At this time of year, it pays to think about broader tax scenarios, and this is where advisers can really add value by providing additional advice to suitable clients. I’m sharing three of my planning tips as we approach tax year end, or rather three of the questions I think advisers should be contemplating.
Has your client received a bonus?
If the answer’s ‘yes’, income tax will likely be due, so it’s time to ask if they wish to use some or all their bonus to invest for their future tax efficiently. There are several ways they can invest their bonus. This includes contributing to their pension.
But has your client maxed out their pension this year?
Though the annual pension allowance is £60,000, this is tapered for high earners. It could, in fact, be as little as £10,000. So, if your client is suitable, why not explore additional options that can help your client invest tax-efficiently for retirement? This might include Venture Capital Trusts (VCTs) which offer a way to invest for the future tax efficiently.
Is your client trying to take money out of their business tax efficiently?
The tax treatment of dividends has become tougher. The dividend allowance is small at £500 and the highest dividend tax rate is 39.35% for amounts over this.
If you have clients who own a business and want to take a dividend, there might be an opportunity to make an investment and offset the tax due. For example, with a VCT, 30% upfront income tax relief can be claimed against dividends.
