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Money matters – so make the most of yours

How can you reduce your tax bill? With the tax year end approaching, now is the time to start thinking about how to reduce your tax bill. Of course, this matters all year round, but as the deadline looms, it is particularly important, certified financial planner Robert McDonald looks at the issue.

Recently, data was published that revealed that of the 14 million investors in the UK, only 20 per cent invested in a stocks and shares ISA (Individual Savings Accounts) last year, a statistic that is quite astonishing. Most people know about ISAs and the fact that they offer tax-free returns, however, they may not know that there are lots of other ways to invest that not only offer the prospect of growth but also some fantastic tax benefits. ISAs are the arrangements that most people are aware of and, in simple terms, they allow you to invest up to £11,520 in a tax advantaged environment, and can be either in a stocks and shares vehicle, cash, or a mix of both. If cash is used, the maximum for the 2013/14 fiscal year is £5,760. Any interest and/or growth within the plan suffers no income tax or capital gains tax although in the stocks and shares vehicle any tax paid on the underlying funds cannot be recovered. For those savers who have no access to an occupational pension, utilising the personal pension vehicle is a very tax-efficient mechanism. Depending on your tax band you could be receiving tax relief of 20 per cent, 40 per cent and at its highest level 45 per cent of relief from the Revenue. It is often said that pensions are the primary mechanism in which “real working people” can maximise long-term tax-efficient saving arrangements for their retirement. For higher earning individuals

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there are many other tax efficient arrangements that include Venture Capital Trusts (VCT), Enterprise Investment Schemes (EIS) and investing in Alternative Investment Markets (AIM) although these arrangements can be complicated and it is imperative that appropriate advice is sought. It’s not only adults who can enjoy tax-efficient savings and investments; children are eligible for a Junior ISA from birth. Funding can come from parents, grandparents, aunts, uncles, relatives or friends and the savings are locked away until the child is 18 whereupon the money becomes theirs absolutely. It is important that you to ensure that all tax advantaged arrangements available to you are explored. As always, at this time of year rumours abound in relation to tax-relieved savings and investments that could be a target for the Chancellor’s axe. The suite of tax-efficient savings and investments available should therefore be considered as it could be a “use it or lose it opportunity”. @clydelifemag

Clyde Life March 2014 Issue 17  
Clyde Life March 2014 Issue 17  

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