With all the white noise of Christmas, it is easy to forget the financial fundamentals of financial planning but all these realities will be with us again for the New Year. With that in mind it is worthwhile reviewing where you are financially when the excitement and joy of Christmas and New Year celebrations are concluded.
As with most things in life having a plan is essential, being prepared and along with thinking of others, will ensure that you have an excellent start to the New Year.
Keeping with the theme of giving, charitable gifts offer tax benefits.
Gift aid relief means that the charity benefits from a tax reclaim but higher rate taxpayers can obtain a reduction of tax. In certain cases the making of a charitable gift can bring even more dramatic tax savings (for instance if you have made a chargeable event gain which is subject to higher rate tax).
Inheritance Tax (IHT) Gifts out of Income
One of the reliefs that is often forgotten is that regular gifts out of surplus income are totally exempt from IHT. If you have surplus income, which you wish to gift, making a gift to someone at Christmas or New Year or on a regular basis is a good way to set up a pattern.
It is always a good idea to keep very good records of such gifts (including proof that they came out of surplus income) so that the relief can be claimed on death.
The kids could do with a spot of cash and you’re pretty certain that you could help them out a bit. How much can you give them and get an annual exemption for Inheritance tax? It’s £3,000 for each of you and your spouse.
Gift peace of mind to your loved ones
There is no point in putting in place great plans for the future if you’re not going to get there. Life insurance is generally inexpensive and gives you and your family peace of mind that liabilities are going to be met. Also don’t forget critical illness cover – people in the UK are five times more likely to suffer a critical illness like a heart attack, cancer or stroke before 65 than they are to die. Critical illnesses cover pays out money on diagnosis of one of a list of serious illness, money that can be used to repay a mortgage, fund needed private medical treatment, or just tide you and your loved ones over during recuperation.
Plan your Retirement
You put your feet up and enjoyed relaxing in front of the fire without the pressures of work and wonder if it might be the time to step down from your business. Planning your retirement and the tax consequences thereof is vital; do you have enough to live on, would your pension be big enough, could you top up your contributions to boost this and get tax relief? We can advise you on all aspects of retirement planning.
Take advantage of available tax reliefs – examples are ISAs which grow free of personal taxation. Have you utilised your full ISA allowance for 2017/18? For 2017/18 you can save a maximum of £20,000 and this can be in a cash ISA, a stock and shares ISA, a Help to Buy ISA, an Innovative Finance ISA, Lifetime ISA or any combination of each of them.
Get on the property ladder
Help to Buy ISA comes out this December, which is great news for first time buyers. Help to Buy ISAs are a no-brainer if you’re saving for a deposit for an eligible home. It’s a tax-free savings product in which the Government adds 25% on top of whatever you’ve saved.
Making a will is a job that many people put off and as a consequence approximately one third of us die without having written a will. If you have children under 18 it is very important to have a will to name a legal guardian.
Even if your assets are not substantial and your wishes are straightforward it is still advisable to make a will, as the practicalities of dealing with the Estate are much easier if there is a valid will. Do not put it off any longer!
Complete your Tax Return
Christmas is the time to get your tax return completed so your accountant has a fighting chance of getting it to HMRC within the deadline, with that you will benefit from the reliefs you will have planned for over the last tax year.
Review your Credit Card bills
Often we forget with the excesses of Christmas and then into New Year to review debt. Best plan is to clear off expensive debt before saving – you will certainly not get as much interest from a bank account as you will be paying on your debt. There is a possibility you might get a better return on a different sort of investment but you would have to take more risk and there would be no guarantee; and all the while you’ll be sure to be paying the interest on the debt.