Work smarter not harder

This is a saying that I always think should apply to all aspects of our lives, including our savings. Although I think this rule is always key, it could be argued that with the interest rate at an all time low it’s even more relevant at this time.

So as an adviser how do I believe you can be smarter with your finances? As many of us have time on our hands due to the lockdown I thought I would write a checklist of some of the things you could consider, especially with the end of the tax year looming when many of the allowances for this year come to an end. Here are a couple of key questions I feel you should ask yourself:

Are my investments in the most tax efficient medium? Each of us have a number of different allowances and the tax treatment can also affect our rate of return. For example, pension contributions can attract tax relief and this in turn can enhance their returns, although it is also important to consider the tax treatment of withdrawals too.

Moving funds into a more tax efficient environment may not result in a gain that you can instantly see, but in the long term may enhance your returns. For example, you may have funds in Unit Trusts which are not in an ISA wrapper. It could be beneficial to do what is known as a “Bed and ISA” which would allow you to take the funds tax free at a later stage. Care needs to be taken as Unit Trusts are subject to Capital Gains tax on their disposal but there is currently a Capital Gains tax free allowance which could be utilised.

The ISA allowance is another one you should consider utilising. One of the benefits is that it can help build up for more tax efficiency at a later stage.

Am I utilising my personal allowance? This I feel is especially relevant when you are drawing funds from a pension, to help minimise your tax. But it may not be just the personal allowance that needs to be considered, it could be utilising other tax bands if you know in the future that your tax band could increase.

Manipulating our savings to maximise our returns may not be straightforward and seeking professional advice may help. I have often said that I feel my key role is being a sounding board. We offer a number of alternative ways to access our services safely during this lockdown, including video and voice call. We offer a free without obligation consultation so it may also be a good time to utilise this if you currently have some spare time on your hands.

*This is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which are liable to change without notice. The impact of taxation (and any tax reliefs) depends on your circumstances.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

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