How To Preserve Your Wealth

How To Preserve Your Wealth

It shouldn't be just at the end of the tax year that you look at your financial situation.  In fact, it is better to have a regular review in the early parts of the financial year, so you have long enough to make adjustments, and not miss any deadlines.  This month we are going to look at all the ways you could be losing - or saving - tax.  None of this information should be construed as advice - as every individual's tax situation is unique and you should get independent financial advice before making any decisions.  However, here are some things to consider.

Income Tax

Tax can seem simple at first sight.  You have a personal allowance and then increasing rates of tax apply as you earn more.  However, get to £100k and for every £2 you earn over that your personal allowance is reduced by £1.  So by the time you reach £125k earnings your personal allowance is zero.  It may be worth considering tax-efficient alternatives to salary/bonuses, such as higher pension contributions.

You could also transfer other income-yielding assets to a partner with a lower taxable rate.

Tax Relief

If you are working from home (for example due to the pandemic) you may be entitled to tax relief for your increased costs - broadband and heating for example.  You could claim the exact amount back up with receipts/bills, or a flat £6 a week.

Dividend Tax

Everyone has a tax-free dividend allowance of 2k per annum.  After that dividends are taxed at 7.5%, 32.5% and 38.1%.  Company owners, therefore, will generally benefit from taking more income from dividends rather than salary.

Capital Gains Tax

Every taxpayer has an allowance of £12,300 when releasing capital gains.  This is another situation where transferring assets to a partner to use their allowance, may be beneficial. Capital gains are treated more favourably at the moment, than income or dividends.  So it can be more tax-efficient to target a return through capital gains.


All UK residents over 18, have an annual allowance of £20k which can be saved or invested in an Individual Savings Account.  There are also Lifetime ISA's - which qualify for a government bonus and can be a good way of helping a child (over 18) buy their first home.

Pension Contributions

As already mentioned - it could be more tax-efficient to put more money into your pension rather than take it as income.  if you are the owner of the company it could also save you on corporation tax.  You can also carry forward unused annual allowances from up to the last 3 years, to claim more tax relief.

You can also contribute to other peoples pensions - children or grandchildren for example, and they will receive tax relief.

Remember the lifetime pension allowance is £1,073,100.  If you are approaching this level - get advice before accessing your pension.  Above that level the tax is severe!

Inheritance Tax

Your tax-free amount is £325,000plus any unused nil-rate band from a deceased partner. There is also an additional £175,000 tax-free when leaving a home to a direct descendant.

If you leave at least 10% to charity - any portion outside your nil rate band will be taxed at 36% instead of 40%.  Depending on the amounts involved that could save your loved one's tax, after you have passed.

And on that point make sure your will is up to date.  Any major life change should be accompanied by an update to your will.


If you would like an independent review of your financial, tax and pension situation, email or connect and message him on LinkedIn here 







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