5 top tips that should be built into the planning for those families wanting to save tax!

If like me, you find that you get to the end of your week almost on auto pilot, just navigating through the wades of washing, school homework, meal prep and various other household jobs that seem to never end (and I haven’t even mentioned client work and running a business)! It’s quite possible that sitting down and thinking about your overall tax efficiency and financial planning as a family doesn’t ever quite make it to the top of your ‘to do’ list!

In my experience, as busy people we tend to run four lists in our minds:

1)    Important and urgent tasks

2)    Important, but not urgent tasks

3)    Urgent, but unimportant task

4)    Neither Urgent, nor important tasks (so clearly these things are filtered out without even actually making the list in the first place – so technically there are only 3 lists!)

And in reality, tasks on list No1 and No3 are generally what gets most of our time and attention. This is mainly due to the urgency of the task required. So for example, making sure the children’s games kits are washed this evening and dry again ready for tomorrow, for me, would fall under the third list of urgent (it has to be done), but not majorly important in the grand scheme of life! Making sure my car is MOT’d on time, would fall under the first list, as it has to be done urgently if the MOT is due to expire and its fairly important due to the illegality of having no MOT and therefore no valid car insurance!

So, what do we do about the tasks that end up on list No2?! These are generally made up of important jobs, that can often have significant impacts on our lives, but due to the lack of urgency they can easily be forgotten. It is up to us to really see and understand the value in them and create our own urgency. This is very much a skill I have learnt to apply through running and growing a business that I’m always wanting to push on to the next level. Moving anything on to the next level, whether it be a business, your career or your home, requires some time to be set aside for careful thought and planning.

Unfortunately, I think for many people, getting their financial house in order and allocating time in their week/month for financial and tax planning falls into list No2! The most obvious reason for this will be lack of time to allocate to everything that needs to be done, other more urgent tasks as we’ve alluded to above and perhaps not understanding the real impact and importance that a good financial plan can have on ours and our family’s future. I would also say, a feeling of ‘where do I start?’, overwhelm and lack of understanding may contribute to this being downgraded to the No2 list!

So, with a view to giving some simple and straightforward soundbites that you can quickly scan over and maybe pick just a few that you could look into, ask more questions about and maybe even apply to your own situation, could have a beneficial impact on your financial future and therefore your overall security, wealth and health.

Our 5 Top Tips:

1)    Make pension contributions – we have been talking about this a bit over the past few weeks on our Facebook and LinkedIn pages – THIS IS ONE OF THE ONLY WAYS THE GOVERNMENT WILL GIVE YOU BACK TAX!! – contributions can be made either personally or via your company if you’re a business owner – this can lead to savings of Income Tax, Corporation Tax, Dividend Tax and the potential reinstatement of other tax allowances that you may have lost due to your earnings.

2)    Make use of your annual Individual Savings Account (ISA) allowance – ANY INTEREST, GROWTH OR INOCME IS FREE FROM TAX!! - we have a whole ￡20,000 per annum (each for couples) that we can house our savings or investments in. If we are fully maximising these allowances, it would mean that the majority of us would hold all our money within these tax efficient environments.

3)    Make sure you have a Will – an up to date, tax efficient Will, one that makes use of all your allowances when you die is crucial to ensure you reduce/remove any Inheritance Tax that could be due on your estate (charged at 40%)

4)    If you have an Inheritance Tax liability it is important that you’re making use of your annual gifting allowances and other gifting/trust planning to reduce your overall taxable estate value.

5)    Make sure that if you hold shares, investments or property portfolios that you are making the most of your annual Dividend allowance and also Capital Gains Tax allowance and not letting any gains roll up that you then have trouble to alleviate later down the road.

Other key tax planning tips:

-       Claim tax free childcare

-       Make use of the transferable married couples allowance

-       Maximise your personal savings allowance tax band

-       Consider your company car scheme and having a car with lower CO2 emissions

-       Run allowable self-employed car costs through your business

-       Make transfers of assets between spouses to ensure the most tax efficient distribution of assets applies

-       If possible, try to reduce your taxable income below ￡100,000 by using some of the above methods

I appreciate that tax planning is probably one of the most boring things ever to consider, but I cannot stress enough the difference a good plan can make to your overall situation if put in place early on. The biggest savings here will be made in the inheritance tax space for those who’ve already retired, but for our younger clients, still in their working lives, the impact of making personal and/or company pension contributions is astounding. If we were to look back over a 30 year period for someone who has been making regular personal pension contributions of ￡400 net per month, the tax saving/rebate alone would be ￡36,000, never mind the compounding growth achieved on these contributions!

I’d love to hear your thoughts on where financial/tax planning sits for you on the urgent/Important sliding scale and whether there’s anything we could do to help you with this.

With love, Stefanie x