Maxed out ISA? Pension Full? What next?

Jan has a 40 year career in financial services with experience manning operations, compliance, marketing, and distribution in both distributor and provider organisations. For the last 20 years a part of Jan’s role has been sharing knowledge with financial intermediators to help them deliver good client outcome.

To link in to our last meeting regarding advising vulnerable clients, Jan opened her seminar by discussing her involvement with Alzheimer’s UK as a dementia champion. She is involved in providing awareness seminars in respect of vulnerable clients to the financial sector.

Jan provided an overview of some basic tax planning reminders such as:
• Gifting income.
• Gifting assets to lower tax paying spouse.
• Capital Gains Tax in annual exemption of £12,000 for the year 19/20.
• Equalising assets between spouses before disposal. This will double their allowance to £24,000 for Capital Gains Tax purposes and could potentially save on Inheritance Tax.
• Capital losses in previous tax years can be used to off-set Capital Gains in the current tax year. Jan specifically noted that losses needed to be registered with HMRC to offset against future gains. This needs to be done four years from the tax years the loss is made.
• Instruct investment managers to most effectively utilise Capital Gains Tax and annual ISA allowances efficiently.
• Annual exemption of £3,000 per annum for Inheritance Tax purposes.
• Gifts from normal expenditure, to help reduce a potential Inheritance Tax bill by making regular gifts from surplus income.
• Residence Nil Rate Band – The rules need to be reviewed carefully in order to benefit fully from this allowance especially for clients with estates in excess of £2 million.
• Outright gifts or gifts into trust- Gifting could reduce the overall Inheritance Tax liability if the Donor survives seven years. Gifts to Discretionary Trusts should be within the client’s available Nil Rate Band to avoid any lifetime charges.

Jan then detailed the characteristics of investment bonds and some of the benefits of holding an investment bond. This included the Income Tax benefits in that it is only paid if:

• A chargeable event occurs and this results in a chargeable gain and the chargeable gain when added to the other taxable income falls into the individuals higher or additional rate tax payers.
• Chargeable events include death of the relevant life insured.
• Assignment of money and monies worth; adding or removing a life assured maturity withdrawals in excess of 5% or full surrender of the investment bond.

Collectives generally use dividends allowance, Capital Gains Tax allowance and rebate the cost of capital gains purposes whereas investment bonds are suitable for higher additional rate tax payers, Trustees taxed at deferred withdrawals and assignments.

Jan finalised by reminding us that onshore bonds are suitable where the individual wishes to invest in the UK and be subject to UK regulation and are not planning to live or retire abroad during the policy term whereas offshore bonds are suitable where the individual wishes to hold the investment for a long term in order to benefit from a gross roll up of funds and they intend to move abroad to a lower tax jurisdiction before the surrender.