Tax Planning
Whether
it's the money we earn or the money our savings earn for
us, the taxman takes as much as £4 in every £10. But while most of us
dislike paying tax, seven out of ten of us bury our heads in the sand
instead of doing anything to cut our rising personal tax bills. In fact
as a nation we waste a staggering £7.5 billion
each year by not taking
tax action.
A few easy tax-planning measures can really cut the tax you pay, giving a good boost to the returns you and your family get.
Each
year we waste an average £155 per taxpayer in unnecessary payments and
missed opportunities.
Life policy payouts
The payouts from most life insurance policies are free of personal tax. But that doesn't mean you can forget about the issue of tax altogether where your life cover is concerned.
When you die, the proceeds of your life insurance policy are paid to your beneficiaries, and may be subject to inheritance tax (IHT). This tax is charged at 40% on estates worth more than £600,000 (2007/2008) per couple or £300,000 per person who is not married – including the value of your home – and could land your heirs with a big bill. Every £600,000 of taxable assets you leave behind could create an IHT bill of £240,000 for your heirs to pay.
Transfers between spouses and civil partners are free of IHT, and so IHT will not be due if you leave your assets to your partner. Of course, this may merely postpone the problem until the last surviving partner dies, leaving behind a hefty IHT bill due on his or her estate for beneficiaries to pay.
Brian Vallely Kellands Independent Financial Services can help you minimise the amount of IHT your heirs will face. For exemple, you may be able to arrange your life insurance in a way that the proceeds remain outside your estate, and can be used to meet the IHT liability arising from other assets.
Tax advantages
Life insurance is not only a way of protecting your family, but can also be a tax-efficient way to save for the future.
Some life policies are structured as bonds, which allow you to fund the policy with a single lump-sum investment and if you want you can draw a regular income. Within certain limits this income is free of immediate tax and if you are a basic rate payer, may remain free of all tax.
Offshore life insurance bonds, based in tax havens like Jersey or the Isle of Man, can be used to defer UK residents' income tax until the investor falls to a lower tax bracket. Although not suitable for everyone, these products can be used by investors with £5,000 or more to invest.
Due to the additional complexities of offshore taxation,
should you decide to use offshore bonds, it is vital that you get all
the details of the arrangement right, so be sure to ask
Brian Vallely
Kellands Independent Financial Services to help you.
