Steve Baker Financial

Using your ISA allowance

Steve Baker — Wed, 15 Feb 2012 15:54:32 +0000

As we move closer to the end of the tax year its time to consider using your annual ISA allowance if you have not done so already, otherwise it is lost forever.

The current annual ISA allowance is £10680 which can now be mixed and matched between cash & stocks & shares.

For a scientific bespoke approach to your investments call us now on 01296 641868

End of Year tax reclaim

Steve Baker — Thu, 09 Feb 2012 15:22:46 +0000

Now that tax returns have been (or should have been) completed and income tax bills are a known quantity, why not get some of that tax back in a Government sponsored tax wrapper such as a VCT (Venture Capital Trust), or EIS (Enterprise Investment Scheme).

There are also spin off benefits with regard to Capital Gains Tax (CGT) and Inheritance Tax (IHT).

If reclaiming tax legally is of interest then why not call us now on 01296 641868

Improved income & Tax efficiency in 2012

Steve Baker — Thu, 12 Jan 2012 16:30:37 +0000

With 2012 promising to be a tough year financially a lot of people will want to enhance their sources of income, or indeed replace lost income streams.

This can be done by using a scientific risk profiling tool, diversifying asset classes with the inclusion of negative correlation as a hedge against falling markets, and choosing the correct tax wrapper.

Often the wrong wrapper is chosen with the end result being an income or capital erosion process taking place, and in some cases the reduction of a persons age allowance.

Tax Mitigation – Enterprise Invest Schemes (EIS)

Steve Baker — Fri, 30 Sep 2011 11:07:49 +0000

It is important that taxes are paid for the health of the UK economy, however it is also important that we do not pay too much tax to preserve our personal wealth.

Taxes come in many forms, and there are solutions such as Enterprise Invest Schemes (EIS) that can mitigate multiple taxes, provided underlying investments are held for at least three years there are three key tax benefits:

30% UPFRONT INCOME TAX RELIEF – Investors receive tax relief of 30% of the amount invested, up to £500,000 per year, against their income tax bill for the 2011/12 tax year. Investors also have the option to carry back the tax relief to the 2010/11 tax year, but this relief will be at 20% which was the rate available for that tax year.
For example an investment of £1 million this year could result in 30% income tax relief on £500,000 this year, and an additional 20% income tax relief for the other £500,000 against last year’s income tax bill, resulting in a total of £250,000 tax relief.
CAPITAL GAINS TAX (CGT) DEFERRAL – CGT is deferred for the life of the investment, gains made up to three years previously can be deferred enabling the use any future capital losses to offset previous gains.
INHERITANCE TAX RELIEF – It is likely that a proportion, which will be determined by HMRC as part of the probate process, of the investment will, over time, qualify for Business Property relief (provided investments are held for at least two years and at time of death). The proportion that qualifies can be passed to beneficiaries free of IHT. In contrast to pensions and trust based solutions, investors retain control of their money during the life of the investment.

We recommend a specialist company in this arena called Octopus, their EIS is designed to deliver improved capital preservation compared to typical EIS products. Octopus undertakes a rigorous process to identify suitable investment opportunities and we’ll only invest when they are confident that they have found the right company at the right price.

Furthermore, Octopus will allow all of its management fees to roll up interest free and will only take them at the end of the minimum three year trading period, providing investors still receive back the amount invested into qualifying companies.

Once the investment has been held in the underlying funds for three years capital can be released, or potentially roll it over into a new EIS – and receive a further 30% income tax relief.

Inheritance Tax Planning

Steve Baker — Fri, 30 Sep 2011 10:52:11 +0000

In these days of complex legal structures, legislation and attacks on our personal assets from invasive taxes, what about a solution to inheritance tax planning that eradicates all of the previous problems?

I am talking about a low risk inheritance tax solution that has been designed to give clients access to their money, with the ability to add and withdraw funds, as well as provide them with a net return of 3% per annum (after deducting the initial charge and the dealing fee). This is equivalent to 5% per annum for a higher rate tax payer.

In addition, instead of waiting for the usual seven years, your investments become exempt from inheritance tax after just two years.

This is an investment opportunity that offers attractive inheritance tax advantages, while targeting investments that deliver a more predictable return and capital preservation.

In summary, there are three key advantages:

LOWER RISK – The fund will be investing in companies that we believe to qualify under the rules relating to business property relief. These investments will all offer a higher degree of capital preservation. The companies in which the fund invests would seek to reduce any potential risk through the use of credit insurance or by deal structure.
SPEED – Unlike most other inheritance tax solutions, which take seven years before they’re fully exempt from inheritance tax, these are exempt from inheritance tax after just two years.
CONTROL – There aren’t any complicated and expensive legal or trust structures.