Tax-efficient planning is mostly a matter of using what is already available to you, in a sensible order, before considering anything more elaborate. Allowances reset each year, and the unused ones simply disappear.
Very little of this is complicated. It is just rarely done deliberately.
Personal allowance, the personal savings allowance, the dividend allowance, the capital gains exemption and the ISA subscription limit all come round annually. Coordinating them across a couple, and using both sets rather than one, changes the outcome more than most product decisions do.
An ISA shelters interest, dividends and gains from tax, with no further tax to pay on withdrawal. Cash ISAs suit money you may need soon. Stocks and shares ISAs suit money you can leave alone for years. Lifetime ISAs carry a government bonus for a first property or retirement, along with a withdrawal penalty in other circumstances.
Contributions attract relief at your marginal rate, which makes pensions the most tax-efficient saving available to most people, particularly higher-rate taxpayers. The trade-off is access, since the money is locked away until the minimum pension age.
Annual and lifetime limits apply, and contributions can be affected by high earnings. We will check where you stand before recommending anything.
There is usually a sensible sequence. Clear expensive short-term debt. Hold an accessible emergency fund. Take any employer pension match, which is the closest thing to free money in the system. Then use ISA and pension allowances according to when you will need the money.
Transfers between spouses and civil partners are generally free of tax, which allows income and gains to be spread across two sets of allowances. It is one of the simplest adjustments available and one of the most commonly missed.
We advise within the boundaries of our permissions, and we are clear about them. Detailed tax planning, trusts and estate structuring call for a solicitor or an accountant, and we will introduce you to one rather than improvise.
A first conversation is free and carries no obligation.
