We helped our client structure his tax affairs

Our client was a high earner who was soon to retire, he said:

“With retirement around the corner, I am looking for advice on how to structure my affairs – alongside those of my spouse who is also planning for retirement, though with a smaller pension than mine. We need to know how best to treat the investments I have recently inherited from my mother and how to make use of any relevant allowances. We want to be sure our future financial needs will be met.”

How we helped

We asked the clients for an estimate of their current and anticipated future income. We asked for a list of assets and found out that the inheritance included a property which the clients wished to rent out going forward.

We prepared a report detailing how they could look to equalise income. In the report we looked to maximise the use of their personal allowances and tax rate bands, considering the capital gains tax rules on transfers between spouses and civil partners. In the report was a summary of their current income and projected position based on planning.

In preparing the report, we worked with their stockbroker to ascertain the estimated income to be generated by the inherited investment portfolio, and the potential to use tax free investments such as ISAs. We also liaised with the pension adviser to plan the level of their retirement income.

The outcome

The clients were able to plan their financial requirements for retirement.

Both individuals were able to preserve their personal allowances and enabled them to maximise the use of the lower-earning spouse’s basic rate band. The clients were also able to consider the level of withdrawals from their pension funds, with a view to preserving these as far as possible, because of their current favourable inheritance tax status.

The financial adviser was able to transfer investments to maximise the use of the unused ISA allowances, and there would now be two annual capital gains tax exemptions to counter tax on any taxable disposals.

We can continue to review their income requirements as their needs change, and help with their tax compliance requirements, including the completion of tax returns.

When looking at retirement and other lifestyle changes, it is important to take full advice to ensure that income needs are met now and in the future, as well as other planning such as that relating to inheritance tax and updating Wills.