How tax planning can pay for itself

7 March 2023

4 minutes

At a glance

• Taking advice can save you money and improve your financial wellbeing.
• Getting professional tax advice helps you make sense of the UK’s complicated tax rules and regulations.
• Having regular reviews with your financial adviser means you can stay tax-smart helping you to save money each year at tax-year end.

It’s not often you’ll find ‘talk to my financial adviser about tax’ at the top of someone’s to-do list. If it’s there at all, it’s usually just below ‘clearing out the shed.’

Tax planning sounds hard work (like the shed), but building it into your lifelong financial planning pays off well in to the future. This article will show you how it can help make you better off in the short- and long-term and improve your financial wellbeing.

Planning your tax efficiently is one job where it pays to get the experts in. Our UK tax system is complicated –there are more than 1,000 different rules and regulations. Knowing which ones apply to your situation is something that a financial adviser can spot, and then help you plan efficiently to reduce your tax bill.

You might easily pay too much tax if you don’t know all the allowances and reliefs that you can take advantage of.

The good news is that tax advice should quickly pay for itself.

Making the most of tax allowances

Tax allowances aren’t the same as tax loopholes. They’re there to help people save and plan for their futures, so they are designed to help with your long-term financial planning. Efficient tax planning has a positive impact on your financial prospects, whether you’re looking at short- and medium-term savings plans; retirement saving with pensions; or planning to pass money on to your loved ones.

You’re probably aware that putting your money into a Cash or Stocks and Shares ISA will mean you don’t pay capital gains tax or income tax when you take it out at the other end. However, you may not be quite so aware of the tax rules around pension saving. Not only do eligible pension contributions get a substantial boost from tax relief, your pension money remains sheltered from tax as your pot increases.

Tax-efficient pension planning

When you take money out of your pension, things become a bit more complicated tax-wise. You could get caught out by Emergency Tax or trigger the money-purchase annual allowance which reduces the amount you can pay into your pension if you make a withdrawal.

If you’re getting close to retiring, tax planning advice will help you manage the amount of tax you pay. Your St. James's Place Partner can help you structure your retirement income tax-efficiently, so you can feel confident you’re only paying what you owe, and no more.

Working out the best way to pass money on to your loved ones without paying a substantial amount of Inheritance Tax, or IHT, is another minefield. Inheritance Tax rules are complex, and an adviser can explain how you make gifts or open certain trusts in order to reduce the amount of IHT your family will have to pay.

Is it worth paying for planning advice?

It’s always worth paying for tax planning advice, whatever life stage you’re at. When you’re building your professional career, you’ll hopefully see your salary and your bonuses, or share options increase too. It would be a shame to see some of that hard-earned cash disappear in tax bills, so getting tax advice as you climb the career ladder really pays off. It’s the same if you own a small business. You might want to know the best way to extract value from your company. Or how can you pay yourself in the most tax-effective way.

Many more of us are self-employed or sole traders since the pandemic. This often means that your income is uneven, and you have ‘feast or famine’ months. In the good months, you might be able to take advantage of the three year ‘carry-forward’ pension allowance, which will really give your pension a boost.

Keep talking about tax planning

Many life stages or life events make us more likely to ask for some help planning our taxes. But to get the most out of tax planning, it’s better to make it an ongoing conversation, rather than a one-off discussion. Your life changes over time, and tax rules also change from year to year, so once you’ve started planning properly you want to keep on doing everything you possibly can to manage your money tax-efficiently.

Tax advice is even more valuable if you have a more complicated financial set up or personal situation.

Tax planning is all about paying the right amount of tax and not a penny more. By taking expert advice rather than going it alone, you can feel confident you’re paying the right tax at the right time, and staying in full control of your finances.

You’ll definitely sleep sounder on April 6th knowing that all your tax has been done as it should. Nobody likes a nasty surprise from HMRC.

If you’d like some help planning your taxes more efficiently, just get in touch with us.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation can change at any time and are generally dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

Cash ISAs are not available through St. James's Place.

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