Forward Thinking with your Tax Planning

Everyone knows that an IFA can sort out your mortgage or help you invest in a pension or an ISA, but I thought it would be good to share with you what a really good planner does and what an impact they could make.

A good planner knows and understands their clients and can use all relevant tax allowances and reliefs to make the very best of what a client is doing to meet their financial objectives. They work with your accountant and other advisers to let you concentrate on doing your day job- it’s what you do best.

I thought it would be good to share a current advice case with you so you can see the impact we can have on our clients lives:

I have two directors who started talking to me just before Christmas. The two directors are 40 and 60, and they run a successful company which has strong trading income and good levels of profit. They pay themselves a mixture of salary and dividends, nothing strange or unusual so far……. Until you delve a bit deeper, the salary and dividends takes one of them beyond £100,000 of earnings, which means that they now lose their personal allowance – this means that on the earnings between £100,000 and £121,200 there is an effective 63% tax charge, on that £21k income alone that is £13,300 of tax!!

By knowing these clients, how they structure their pay, and knowing their business, we can work to get back this personal allowance and save this director the £13,300…… sounds brilliant doesn’t it, and it works, but going one step further we can save the company a further £68,000 in tax, just by knowing our stuff, and applying the principles of financial planning to each client as needed.

This means these two gents have saved over £80,000 in tax!

Now planning like this doesn’t suit each client, obviously, and we need to look after each client and their objectives in isolation, but imagine if this was ‘just’ a one man Ltd co, the impact could be £47,000 of savings, or if it’s a three man company £117,000 or a four man company £153,000 – The impact of a planner in organizing your finances is huge.

However, tax planning needs to be made before the end of the tax year, so the time for action is now, and so content are we with this planning that we will donate some of our fees for this work between now and the tax year end to charity – for every £10,000 tax we save, we will donate £100 of our fee to Ellenor, in support of the fabulous work they do within the local community.

Nothing contentious, nothing out of the park, just good solid financial planning. And, by helping 30 or so similar people we could save in the region of £1m, and at the same time donate £10,000 to Ellenor – that’s got to be worthy of talking about, and thinking if you, or anyone you know, could benefit from a talk with not just any IFA, but a really good financial planner!!

*Each case will have it’s own specific details, and it’s own unique calculations. The above is a generic guideline and no advice should be construed from this article at all, or acted upon, without taking individual independent advice