Frequently Asked Questions
» I am retired but my company pension takes me into the 40% tax bracket. I had cash deposits earning 4% after tax until the credit crunch which I used to top up my income. After tax the returns are now only 1%. What if anything can I do?
Base rates have been pegged at 0.5% by the Bank of England for 18 months now and we believe it is unlikely that we will see any increase in rates for some time. Income tax rates are the other problem here as they erode the already low returns from cash deposits. Leaving all your investments in cash deposits is currently an investment strategy which will lose money in real terms, when inflation and income tax are taken into account.
Getting a better return than cash involves taking on more investment risk. We have successfully provided income seeking clients with tax-efficient portfolios where risk is controlled in terms of the asset classes chosen. Everyone's attitude to taking more than cash deposits is different, but we can tailor solutions to match individual risk tolerance. A husband and wife who are currently not using their annual capital gains tax allowance can take substantial tax-free sums from their investment each year up to the value of the allowance (currently £10,100 each).
» I have a business with strong cash reserves which I currently don’t need for reinvestment in the business but the interest rate is poor. Any ideas?
You may still be able to move some or all of these deposits into real asset portfolios and benefit from tax efficient returns. This very much depends on the accountancy rules your auditors are currently using. Why don't you speak to our own in house accountancy team and they can advise both you and your auditors on what options you have?
» I want to give money to my grandchildren but my solicitor says that using trusts is no longer as tax efficient as it once was. Is there nothing else I can do?
Your solicitor is quite correct. The use of trusts may still be appropriate to your circumstances, but there is an alternative from an unlikely source - the European Union. In continental Europe the historical use of trusts in tax planning is almost unheard of and yet wealthy European investors still have that ability to make gifts and exercise control over when the recipients become entitled to the assets, without the use of trusts.
It is a little known fact that such schemes are also now available to UK investors.
Your solicitor may not be aware of these as they are based on European insurance legislation called the 3rd life directive. We would be happy to talk to them on your behalf and explain how these schemes work.
» I have a business and I have had a reasonable offer. Can you work with my accountants to maximise the investment opportunities for the proceeds and to minimise any taxation liabilities?
This is a common exercise for both our tax and financial advisory teams. The key is to get us involved even before you have an offer and we would work with your accountants to formulate a plan of effective action.
» I now fall into the 50% income tax bracket. Can you help me pay less tax?
There are various methods which can be legitimately used in order to limit your liability to the highest rate of tax. For example, pension contributions can be one of the most effective means to achieve this but recent legislation has curtailed the amount of contributions which are eligible for tax relief. Venture Capital Trusts (VCTs) provide 30% income tax relief but they are higher risk investments and therefore must be appropriate to your risk tolerance.
We have successfully worked with high earners in order to find the most appropriate tax strategy for them and make sure they are making maximum use of legitimate reliefs and allowances as part of an overall tax and investment strategy.
» I am concerned that my investments are not tax-efficient. Do you consider appropriate tax structures when building investment portfolios?
When building an investment portfolio we always work to ensure that your investments are organised in the most tax-efficient way for your circumstances. We aim to minimise income and capital gains taxes during your lifetime and inheritance tax on your death.
» I have a number of existing trusts for my family but have not reviewed them for some time. I have read that there have been recent changes to the taxation of trust investments but I am not sure if they affect me. Can you advise me accordingly?
The Finance Act 2009 increased the income tax rate for trusts to 50% from 40% and the dividend trust rate from 32.5% to 42.5 for any trust that can accumulate income. Affected trustees may therefore need to rethink their investment strategy so a review of the trust investments is certainly needed now.
» I am planning to retire abroad and probably in France or Spain what tax action should I take now?
Effective planning and timing the exit to different countries is vital. For example you need to ensure that the assets you have invested now are in a sufficiently portable structure that will ensure you do not incur unnecessary additional taxation in your new country. We have access to various tax structures for your assets that could be appropriate. Ask us for a recommendation as early planning and timely action is relevant here.
» Do you know how I can protect the value of my pension fund above the £1.5million lifetime limit from tax?
If you have a large pension fund which is at the lifetime limit then we have solutions to protect future investment growth on the fund from being liable to lifetime allowance tax charges. Please contact us to discuss this.
» I am concerned about the impact of Inheritance Tax (IHT) on my estate. What can I do about this problem?
What can be done about an inheritance tax liability very much depends on individual circumstances. Unfortunately many people only really start to worry about IHT once it is too late to do much about it. Changes in legislation over the last few years have demonstrated that HMRC will act quickly and sometimes retrospectively to curb avoidance of this tax. By far the best way to deal with IHT issues is to start planning early and make maximum use of the available exemptions and the ability to make potentially exempt transfers. If you are concerned by inheritance tax then please contact us and we can advise you accordingly.