7th December 2017

Prudential: Planning for £50,000+ tax-free annually

Nobody likes paying tax, but luckily our system offers legitimate opportunities to diminish tax payments. Liz Hardie, Technical Specialist at Prudential explores.

By carefully preparing and planning a multi-wrapper solution for clients with capital/disposable income to invest, we can help them achieve in excess of £50,000 p.a. tax free.

help them achieve in excess of £50,000 p.a. tax free.

Let's look at the allowances for 2017/18:

Income Tax Personal Allowance and Basic Rate Limits

• Personal Allowance (PA) is £11,500, income limit for the PA remains at £100,00
• Income tax rates stay at 20%/40%/45%
• Basic rate tax band increased to £33,500 except in Scotland, where the basic rate band is up to £31,500 for non-savings, non-dividend income only.
• Additional rate tax band remained at £150,000

Capital Gains Tax

The CGT Exemption increased to £11,300 but the rates remain at 10 & 20%. Capital gains on residential properties (not qualifying for Private Residence Relief) and the receipt of carried interest have rates of 18% & 28%.

Dividend Nil Rate

The first £5,000 of dividend income is tax-free, regardless of where it sits within the tax bands. Dividend income above £5,000 is taxed at 7.5% at basic rate, 32.5% at higher and 38.1% at additional.

Personal Savings Allowance

The Personal Savings Allowance (PSA) allows tax free savings income of up to £1,000 depending on the client's tax position.

Starting Rate for Savings

Starting rate limit (savings income) remains at £5,000 - it's restricted by non-savings taxable income so that none of the band will be available if that income is above their PA, plus the £5,000 starting rate.

To read full article, click here.

Technical, Tax, Trust & ISA