Tax allowances

This is dull housekeeping, but please bear with me. There are range of perfectly legitimate annual tax allowances available to all UK taxpayers.

Many do not have the time to investigate and harvest these allowances efficiently – we do.

A family of four, with high enough income can invest up to £2,380,200 every year very tax efficiently.

The Government subsidises these investments to the tune of £714,960 pa, which means that £2,380,200 invested costs you £1,665,240. That represents a generous 30% tax break.

In addition, there are usually future additional Income, Capital Gains and Inheritance tax benefits too.

Yes, there are strings attached over access, control, investment strategy but used in combination an attractive and tax efficient portfolio can be created.

For example, if you are a high earner with your own business, you should be able to move £40,000 pa out of your company into a pension account.

That payment should attract Corporation Tax relief for the company, be protected from future creditors, remain under your control, be invested (more or less – there are some restrictions) as you wish, be available to you from a certain age, be outside your estate for IHT purposes and be passed to your spouse and then children if you don’t get to spend it.

Over the course of 10 years, and assuming a reasonable rate of return around £600,000 could be protected this way. If your spouse works in your business, you can double that. If you both then used your annual ISA allowances and invested for IHT protection that would add a further £600,000.

That is a 10-year total of £1.8m that could be set aside and protected from IHT as well as gaining valuable income and capital gains tax relief whilst remaining entirely under your control.


Posted on

March 16, 2022