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Tax and Estate Planning

Estate planning involves tax, but it encompasses much more. As with most tax planning, the key is to know what you want to achieve - who should benefit after your death and what they should receive - and also who you mightwant to make gifts to and in what form.

Inheritance tax is then likely to become the main issue, with a flat rate of 40% at death to the extent that an estate exceeds the nil rate band - currently at the relatively low level of £325,000.

You may also be entitled to a residence nil rate band which by 6th April 2020 will be worth £175,000. So married couples or people in a civil partnership may (and there are conditions) may be able to leave their beneficiaries on second death a tax free estate of up to £1m.

There are also a number of annual IHT exemptions. Perhaps the most interesting one is an exemption from tax on gifts out of surplus income. But you need to demonstrate that the income is surplus.

Nor can you afford to ignore the impact of other taxes such as capital gains tax, stamp duty and income tax in this context.
Most business assets escape the inheritance tax net under the current rules, but private homes, investment properties as well as stocks, shares and cash are generally taxable regardless of where they are situated. As your circumstances and the tax rules change, it is important to keep your estate planning under review. The earlier that you start planning, the easier it may be to achieve your objectives.


Not enough people think about protection and certainly not enough are protected. Far too many employees don't know what protection benefits their employer provides even though the amount of company- provided life cover has risen the usual 2/4 times basic salary to 10 times in some cases.

Nor do people realise that their chance of suffering from a critical illness can be 5 times more than of dying before the age of retirement. By and large companies do not provide critical illness cover.

Do you have any income protection or know what your company would provide if you had an accident and were unable to work?




Do you know how much risk you are prepared to tolerate when you invest? This is the question that lies at the heart of investment planning – and very often the discussions about risk take the longest. The basic investment choice is between the following asset classes:
•Cash deposits in banks and building societies.
•Fixed interest securities – effectively loans to the government or businesses.
•Property – commercial or residential (very different from each other).
•Equities – shares in companies listed on stock exchanges.
These are the building blocks of investment portfolios. Your risk profile – how much risk you can and should be prepared to take on – will help determine the appropriate mix of these basic components in your portfolio, usually called the asset allocation.
There are several other factors to consider such as how investments are taxed, and the choice of fund managers and institutions, which can make a substantial difference to your returns, but asset allocation is almost certainly the key decision.


Pensions and Retirement

The taxation of pensions drastically changed in April 2006, opening up both opportunities and potential pitfalls. At the time, HM Revenue and Customs described the process of change as ‘simplification’. While this description was correct initially, a steady flow of Budget revisions since – mainly aimed at increasing revenue for the Exchequer – have recreated a labyrinth of complexity.
Eight years on from the ‘simplification’ tax changes, in the 2014 Budget the Chancellor announced a new wave of pension tax reforms.

In April 2016, an equally seismic pension change happened, to state pensions. A single-tier state pension has replaced both the basic state pension and the second state pension, leaving a new structure better suited to integration with another pension reform now being phased in – the introduction of auto-enrolment.

The government has also introduced caps on the amount that can be invested in pension contributions in each tax year and penalties on large pension pots just over £1m.

The welter of past, present and future changes make now  a good moment to review your pension arrangements and possibly look at alternative methods of retirement.


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