Tax & IHT guidance - Intelligent Money Private Clients
Discussion
Weird. Some of us do actually value the approach IM have taken.
I've benefitted from some of the answers they've given other members, despite there being no product for them to sell (capital gains tax, child benefit etc). I trust others have, too.
There are some fantastic professionals on this forum, and when the time comes I'll be in touch with the likes of Equus and Sarnie.
I hold IM in the same regard (albeit I've already signed up with them).
On a closing note, would it make more sense for this type of chat to be in the 'general chat'?
I've benefitted from some of the answers they've given other members, despite there being no product for them to sell (capital gains tax, child benefit etc). I trust others have, too.
There are some fantastic professionals on this forum, and when the time comes I'll be in touch with the likes of Equus and Sarnie.
I hold IM in the same regard (albeit I've already signed up with them).
On a closing note, would it make more sense for this type of chat to be in the 'general chat'?
rockin said:
What's the point of a forum where the response to every question is going to be "contact us privately"?
It depends on the privacy of the question.Most questions that I have seen asked have been responded to in open forum, but with privacy maintained.
The original thread has just reached its limit, have a butchers at that, then decide if IM are open and honest, or just a bunch of chancers.
https://www.pistonheads.com/gassing/topic.asp?h=0&...
anonymous said:
[redacted]
If you want to use them like a financial samaritans, you can do.As far as I am aware, you get the same quality of service on the forum whether you have invested with them or not.
Writing from previous experience, if you are asked to e-mail a question, it will get answered - investor, or not. It's then up to you whether you post the reply or not.
I am keen that this doesn’t descend into a back and forth distraction so this post is to try and lay out the objective purpose of the forum.
IM set it up to offer guidance and answer questions on general finance and provide a platform for others to share their view. Based on the way IM represents itself people may then decide to explore the services of the IM “the business” or not.
To be clear any answer supplied on a forum will by its nature always be guidance and not Regulated Financial advice.
We agree that everybody should be aware that we offer Guidance not Regulated Advice and anybody that has chosen to deal directly with IM Private Clients is very aware of this.
For clarity Guidance provides you with information and explanations that you need to be able to make your own decision about the correct action for you. You are responsible for the decision that you make.
Regulated Financial Advice is a specific recommendation for you by a regulated adviser and the adviser is responsible for ensuring that the recommendation is appropriate for you.
IM Private Clients is a guidance service that will work with you to help you understand the options, the tax position and pros and cons of the solutions available and a general overview of the things you may want to consider. You are then able to decide what you want to do.
This will typically be discussion about the investment vehicles available ISA, Pension, GIA etc and the how different investment approaches work.
I believe that people that have dealt with IM Private Clients will testify to the fact that we don’t “flog investments” or “sell IM Investments”. I am not aware of anybody who has spoken to any of the team and feels that they have received a sales pitch.
We aim to only discuss IM investment if asked to do so, and if asked we will provide information and detail about the options available, so you are able to decide if you believe it is right or you.
It is a service we are happy to offer, for those who find it of interest please feel free to use and abuse it, for those that feel it isn’t right for you please feel free to not to.
Regards
Nik
IM set it up to offer guidance and answer questions on general finance and provide a platform for others to share their view. Based on the way IM represents itself people may then decide to explore the services of the IM “the business” or not.
To be clear any answer supplied on a forum will by its nature always be guidance and not Regulated Financial advice.
We agree that everybody should be aware that we offer Guidance not Regulated Advice and anybody that has chosen to deal directly with IM Private Clients is very aware of this.
For clarity Guidance provides you with information and explanations that you need to be able to make your own decision about the correct action for you. You are responsible for the decision that you make.
Regulated Financial Advice is a specific recommendation for you by a regulated adviser and the adviser is responsible for ensuring that the recommendation is appropriate for you.
IM Private Clients is a guidance service that will work with you to help you understand the options, the tax position and pros and cons of the solutions available and a general overview of the things you may want to consider. You are then able to decide what you want to do.
This will typically be discussion about the investment vehicles available ISA, Pension, GIA etc and the how different investment approaches work.
I believe that people that have dealt with IM Private Clients will testify to the fact that we don’t “flog investments” or “sell IM Investments”. I am not aware of anybody who has spoken to any of the team and feels that they have received a sales pitch.
We aim to only discuss IM investment if asked to do so, and if asked we will provide information and detail about the options available, so you are able to decide if you believe it is right or you.
It is a service we are happy to offer, for those who find it of interest please feel free to use and abuse it, for those that feel it isn’t right for you please feel free to not to.
Regards
Nik
As every fule nose, sponsorship is a powerful symbiotic marketing tool. From the sponsor's perspective it is expected to achieve certain business goals whilst conferring benefits on its target.
Works well here. Obviously many seem to have benefitted from IM's interventions on the forum, and IM seem to have benefitted by increasing their client base.
Marketing and sales aren't really the same thing, and if "flogging" = 'hard sales' there doesn't really seem to be any sign of it.
Works well here. Obviously many seem to have benefitted from IM's interventions on the forum, and IM seem to have benefitted by increasing their client base.
Marketing and sales aren't really the same thing, and if "flogging" = 'hard sales' there doesn't really seem to be any sign of it.
Groat said:
As every fule nose, sponsorship is a powerful symbiotic marketing tool.
BTL is the answer. Enny fule kno that. How many are being advised to pursue BTL instead of the dangerous lottery of stock markets?https://www.youtube.com/watch?v=4ZOmIpTRVNA
OK, I'll start with a nice hypothetical, non personalised example that explores some first principles of tax planning (can spot my naivety yet?)
Understanding that every individual has separate goals, so circumstances differ and in words that an intelligent 14 year old can understand....
If I 'do a deal' that leaves me with £1m cash (after fees/costs etc) in a Ltd company, what is the most efficient (and legit!) way of extracting it? All in one go? Spread out over a few years? How does it all work? Option 1 might be entrepreneurs relief? If that doesn't apply as I've used my allowance, what next?
The simple stupid basics please, for a thicky who doesn't do finance
Understanding that every individual has separate goals, so circumstances differ and in words that an intelligent 14 year old can understand....
If I 'do a deal' that leaves me with £1m cash (after fees/costs etc) in a Ltd company, what is the most efficient (and legit!) way of extracting it? All in one go? Spread out over a few years? How does it all work? Option 1 might be entrepreneurs relief? If that doesn't apply as I've used my allowance, what next?
The simple stupid basics please, for a thicky who doesn't do finance
abph said:
Hi IM/Nik,
Firstly, just wanted to thank Intelligent Money for offering such service. I would like to be one of the first to get stuck in.
I have used a separate account given information provided below is in the public domain, and obviously sensitive.
My wife and I want to begin considering IHT implications of the below situation. We are both 34, and would like to consider the basics of IHT planning and vehicles to allow ease of passing to our two kids (come the fateful day). We have our investment strategy and personal finances dialed. We therefor would like to consider the basics of IHT planning and vehicles to allow easy of passing to our Kids (come the fateful day). Our current long term holdings thus:
Equities in GIA - £450k
Equities in Pension - £10k
Equities in ISA's - £30k
I anticipate ISA and pension to total over £1m with GIA over £3m in the next 20 years (assuming many things of course). We will own our currently mortgaged home outright by this time. We will be mid 50's by this time, and will then begin to draw down.
I have seen that Trusts are beginning to phase out, instead being replaced by Family Investment Companies. Is this something that
would benefit me/us, as we can then make our 2 kids share holders? Perhaps you could use the above example to show an estimated tax position and how this can be mitigated?
Thanks in advance and over to you!
Hi ABPHFirstly, just wanted to thank Intelligent Money for offering such service. I would like to be one of the first to get stuck in.
I have used a separate account given information provided below is in the public domain, and obviously sensitive.
My wife and I want to begin considering IHT implications of the below situation. We are both 34, and would like to consider the basics of IHT planning and vehicles to allow ease of passing to our two kids (come the fateful day). We have our investment strategy and personal finances dialed. We therefor would like to consider the basics of IHT planning and vehicles to allow easy of passing to our Kids (come the fateful day). Our current long term holdings thus:
Equities in GIA - £450k
Equities in Pension - £10k
Equities in ISA's - £30k
I anticipate ISA and pension to total over £1m with GIA over £3m in the next 20 years (assuming many things of course). We will own our currently mortgaged home outright by this time. We will be mid 50's by this time, and will then begin to draw down.
I have seen that Trusts are beginning to phase out, instead being replaced by Family Investment Companies. Is this something that
would benefit me/us, as we can then make our 2 kids share holders? Perhaps you could use the above example to show an estimated tax position and how this can be mitigated?
Thanks in advance and over to you!
IHT is a large area to cover generically but here is a starter for 10!
IHT is an area that has many wrinkles and off shoots but this should set out the basic principles.
In very broad terms IHT is a balance between giving your assets away and maintaining control and benefiting from them.
The more control that you maintain over your assets the less tax efficient the solution is likely to be and if you look to gift and maintain control the more expensive the solution is likely to be.
i.e. if you simply gift the assets and then live 7 years there is no IHT liability so it is very tax efficient and cost effective but you have no control or benefit from the assets you have gifted.
Basic Principles
Beyond gifts between spouses and some additional allowances the assets of an individual’s estate above £325,000 are subject to IHT.
There is a further allowance of £125,000 for property that is passed to Children or Grandchildren.
The main allowances that are available to reduce the value of the estate and any IHT bill are the gifting allowances. These can be broadly spilt into immediate relief and potential relief.
The immediate relief options are limited to :
£3,000 p.a. (you can carry forward an additional years allowance if it wasn’t used)
Gifts of £250 per person, (excluding any individual that you gifted the £3,000 allowance to)
Gifts from regular income that do not affect your standard of living. The rules for this exemption are quite detailed for example, these gifts must be regular i.e. payments into a regular savings plan or life insurance policy.
Potential Relief (Potentially Exempt Transfers)
This relief is available on any gift that is made. The gift becomes exempt from IHT 7 years after it was made. There is a sliding scale of relief given from year 3 to year 7, know as taper relief so if you die between year 3 and 7 there is a reduction in tax payable and after year 7 the gift is exempt from IHT.
Any planning to reduce an IHT liability is based around use of these allowances.
The use of trusts can allow any asset to be gifted without it passing directly to the beneficiary at that time or to split an asset between its current value and any future increase in value. This can be used to “cap” the value at its current level rather than have future increases in value add to any IHT liability.
Broadly speaking if the person gifting the asset into a trust maintains some benefit from the asset then it is unlikely to be efficient on reducing IHT.
It is this area that becomes very dependent on the type of asset to be gifted, the control that the person gifting wants to maintain and their need for any on-going benefit from the asset.
For example if an individual was to gift their property either to another individual or a trust and then continue to live in the property without paying a market agreed rent, on death the property is unlikely to be treated as gifted and included at its full value for IHT purposes.
The second consideration is to “insure the liability” This involves putting in place a life insurance policy that pays out on death of the individual whose estate you are looking to protect.
If the individual has enough surplus income to meet the “funded from regular income” criteria then the premium can be paid by them and not be treated as a gift.
The policy can be placed in trust so that the benefits do not form part of the estate and on death pay out enough to either fully pay or contribute towards any IHT bill.
This approach doesn’t try to reduce any IHT bill, but provides a means to pay the bill without using the assets form the estate.
Sometimes a combination of both may be used, for example gifts are made to reduce the value of the estate and reduce the potential tax bill.
If these gifts exceed the annually £3,000 allowance, there will still be a tax liability for 7 years after the gifts are made. You can then use a life insurance policy to cover this 7-year period.
In summary you can either make use of gifting allowances and the 7 year Potentially Exempt Transfer rules to bring the value of the estate under £325,000 or insure to cover the bill that you may be subject to.
When using the gifting route, you can make use of trusts to maintain some level of control of the assets without having a beneficial interest or split the current value of the asset from future growth and so prevent any IHT liability from increasing.
The use of trusts and Family Investment companies seek to make use if the 7-year gifting rule. The asset is gifted but the trust/investment company allows you to maintain control of the assets and in some instances benefit from any growth/return on the asset.
Family Investment Companies have become more popular after the tax position on Trusts changed in 2006 and many trusts became subject to a tax charge on establishment.
A Family Investment Company is established in the same way as any Ltd company. The structure of the Directorships and shareholdings allow control of the assets and distribution of gains/returns. As with any IHT panning solution the costs of established and management need to be weighed up against the tax saving along with the tax position on gains and distributions which are potentially subject to both Corporation and Income Tax.
I hope this helps. There are several “wrinkles” and offshoots from these main principles that can be applied given individual circumstances and needs.
As Julian has said if you would like to talk through your individual situation I’m very happy to share thoughts and ideas with you for you to consider.
Regards
Nik
PM3 said:
On the Gift theme ....
If I were to pay off my childs university fees loan ( 27 K ) in one transaction , is this same as a gift for tax purposes ?
Hi PM3If I were to pay off my childs university fees loan ( 27 K ) in one transaction , is this same as a gift for tax purposes ?
A bit of a grey area I am afraid. If your child is still in full time education then the repayment of student loan by a parent is usually IHT exempt. If you are paying education fees "as you go" i.e. while they are in education the payments are also usually IHT exempt.
If they have now left full time education it is likely to be treated as gift and so be taken into account for IHT.
Cheers
Nik
PM3 said:
On the Gift theme ....
If I were to pay off my childs university fees loan ( 27 K ) in one transaction , is this same as a gift for tax purposes ?
As an aside, are they likely to be liable for £27k of repayments over 30 years?If I were to pay off my childs university fees loan ( 27 K ) in one transaction , is this same as a gift for tax purposes ?
If they are unlikely to earn an average (in today's terms) less than £37,295pa for the next 30 years, they will not repay it all and the excess will be written off.
ben5575 said:
OK, I'll start with a nice hypothetical, non personalised example that explores some first principles of tax planning (can spot my naivety yet?)
Understanding that every individual has separate goals, so circumstances differ and in words that an intelligent 14 year old can understand....
If I 'do a deal' that leaves me with £1m cash (after fees/costs etc) in a Ltd company, what is the most efficient (and legit!) way of extracting it? All in one go? Spread out over a few years? How does it all work? Option 1 might be entrepreneurs relief? If that doesn't apply as I've used my allowance, what next?
The simple stupid basics please, for a thicky who doesn't do finance
Hi Ben5575Understanding that every individual has separate goals, so circumstances differ and in words that an intelligent 14 year old can understand....
If I 'do a deal' that leaves me with £1m cash (after fees/costs etc) in a Ltd company, what is the most efficient (and legit!) way of extracting it? All in one go? Spread out over a few years? How does it all work? Option 1 might be entrepreneurs relief? If that doesn't apply as I've used my allowance, what next?
The simple stupid basics please, for a thicky who doesn't do finance
Assuming you are talking about £100k of profit within a Ltd company and how to extract that £100k excluding the use of Entrepreneurs Relief you are looking at 3 main options :
Pension Contributions, Drawing it as Taxable Income, Drawing it as Dividend or a mix of all three.
Employer Pension contributions are the most tax efficient as it they are treated as a business expense. You may be able to use carry forward rules to increase the size of the contribution you can make.
You would also need to take into account the point at which you need/want access to the money and the tax considerations at that point but as a tax efficient way of taking money out of the business it is very efficient.
Drawing the money as income or dividend is dependant on your other income at the time of withdrawal.
The effective tax rates are :
Income with the basic rate band:
Taken as Income effective tax rate : 45.80%
Taken as Dividend effective tax rate : 26.50%
Income with the higher rate band:
Taken as Income effective tax rate : 55.80%
Taken as Dividend effective tax rate : 51.50%
Income with the additional rate band:
Taken as Income effective tax rate : 60.80%
Taken as Dividend effective tax rate : 57.10%
If there is no other income you can also take into account your personal allowance and NI doesn’t kick in until £9,568.
If you don’t need the money in one go you can draw the money down over different financial years to keep the draw down in lower tax bands.
Cheers
Nik
Intelligent Money said:
PM3 said:
On the Gift theme ....
If I were to pay off my childs university fees loan ( 27 K ) in one transaction , is this same as a gift for tax purposes ?
Hi PM3If I were to pay off my childs university fees loan ( 27 K ) in one transaction , is this same as a gift for tax purposes ?
A bit of a grey area I am afraid. If your child is still in full time education then the repayment of student loan by a parent is usually IHT exempt. If you are paying education fees "as you go" i.e. while they are in education the payments are also usually IHT exempt.
If they have now left full time education it is likely to be treated as gift and so be taken into account for IHT.
Cheers
Nik
Thanks for that . Glad I basically bankrolled all the other costs such as living for the duration of the degree and masters and also paid of the extra Masters educational loan or whatever that was called ....so only leaves the legacy 3 x 9K thing ( she was the 1st year to be sold out by the disgraceful liberals lie of the century )
Not that I want to make everything soft and comfortable.... it is a little bit of a millstone to start proper life out with . One that I didn't have as the taxpayer sent us drinking cheques in my time
she is doing her doctorat and what I gleen is that is not considered as full time education ( as it is actually funded ) .....so I'll mull it over and set the money aside doing harder work than the student loan interest rate ...and see how I feel in a couple of years.
Personally I doubt ( and sincerely hope) she will not be one of those banking on not working hard enough to achieve an income level that makes it eventually pay off.
Intelligent Money said:
Hi Ben5575
Assuming you are talking about £100k of profit within a Ltd company
Thanks Nik, that's helpful, not quite what I was suggesting but I'll catch up with you separately with the specifics of that's ok please? Assuming you are talking about £100k of profit within a Ltd company
It was more about trading off pensions (and any limitations around that) vs corp tax vs paye vs divi vs anything else for £1m rather than £100k left in a business bank account at year end as the income banding has much more of an affect at that level.
But putting that to one side and picking up on the pension thing... For example: How much can a company put into a personal pension? Is it a fixed maximum or a maximum % of earnings and if so are these PAYE earnings or divi earnings. Is it an annual maximum or a lifetime maximum that a single company can put in a private pension (so could I have five companies putting maximum amounts) or is the maximum relative to me?
Then how much can I put into a pension? Is it unlimited or capped? Lifetime or annual? Is a maximum figure or % of something if so what? What does 'carry forward rules' mean?
I'm sure those are really simple questions to those who do this everyday. But to thickos like me and other similar idiots reading this thread (
), I thought it might be helpful to provide a simple overview. If indeed a simple overview is possible?!ben5575 said:
Thanks Nik, that's helpful, not quite what I was suggesting but I'll catch up with you separately with the specifics of that's ok please?
It was more about trading off pensions (and any limitations around that) vs corp tax vs paye vs divi vs anything else for £1m rather than £100k left in a business bank account at year end as the income banding has much more of an affect at that level.
But putting that to one side and picking up on the pension thing... For example: How much can a company put into a personal pension? Is it a fixed maximum or a maximum % of earnings and if so are these PAYE earnings or divi earnings. Is it an annual maximum or a lifetime maximum that a single company can put in a private pension (so could I have five companies putting maximum amounts) or is the maximum relative to me?
Then how much can I put into a pension? Is it unlimited or capped? Lifetime or annual? Is a maximum figure or % of something if so what? What does 'carry forward rules' mean?
I'm sure those are really simple questions to those who do this everyday. But to thickos like me and other similar idiots reading this thread ( ), I thought it might be helpful to provide a simple overview. If indeed a simple overview is possible?!
Hi Ben5575It was more about trading off pensions (and any limitations around that) vs corp tax vs paye vs divi vs anything else for £1m rather than £100k left in a business bank account at year end as the income banding has much more of an affect at that level.
But putting that to one side and picking up on the pension thing... For example: How much can a company put into a personal pension? Is it a fixed maximum or a maximum % of earnings and if so are these PAYE earnings or divi earnings. Is it an annual maximum or a lifetime maximum that a single company can put in a private pension (so could I have five companies putting maximum amounts) or is the maximum relative to me?
Then how much can I put into a pension? Is it unlimited or capped? Lifetime or annual? Is a maximum figure or % of something if so what? What does 'carry forward rules' mean?
I'm sure those are really simple questions to those who do this everyday. But to thickos like me and other similar idiots reading this thread (
), I thought it might be helpful to provide a simple overview. If indeed a simple overview is possible?!Apologies I don't know where I came up with £100k from!! Unfortunately the principle is the same but the tax liability is greater and any exit over time takes a lot longer!!
It is possible to put the cash to work while still held in the business by investing the capital in the businesses name.
On the pension contribution question, a company can contribute £40k into a pension for an employee or director. This is irrespective of the individuals earnings. Subject to a couple of other criteria you may be able to go back three years to mop up missed contributions as well so it may be possible to contribute a maximum of £160k in a given tax year. This is called carry forward.
The 2nd factor to account for is that as an individual the maximum that be paid into a pension in your name is £40k, p.a. from all sources, so if you have five companies they can contribute a maximum of £40k between them. If you have carry forward to use the contribution is again the maximum for you, so if it was £160k this is a £160K from all sources.
Hope that makes some sense
Cheers
Nik
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