In all areas of financial planning, tax has to be considered, whether in its effect on a transaction or in terms of mitigation. Investment vehicles have different tax treatment and your adviser will always take these into account when discussing suitable investments with you.
Income Tax can be avoided through the use of Individual Savings Accounts (ISAs) and can be deferred through the use of offshore bonds. Pension contributions qualify for tax relief as do the underlying investments in them and there are other savings vehicles such as Enterprise Investment Schemes and Venture Capital Trusts that qualify for tax reliefs. The top rate of income tax at present is 45% for those with total income in excess of £150,000 per annum.
All individuals and trusts have a Capital Gains Tax allowance available each year. For an individual this is £11,000 at present and the rate of Capital Gains Tax is set at 18% where total taxable income and gains are under £34,370, and 28% for any in excess.This cannot be carried forward if not used - your adviser will discuss ways of using this valuable allowance.
Inheritance Tax at 40% can make a large dent in your legacies. You have an exempt amount of £325,000 before this tax is charged and there are ways of organising your assets in order to help mitigate this liability. Your adviser can discuss the use of various schemes which may reduce or mitigate your liability to Inheritance tax.
Trusts are useful vehicles that are ideal for protecting assets and allowing you to retain control. However, they can be taxed at the very penal rate of 50% so it is vital that the underlying investments are structured correctly to avoid this charge.
The Financial Conduct Authority does not regulate trusts and taxation advice.