Many tax reliefs and allowances are well-known, however some are more complicated. If you are a high earner or your overall household income is high, you will need to be smart and plan ahead to make sure you utilise tax reliefs and allowances efficiently.
At Four Wealth Management, an experienced financial adviser can work with you to make sure you are making use of all the allowances that your household is entitled to.
Tax rules and allowances change frequently and having a financial adviser to help will make sure that you are aware of the latest legislation and how it could impact your personal circumstances.
Book a no-obligation meeting now about tax planning
Below are some allowances that couples can utilise.
The marriage allowance
Married couples and civil partners may be able to transfer some of their income tax personal allowance to their spouse.
If you earn under the £12,570 personal allowance and your spouse is a basic rate taxpayer, you can gift £1,260 of your allowance to your spouse. This could save them 20% tax on the amount of £1,260. A potential saving of up to £252. You can also backdate this for four tax years.
Being tactical about ISA and Pension contributions
ISAs and Pensions are popular ways to save due to the tax advantages of accounts. Adults have an annual ISA allowance of £20,000 (for the 2022/23 tax year). ISAs are tax-efficient as any growth is not subject to income or capital gains tax.
Even if you have fully utilised your ISA allowance, you should also make sure your partner has utilised their own allowance.
A pension benefits from tax-relief on contributions. Most people can contribute up to £40,000 per year or up to their annual salary if it is lower and receive tax relief. Married couples cannot share allowances but you can both make sure you have utilised as much of the allowance as possible.
You might also be able to carry forward any unused pension allowance from the previous three tax years and contribute a lump sum if you are able to.
Plan to mitigate Inheritance Tax
Inheritance Tax is currently charged at 40% on any assets in your estate over the value of the Nil Rate Band of £325,000. Your estate is made up of all of your assets including your house, cash, cars etc. You might also qualify for the Residence Nil Rate Band of £175,000 (£350,000 per couple) if you leave your house to a direct descendant such as child or grandchild. Inheritance Tax is easier for married couples to reduce as they can combine their allowances. By combining the Nil Rate Band Residence Nil Rate Band, each couple can shelter up to £1 million of assets from Inheritance Tax.
If your estate is worth more than £1,000,000 or you will not qualify for the Residence Nil Rate Band, there is some tax planning you can do in advance to mitigate your Inheritance Tax liability meaning you can leave more to your loved ones.
Everyone has a gifting allowance of £3,000 per year that they can gift to anyone they choose. This is immediately outside of the estate for Inheritance Tax purposes. Each person also has an unlimited number of small gits up to £250 they can use in each tax year. However, you cannot use more than one of the allowances to gift to the same person.
There are many other gifting allowances and solutions to Inheritance Tax, some of which are more complex.
To find out more about gifting and mitigating Inheritance Tax, you can book a no-obligation meeting with a financial adviser at Four Wealth Management. Book online now or call 0117 973 0500.
Get expert tax advice
The easiest way to make sure you are utilising all of your tax allowances is to speak to a financial adviser at Four Wealth Management. There is no ‘one size fits all’ solution and your financial adviser will take the time to fully understand your individual circumstances and goals and create a tax-efficient plan for you.
Book a meeting now or call 0117 973 0500.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
