Tim Hills, financial planner at JLT Wealth Management, runs through the key tax discussions you need to have with your clients...
Most clients have ample opportunity to keep more of their hard-earned wealth, using well established and non-contentious plans that will never appear on HM Revenue & Customs’ (HMRC) radar. But how many clients use all that is available to them?
The following are some questions that may be useful to use with new clients, as well as to reinforce and refine plans for existing clients.
Do you both pay the same rate of income tax?
Ten tax planning points to raise with clients
If not, is it possible to rebalance incomes so that this can be achieved, thereby making the most of the available personal (and age) allowances?
If you are fortunate enough to earn over £100,000, what can be done to bring the income level below that threshold?
The personal allowance reduces where the income is above £100,000 – by £1 for every £2 of income above the limit. Someone under the age of 65 earning £118,880 will lose their whole personal allowance.
Have you used your full ISA allowances, not just the cash element?
If you have no “new” money you wish to commit to your portfolio, do you have any other investments in tax wrappers?
While we tend to think of OEICs and unit trusts to ‘Bed&ISA’, a partial encashment from an investment bond (which, of course, notionally suffers basic rate taxation within the fund) is another source to fill ISA allowances.
Clearly, care must be taken to avoid triggering tax charges using funds from a bond.
Are you considering disposing of any assets and, therefore, incurring capital gains tax (CGT)? Who owns the asset?
Transfers between spouses are not disposals for CGT. Plan when to crystallise gains – for example, if a client is considering a gift of property, now may be a good time due to the effect of the market on current values. Do you have losses that may be offset? This is often missed.
Have you made full use of your annual allowance for pension planning?
If so, what about the previous three years? Attention needs to be paid to pension input periods and ensuring the client was a member of a pension scheme for eligibility purposes.
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