End of year tax planning needs to get personal. Better still tax planning needs to be personal all the way through.

You don’t need all the income and you don’t need all the capital. Normally we find that clients want to enjoy the benefits of the capital and the benefits of the income, but money sitting in the bank is not always a source of that pleasure.

What do we mean?

For Arts Sake

If you have £400,000 sitting in your bank account you can look at the bank balance and that might give you pleasure.

If you sit in an apartment overlooking a Mediterranean sunset then you get a different type of pleasure from that £400,000 invested.

Jackson Pollock’s first painting sold for $306 in 1950, and may now be worth almost $20 million. Using your money to invest in art could give you a different type of pleasure from the cash sitting in the bank.

With a Pollock, the two ways to get such pleasure could be the capital gain or possibly appreciation looking at the art work.

With cash in the bank, you could draw the money down and pay for a funeral with the last £5000.

Investing the capital means you could  see the value grow and generate additional income to enjoy in your future.

Investing the capital could also mean that you can enjoy the asset without incurring the tax liability.

Income & Capital Taxed to Death

Individuals with large capital holdings in cash property, business, and investments, have a potential inheritance tax liability to their country of domicile.

Expats are domiciled to their home country for 15 to 20 years when living and working abroad, meaning UK expats have a potential 40% UK inheritance tax liability on the world wide assets on death.

If a family trust or family company owns those capital assets, then inheritance tax is avoided.

The family business can own the property investments, and other assets that can still be used by the family.

Your overseas property or business could be owned in a family trust, avoiding the cost and delay probate and 40% inheritance tax.

Yet you can still enjoy those assets or receive income from them.

Personal Shares

It can get more personal when looking at income specifically. If one family member owns all the assets, that means that personal allowances are not being used for maximum tax saving.

UK property rental income is taxed in the UK with a personal allowance of £12,570 a year. If this property rental income is shared between two or more people, then an additional tax saving of around £2400 a year can be achieved, this means that a couple could pay no income tax on UK property rental income up to £25,000.

The same is true with dividend allowances and capital gains allowances. Effective tax planning by expats, living and working abroad can reduce income capital gains and inheritance tax for the family.

ProACT Know How.

For more information and guidance, contact us.

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