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• Avoiding costly mistakes
Pensions: Pensions are a key vehicle in wealth accumulation, in large part due to the tax relief on contributions. The amount saved will vary depending on your income tax rate but starts at 20% and rises to 40% or even 45% for higher earners. The tax saving, if the pension is correctly arranged, provides a guaranteed saving of income tax, therefore locking in a 20%, 40% or even 45% return on the initial investment through correct use of allowances. In each tax year, employees can fund their pension with the lower of their own income or £40,000. However, in many cases people will have previous years’ allowances available which can facilitate additional funding of pensions once the current tax year allowance – typically £40,000 – has been utilised. This is an exceptionally efficient way of utilising resources like cash savings, which are otherwise earning low rates of Businessreturn.owners employed by their own limited company can fund their pensions directly from their company, and because the pension contributions do not incur corporation tax, this is one of the most tax efficient methods of extracting profits from the Moneybusiness.heldin pensions also grows without income tax or capital gains tax reducing the gains, so you can keep more of your earnings and investment growth.
• Making the best use of your assets and resources
While we will explore some scenarios and examples, the objectives of a holistic financial plan can be summarised as:
• Keeping more of your own money across all of your assets
ISAs: ISAs, and in particular the Stocks and Shares ISA , are another valuable tool often used in holistic financial planning.
The ISA allowance for those aged 18 or above is currently £20,000, regardless of income. A principal benefit of the Stocks and Shares ISA in the wealth accumulation stage is that the investment held within the ISA grows without income or capital gains tax reducing the growth and returns, so like pensions they can help you retain more of your Capitalwealth.gains tax amounts to 10% or 20% when applied, depending on several factors such as earned income and gains on other assets – again these will be considered in a holistic financial plan, so that you are utilising your allowances across all your owned assets.
An ISA’s value is also evident when you are reducing or stopping your working commitments and therefore your earned income reduces or ceases, as all withdrawals from an ISA are also tax free. For example, as many now gradually phase into retirement, reducing from a 5 to a 4- or 3-day working week for several years, ISA’s can offer a tax-free income to supplement earnings, ensuring that the individual or household income and spending can remain the same as when working full time.
In our last article, we looked at how a financial plan is constructed, and the various elements involved. In this, our second article on planning, we will look at how you can benefit from a holistic financial plan. At its heart, a holistic plan can be divided into two distinct chapters – wealth accumulation, when the focus is on growing your assets, and then the decumulation phase where the primary focus is on spending it and distributing it to those most important to you.
HOW DOES A HOLISTIC FINANCIAL PLAN BENEFIT ME?
• Paying less tax, both in the short term and over the long term
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Inheritance Tax considerations
01608www.wise@wiseinvestment.co.ukwiseinvestment.co.uk695100
Protecting the value of your pension is important as money held in a pension is held outside of your estate for inheritance tax. For money held outside of a pension exceeding the available allowances, this tax is charged at 40% in most cases. Property, investments held outside pension, cash, and assets held in ISA are all included in your estate when calculating inheritance tax. So, careful thought should be given to the order in which you access those assets, because doing so in the wrong order could result in a larger estate liable to inheritance tax, which let’s not forget is a 40% tax charge for estates exceeding the available allowances. A holistic financial plan will help guide you towards the best outcomes for you over the long term, taking into consideration those assets which are most liable to inheritance tax first, and providing the best value from the assets and resources that you hold. It is important to remember that, whilst homeowners receive an additional inheritance tax allowance for their own home, no such allowance applies for rented property. Therefore, owners of rented or holiday let property could significantly benefit from tax planning to understand so that the beneficiaries of their estate are not left with a large inheritance tax bill. Studies show that inheritance tax is the most “hated” tax in the UK, however there are a vast range of potential solutions to reduce this and not all require you to give up access to or control of the assets.
Protection, Trusts, and AIM Other tools can also be used in holistic planning to reduce inheritance tax. These include Protection policies written to cover the expected tax liabilities. Crucially these can cover an expected inheritance tax liability while also removing any need to transfer ownership of assets. Trusts are another effective tool. The assets Control of the asset can therefore be retained by the previous owner while also reducing their inheritance tax liability. A wide range of assets can be held in trustcommonly trusts will hold funds and shares for growth or income depending on the needs of the beneficiaries for example. Some smaller companies (those listed on the Alternative Investment Market, ‘AIM’) benefit from a special relief which removes the value from the individual’s estate after only 2 years of ownership. These companies therefore offer a faster way of dealing with an inheritance tax issue than any other option but can have their own risks and should only be set up with advice and usually as part of a holistic financial plan which has considered all your arrangements and long-term plans. So to summarise, using the right combination of instruments and assets across a holistic financial plan can allow you the flexibility to accumulate wealth and then make withdrawals to meet your needs and support loved ones by sharing it in later life. Holistic financial planning will consider all the assets you hold, whether funds and shares, property, and cash, and will determine the most appropriate and tax efficient strategies for providing the level of income both desired and required while managing and reducing inheritance tax.
Registered Office: The Great Barn, Chalford Park Barns, Oxford Road, Chipping Norton, Oxfordshire, OX7 5QR. Registered in England 4970458.
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Example of ISA use in retirement: A 68-year-old retired basic rate taxpayer drawing £1,500 income from their pension might receive £1,200 per month after 20% income tax has been applied. Effective use of an ISA in this instance will allow a variety of options. The retiree could withdraw £300 per month from the ISA, tax free, so that they still have £1,500 to spend, or alternatively they may choose to reduce the amount withdrawn from your pension, supplementing income with drawings from a tax-free ISA. In this instance, drawing a smaller sum from the pension, perhaps £1,000 per month before income tax is applied, and topping up the difference with tax free money from the ISA, would give the same overall amount to spend, but less income tax would be paid as a Inresult.addition to reduced income tax, the pension has a lower withdrawal amount, so the benefit is twofold – reduced income tax and protecting the value of the pension.
Important Information The information contained in this article is not a personal recommendation and should not be construed as investment advice. If you are unsure about the suitability of a particular investment you should speak to an authorised financial adviser. Every effort is taken to ensure the accuracy of the information provided but no warranties or given. HMRC tax rates and allowances are subject to change and tax treatment may depend on individual circumstances. Wise Investments Limited is authorised and regulated by the Financial Conduct Authority, reference number 230553.
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Bum B le & Fawn We are a Local Family run Houseplant shop; we specialise in helping you create a greener home and love to promote healthy living by introducing beautiful Houseplants to your home. With the air around us getting more and more polluted, now is the perfect time to let the plants in to clean your air and look beautiful while they’re at it! Not only do plants help us with the air we breathe, they also help our mental health. Taking a small amount of time a week to clean, feed and care for plants can be enormously rewarding and can help you on the bluest of Wedays.opened our shop so we could share our passion with you. We strive to provide only the best, healthiest plants and accessories and as much variation and colour as possible. We have spent a long time building relationships with our suppliers so that we can offer a much more extensive selection of items than our shop’s size should be able to provide! We stock a fantastic variety of outdoor items, including outdoor furniture and fire bowls, all of which can be delivered to your door! Pop in and see us in-store next time you’re in Chipping Norton. We are always available to advise on plant care or any product we Oursell.
FireGiftsSmartPotsPlantCactiExoticCollections:Houseplants&SucculentsCareandAccessoriesGardensandTerrariumsandHomewarebowlsandOutdoorfurniture
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Nutrition Having a well-balanced diet leads to long term health benefits reducing the risk of heart disease, cancer and diabetes. When properly adhered to a balanced diet will also bolster your immunity to diseases, but just eating healthy at home is not always enough, you still need an active lifestyle to stimulate the mind to its optimum level.
• Capacity for learning • Energy levels
Johnsport-oxfordshirewww.activeoxfordshire.org/access-www.glosoracle.cominclude:Harris
• Ability to manage anxiety and •stressSocial skills
All our local schools have time tabled sports and activities, some of them out of normal school hours. There are numerous sports clubs of one kind or another within the area that encourage young children to participate. Remember you do not have to be an outstanding athlete to take part. Just enjoy the participa tion and the making of new friends. Useful sites for finding an activity in your area
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Games
Now that the Ladies European Cup triumph and the Commonwealth are over, I hope that many of our youngsters have been encouraged to participate in one or more of the sports that they have watched during their break from school. Education is more than sitting at a desk with one’s head in a book. A healthy body and an active mind go together hand in hand, if you feel good physically then the chances are that you will feel good mentally and this plays a huge role in dealing with Therestress. is no doubt that if you continuously study without an active break there is a danger that the mind will stagnate. Exercise will
Regular
Standards You do not have to be of international, county, district or even school standard to be an athlete. The most important criteria is to enjoy the sport or activity in which you participate. Unfortunately some coaches (and parents) have been known to overstep the mark and push youngsters past the point where the enjoyment factor drops off the scale.
enhance:• Quality of life • Emotional wellbeing • Health • Concentration • Self-discipline • Self-confidence
Where to find Sports Clubs and Activities Organisations
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There are two main pruning seasons: autumn and spring. Shrubs that flower in the winter, spring and early summer generally produce their flowers on old wood, which is any stem that grew the previous year. These shrubs need to be pruned in the autumn. Shrubs that flower in mid-summer or autumn tend to produce their flowers on this season’s growth, which means on stems that were produced this year. These shrubs should be left until spring before pruning. If the foliage and flowers are produced on new wood, then it makes sense to encour age the plant to produce as much of this as possible. It also makes sense to prune in the spring because any new growth in the autumn would be vulnerable to frost. Many autumn-pruned plants benefit from ‘the rule of three.’ My grandfa ther taught me this and it and means that each year, in the autumn, after the shrub has flowered, you prune out one third of the oldest shoots. This encourages new growth the following spring while still allowing the shrub to flower on the old wood. Treated this way, the shrub will be completely rejuvenated every three years but will flower every year. Pruning is best approached with a clear purpose. What is your aim? If a reshape is in order and you’re only partially shortening a stem, always prune to an outward facing bud which encourages a nice, open shape. As I’ve already mentioned, pruned plants will do a lot of growing, which means they’ll expend a lot of energy, hence all pruned plants need a good feed in the spring, before the growing season gets Generally,underway.the worst that happens if you get it wrong is that the plant looks a bit naff for one season then bounces back the following year.
Pruning is a word which can in stil fear into the heart of a novice gardener. Rarely do I get asked WHY do we do it? While a shrub won’t die if it isn’t pruned, it might grow too large for the space, or become straggly, or produce poor quality flowers. So, gardeners prune in order to enhance a plant’s performance; to encourage it to produce better foliage, flowers, or fruit. Pruning forces a plant into ‘growth mode’ as it tries to replace what it has lost. When should we prune?
Perfect Pruning!
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