Originally featured in the ABWM Magazine, January 2017
As a child I remember watching the 1960’s western the Magnificent 7, which was repeated almost every New Year on the television. The heroes of the film were an eclectic bunch of characters led by Yul Brynner. So riding in on this theme, I suggest considering the following magnificent seven financial bucket list choices for the New Year.
- Pension Protection
Ensure that contributions to your company pension scheme are maximized; so that tax relief is obtained to boost the amount accumulating in your pension pot. Check whether the pension fund is in surplus or deficit.
- Forestry Purchase
Consider investing in forestry; it is not only eco-friendly but has important tax reliefs, in terms of being exempt from inheritance tax as well as being tax efficient, for income (in the felling and sale of wood) and capital gains tax (sale of land and reinvestment).
- Holiday Home
Buy a holiday home to let; either as furnished holiday lettings or as an Airbnb let, these attract tax relief in the form of allowable loan interest, ongoing expenses after which the net income can be invested in a tax efficient manner i.e. dividends, detailed in point 4.
- Dividends Tax Free
A change in the tax law now allows dividends up to £5,000 to be received without tax being deducted. This does not reduce your annual personal allowance relief of £11,000, which would be available to offset the rental income received from the holiday home lets.
- Grandchildren’s Trust
Set up a discretionary trust for your grandchildren so that the amount in the trust is protected for their benefit. This also has the advantage that the amount placed in trust ‘skips’ a generation for inheritance tax purposes and you control who gets what.
- Charitable Relief
The UK inheritance tax rate of 40% can be reduced to 36% on the remainder of your estate if 10% or more of your estate goes to charity. Ensure that your will states this.
- Seed Enterprise Investment Allowance (SEIS).
SEIS investment helps others (including family members) start a business; the amount invested gives you an income tax relief (50%) and capital gains tax relief (50%) which you can offset elsewhere. Any profit on the investment is not taxable when/if the investment matures after three years!