Ray Pettitt, director at Galleon Wealth Management, explains how to be financially secure
To many people, financial security means not only having the ability to afford to do the things they want, when they want, but also having peace of mind should the unexpected happen.
Most of us lead busy lives and tend to put off thinking about the future, often until it’s too late. However, forward planning now could prove invaluable later in life. For example, do you know what sort of pension you can expect to get when you retire? How much your family would get if you were seriously ill or were to die? Whether you can afford for your children to go on to further education? If you’re paying more tax than necessary? If your savings and investments are in the right place? Who will be the biggest inheritor of your estate?
Inheritance Tax (IHT) can appear to be someone else’s problem – an issue only for the very wealthy. However, while it may appear to be a rich person’s tax, once the value of someone’s house, investments, savings and articles of value such as jewellery or antiques is added up, the potential reach of IHT extends to many. Even the mere mention of tax makes most people shudder. That’s because giving our hard earned money to the taxman is something we all want to avoid, but often we either run out of time or don’t always know where to put our savings in order to keep them away from the clutches of the tax man.
Often described as a voluntary tax, around one in 10 estates are predicted to have an IHT liability by 2018/19 (Office for Budget Responsibility – economic and fiscal outlook March 2014), making this an increasingly important area that people need to address, and getting back to my earlier comment, it is often left until sometimes it is too late in the day. In short, inheritance tax planning has never been more relevant for so many people.
With a significant amount of people’s wealth in the UK tied up in their home, the recent changes to the inheritance tax rules are clearly a positive step. But it will be of limited value for those people who find the residential nil rate band still too low, or those who have estates worth more than £2 million. Therefore it is likely that individuals will have just as much inheritance tax planning to do over the next few years as they do today. As such, we believe investments that qualify for business property relief from inheritance tax will remain attractive to investors.
The scope of business property relief has expanded since its introduction in 1976, making qualifying investments attractive to those looking to plan for potential inheritance tax liabilities. Shares in a company that qualifies for business property relief have to be held for at least two years, and still held at the time of death for the investment to become fully exempt from inheritance tax. The speed at which business property relief qualifying investments become exempt from inheritance tax can be very attractive and differs from other inheritance tax planning solutions.
Assets settled into discretionary trusts or gifted during someone’s lifetime typically remain within the settlor’s estate for seven years. Settlements and gifts also require control of – and access to – your money to be given up for good. For those who can’t afford to wait until 2020 for the main residence allowance to reach the £1 million mark, or those with estates in excess of £2 million, you may well be among those who appreciate inheritance tax planning solutions capable of offering a more time-sensitive and flexible investment alternative.
As independent financial advisers we can help you plan ahead. And because we are not tied to any single product provider, unlike most banks you’ll find on the high street, we can search the whole market to find the best financial products to suit your individual circumstances. We will explain everything in a simple, no-nonsense way so you know what we are recommending and why, and with over 30 years experience in dealing with people’s financial affairs, wellbeing and ensuring that their tax burden is minimised we can help ensure that your hard earned monies are directed to your chosen beneficiaries and that HMRC are not your biggest beneficiary.
To take advantage of a free initial consultation, please call us on 01473 636688 or visit our website at www.galleonwealth.co.uk There’s no obligation and with nothing to lose and probably a lot to gain why not give us a try?