Britons Set To Waste

about the fact their children will have automatic control over this asset at age 18, parents can look to other means such as ISAs, unit trusts/Oeics or offshore bond”.

Capital Gains Tax – Danny Cox, Hargreaves Lansdown

“Capital gains tax is currently charged at a flat rate of 18% on the profits or gains made when you sell (or transfer) assets, the most common being shares, unit trusts and investment property.  If the profit is less than the annual capital gains tax allowance of £10,100 there is no tax to pay.   Saving capital gains tax is simple – spread taking your profits over more than one tax year to use more than one capital gains tax allowance.  Finally don’t forget your spouse’s allowances.  If you hold a joint asset you can use both of your capital gains tax allowances, meaning that profits of up to £20,200 can be realised without creating a capital gains tax bill.

Charities and gifts – Jason Butler, Bloomsbury Financial Planning

“Making charitable donations through the gift aid system is very tax efficient for both the charity and individuals who are higher rate tax payers. The charity can gross up the net gift by 28% and the individual obtains the difference between basic rate and higher rate tax via their tax return. Such gifts also fall out of one’s estate for inheritance tax (IHT) purposes. In addition, gift aid contributions can be used to reduce ‘relevant income’ below £130,000 in the tax year of gift and as such might enable an individual to avoid the anti-forestalling rules, which otherwise restrict higher rate tax relief on pension contributions to £20-30,000 in 2009/10 and 20010/11. The Charities Aid Foundation offers a CAF Account to receive gift aid donations, and any decisions on which charities to help can be deferred to a later date.”

Inheritance – Gordon Bowden, Quainton Hills Financial Planning Ltd

“The wealthy with surplus income and assets should decide how to leave a legacy to the next generation and plan for tax efficiency accordingly. Investing in ‘tax efficient’ vehicles such as ISAs and National Savings will not be efficient if 40% of the capital is lost in Inheritance Tax on death. If surplus income is simply accumulated the cumulative tax rate could be 70% on death – up to 50% income tax followed by 40% Inheritance Tax. Individuals with a desire to leave a legacy must consider this and use Inheritance Tax strategies including the normal expenditure out of income exemption.”

Gilts – Stuart Fowler, No Monkey Business Limited

“Index Linked Gilts are a more tax-efficient way to be compensated for inflation than nominal interest contracts. Most of any nominal yield, whether deposit interest or coupon payments on a bond, is accounted for by the market’s required compensation for expected inflation. It is taxed as income. If you were constrained to spend only the real interest rate you would add the rest back to the capital but only after HMRC had taken a bite. For ILGs most of the inflation compensation is added to capital and charged neither to income nor capital gains tax.”

Check out how much you could be saving by being more tax efficient with Unbiased.co.uk’s tax waste calculator.

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