Tax planning for high earners
Tax planning strategies to help high-earning clients find additional ways to make tax-efficient investments.
Helping your highest earners invest tax-efficiently
People know that pensions and ISAs offer tax reliefs within certain allowances. But there are high-earning clients who’ve exhausted these allowances or could benefit from other ways to invest tax-efficiently.
Venture Capital Trusts (VCTs) and Enterprise Investment Scheme (EIS) investments invest in early-stage companies. Investors can claim certain tax reliefs which act as an incentive to take on the risk of investing in smaller companies. Read more about the risks.
Let’s look more closely at planning ideas you could use to help the high earners in your client bank.
Planning ideas for clients
Additional rate taxpayers
Clients who earn a large salary, have used their ISA and annual pension allowances, and want to continue to invest tax efficiently.
With a high annual income that exceeds amounts that can be invested in pensions and ISAs, these clients could benefit from making incremental tax-efficient investments which will reduce their annual income tax liability
Clients who have invested in a property portfolio to help fund their retirement.
Landlords could benefit from planning that helps them take a tax-efficient income from their properties, or to defer a capital gain should they wish to sell part or all their portfolio.
Small business owners and entrepreneurs with high tax bills who pay themselves through dividends.
Clients who own a business may well build up cash on the balance sheet and want to explore options to extract money tax-efficiently when paying themselves a dividend.
Clients with a broad investment portfolio and high annual income who are interested in smaller company investing.
These clients may be interested in the exciting growth potential and diversification that smaller UK companies bring.
Risks to keep in mind
Capital is at risk
The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
Tax relief can’t be guaranteed
Tax treatment depends on individual circumstances and tax rules could change in the future. Tax reliefs depend on the VCT and portfolio companies maintaining their qualifying status.
The investment may be volatile and difficult to sell
VCT shares and the shares of smaller unquoted companies, could fall or rise in value more than other shares listed on the London Stock Exchange’s main market. They may also be harder to sell.
Got a client in mind? We can help
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Duration: 1hour 48mins