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Tax Mitigation Strategies (Pension Contribution (Experienced Investor…
Tax Mitigation Strategies
Pension Contribution
Maximum £40,000 in a tax year
Increase the BRT by the gross amount
i.e. contributed gross amount of £40,000 would increase from £32,000 to £72,000
Carry forward allowances up to 3 years
Recover lost personal allowance
Have to have a pension in existence
Extreme tax efficiency and beneficial for pension
Experienced Investor
Self-Invested Personal Pension - UK government-approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs (HMRC)
Gross up
net amount = /80 x100
Individual Savings Account
Shelter from income tax and CGT
Lifetime ISA - helping young people save for their retirement or to buy a home
Desirable for clients seeking income
Limited in any given tax year
£15,240
Pay no income tax on interest on deposits in cash ISAs
Pay no income tax or CGT on returns on investments held in an investment (stocks and shares ISA), regardless of your marginal tax rate
Additional Permitted Subscription
Easier to inherit a spouse or civil partner’s ISA tax benefits
Enterprise Investment Scheme
Invest in AIM - small, high risk companies
Typically for high earners - (£500 - £1m) -
no
grossing up
Held for at least
two years
usually also qualify for
relief from inheritance tax
, as do other business assets and unquoted shares, known as
business property relief
Does not lift the threshold, it is taken off at the end
If you lose money, you get
loss relief
which allows you to offset any losses against future tax bills
3 year period to benefit from the income tax reduction
30% tax relief
e.g. £100,000 would receive £30,000 relief
Designed to
help smaller higher-risk trading companies
to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.
Venture Capital Trust
Collective Investment Scheme - diversification
Tradable - shares on the LSE
Maximum 200,000
30% relief
Have to hold them for 5 years
Investment Trust - no CGT payable
Safer alternative to EIS
https://www.moneyadviceservice.org.uk/en/articles/venture-capital-trusts
Gift Aid
Recognised scheme in the UK, which allows wealthy individuals to reduce their tax by giving money to charity
Increase the BRT by the gross amount therefore reducing the amount of income that is taxed at higher rate
e.g. £10,000 / 80 x 100 = £12,500. Increase from £32,000 to £44,500
No limit on the amount
Charity also receives tax relief
Gift Aid was introduced in 1990 and is a well known scheme allowing tax-efficient gifts to be made to recognised charities
Before its introduction, tax relief on donations could only be obtained by using a deed of covenant: a promise to make regular contributions to a named recipient.
The
benefit
of the Gift Aid scheme is that it is flexible because it can apply to regular donations or “one off” amounts.
Relief under Gift Aid is limited to the individual’s combined income tax and capital gains tax liability in the tax year of the donation
NS&I
Safe - UK Gov free from default risk
Premium bonds up to £50,000
Spousal Arrangements
https://www.theguardian.com/money/2017/jan/14/10-ways-cut-tax-bill-file-tax-return
Capital Gains
IHT Planning
Allowances