on the growth in value of your money, but only paid once you realise those gains – usually when you sell the asset.

As your investments and assets grow, your estate (that’s everything you own), increases in value. When you die, a portion of your estate over a certain value is subject to tax. This tax is known as Inheritance Tax (IHT). IHT is levied at 40% on every part of the deceased’s estate worth more than £325,000. But, by making tax plans in advance, there are ways to minimise the amount of IHT your estate will have to pay. For example, you could ‘gift’ some of it out of your estate in advance – although to be of maximum effect, this needs to be documented and done at least seven years before you die. That’s not an easy date to predict – which is why early tax planning is so important!

Should everyone get tax planning advice?

Whether you’re self-employed or working for someone else, tax planning is vital. The rates of tax can change each year: staying on top of these changes, finding ways to invest tax‑efficiently, and managing your personal finances so that they’re working hard for you is best done with the help of an independent financial adviser (IFA). If you have particularly complicated personal finances, you could also benefit from the advice of a tax specialist – but an IFA can give cover most types of tax planning advice in the first instance.