Making additional pension contributions could mean lowering your effective tax rate
For many earners in England, Wales or Northern Ireland, the highest Income Tax rate is 45%. However, while 45% is the highest ‘official’ rate, some individuals effectively pay a tax rate of 60% on part of their income. This phenomenon, commonly called the ‘60% tax trap,’ affects those earning over £100,000 and applies to their income between £100,000 and £125,140.
Reinvesting dividends can significantly boost your investment returns over the long haul
When most people think of dividends, they associate them with generating regular income. However, dividends offer much more than that – they can be a valuable ally in growing your wealth over time. The strategy of reinvesting dividends, where you use the cash payout to buy additional shares rather than taking it as income, can significantly boost your investment returns over the long haul.
Estate planning is often misunderstood as a concern only for the affluent. However, the reality is that managing your assets and final wishes is something everyone should contemplate, irrespective of their financial situation. A robust estate plan acts as a financial safeguard, ensuring your family’s wellbeing after your passing while also facilitating the smooth handling of your affairs.
Taking the first proactive step towards protecting what matters most
Estate planning is an essential process that enables you to maintain control of your assets, express your wishes clearly and alleviate the burden on your loved ones during challenging times. It equips you with the means to protect your financial and personal legacy, ensuring your family is well taken care of and your wishes are honoured.
Estate planning is never straightforward. It involves many considerations, and adopting a one-size-fits-all approach is rarely effective. Every individual’s estate plan should be uniquely crafted to reflect their personal goals and circumstances.
Avoiding unnecessary complications for your loved ones
One of the initial steps in estate planning is to evaluate your financial liabilities. It is crucial to recognise that debts do not vanish upon death; they must be settled from your estate. Maintaining a thorough and accurate record of your outstanding obligations enables the executor of your Last Will to manage your estate efficiently, thereby avoiding unnecessary complications for your loved ones.
Legally reduce the portion of your assets lost to taxation
Organising your affairs for when the inevitable occurs can provide significant peace of mind as you age. A proactive approach to managing family wealth, particularly in minimising exposure to Inheritance Tax, is essential for safeguarding your legacy. Without adequate planning, families may encounter substantial financial burdens, but various strategies exist to legally reduce or even eliminate this tax.
Preserving a family’s legacy, values and lessons learned over a lifetime
Passing on wealth to the next generation is about more than money. It’s an opportunity to preserve a family’s legacy, values and lessons learned over a lifetime. By engaging in strategic planning, you can reduce the burden of taxes while ensuring your heirs are well-prepared to step into their roles as custodians of your legacy.
Extra tax-free allowance introduced on 6 April 2017
The Residence Nil Rate Band (RNRB) is an extra tax-free allowance introduced on 6 April 2017. It is applicable to estates where a residence or its value is inherited by the deceased’s direct descendants, including children or grandchildren. For the 2024/25 tax year, the maximum RNRB is £175,000, which offers relief to those whose estates surpass the £325,000 Nil Rate Band (NRB) threshold for Inheritance Tax.
Valuable opportunities to strategically reduce your estate’s tax liability
Potentially Exempt Transfers (PETs) and Chargeable Lifetime Transfers (CLTs) broadly define gifts made during an individual’s lifetime. Their classification depends on the nature of the gift and the recipient. It is equally important to note that some lifetime transfers are exempt, meaning they are not subject to tax.
