Business AN ALTERNATIVE 2 of Christmas with Pearson Financial Adviser Richard Eastwood It’s the season of goodwill to all men and women, even fifinancial advisers and although a pension may not be top of your Christmas wish list here’s a tongue in cheek look at what your fifinancial adviser could be giving you this festive season: 1 1 12 D Days On the fifirst day of Christmas my adviser said to me – Set a Budget. Many of us overspend at this time of year and this leads to only one place – fifinancial hangover – and you really don’t want that after Christmas! So start creating a budget now. On the second day of Christmas, my adviser gave to me – a plan for all the family Maximising your allowances by holding assets in single names and utilising individual and independent taxation. On the third day of Christmas my adviser said to me – Set a Savings Goal. People with written goals tend to achieve them. Once you have decided what you would like to save – talk to your IFA about where and how to save it. On the fourth day of Christmas, my adviser gave to me – an ISA that’s as good as can be Given the new ISA limits and the ability to hold both cash and equity in the same place, tax leakage on any interest on funds held should be avoided, so make the rainy day fund tax-effificient too. On the fififth day of Christmas, my adviser gave to me – an allowance passed to spouses tax-free Ensure your ISA allowance is maximised each year as income and gains are tax free; the ‘transferable allowance on death’ means tax benefifits can be extended. On the sixth day of Christmas, my adviser gave to me – more interest-paying equity For non and basic rate tax payers, interest payments received inside an ISA are received gross and suffer no further tax, whereas dividend payments are received after a non-reclaimable tax credit (10%), so ensure assets are held effificiently. If holding both fifixed interest and equities, from a pure tax perspective utilise the ISA to hold the interest-paying investment fifirst. On the seventh day of Christmas, my adviser gave to me – gains with less anxiety For higher (40%) and additional (45%) rate taxpayers, dividends received inside an ISA suffer no further tax.This saving equates to 25% and 36.1% of the net dividend received respectively. On the eighth day of Christmas, my adviser gave to me – a saving on my CGT Utilise capital gains each year to maximise the annual exempt amount, meaning £1,980 is saved for non and basic rate taxpayers and £3,080 for higher and additional rate tax payers, as the personal allowance for income tax does not reduce capital gains tax liability. On the ninth day of Christmas, my adviser gave to me – high earners’ tax-effificiency For those individuals whose earnings will exceed £100,000, also consider pension contributions to bring income below this threshold and ensure their personal allowance is unaffected.This could provide an effective tax relief rate of 60% on part of the pension contribution. On the tenth day of Christmas, my adviser said to me – less to pay in IHT Save IHT by gifting money using tax effificient allowances (e.g. the annual £3,000 per year exempt amount) and maximise children’s and grandchildren’s JISA allowances. On the eleventh day of Christmas, my adviser said to me – know the risks Remember Mr Micawber’s famous, and oft-quoted, recipe for happiness: “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness.Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” On the twelfth day of Christmas adviser love said to me – keep it simple. In other words – understand what you own and why, so you can make informed decisions going forward. You would be amazed how many clients forget about company pension pots, it’s reported that up to £15 billion of unclaimed fifinancial assets in the UK lie in old bank accounts, pensions, life assurance and investments. A nice present to yourself in 2019. Merry Christmas and a Happy and Prosperous New Year! MERRY CHRISTMAS AND A HAPPY NEW YEAR TO ALL OUR CLIENTS T. 0161 785 3500 E. enquiries@pearsonlegal.co.uk pearsonlegal.co.uk 70 www.AroundSADDLEWORTH.co.uk