Investment Advice and Tax Planning

Question 1

Inheritance Tax Planning

Answer 1

Most IHT tax planning focuses on reducing value of estate through lifetime gifts:

• giving away assets 7 years prior to death
• transferring gifts into trust 7 years prior to death
• estates transferred to spouse / civil partner (exempt)
• gifts to charity are exempt (or 10% of estate limits IHT to 36%)
• small gifts are allowed up to £3,000 per tax year
• wedding gift of £5,000

Question 2

Income Tax Planning: Making use of Income Tax Personal Allowance

Answer 2

• transferring ownership of investment capital from higher rate to spouse who is not working / having career break
• maximising income and dividend allowances of both spouses
• A person earning between £100,000-123,700 experience a 60% band (40%+20% loss of personal allowance), therefore use employer benefits etc

Question 3

Income Tax Planning: Other schemes

Answer 3

Pension Contributions

Investments in VCT, EIS and SEIS inlcude 30-50% income tax relief on investment

Make use of £20,000 ISA allowance

Question 4

Capital Gains Tax Planning

Answer 4

Spreading ownership of assets between family members to use up annual exempt amounts

Phasing encashments over several tax years to use up multiple exempt amounts

Deliberately realising paper losses to reduce gains that would exceed exempt amount
(bed and breakfasting has been removed by the 30 day rule, however an investor selling and spouse immediately repurchasing and transferring the shares

Using ISAs to shield against CGT

Question 5

Non-taxable income

Answer 5

• ISAs
• NSandI
• Single premium life assurance bonds (5% allowance on initial investment)