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What is Tax Planning and Why is it Important?

What is Tax Planning and Why is it Important?

Tax planning is an important activity when it comes to organising your savings and investments. It’s common to build up savings as you go through life, whether this is through pension plans provided by employers, or personal investments you have made with the future in mind. As your savings increase, the tax implications do too. As experts in wills, trusts, tax, and probate, let us explain exactly how important tax planning is.

Making the Most of your Money

To really make the most of your money, it’s crucial to organise your savings and investments in an effective way. No one wants to pay more tax than they need to, so it’s really important to manage it all in a way that helps you to avoid unexpected tax bills later on in your life. By carefully considering the tax implications of your financial plans, it is possible to reduce the amount of tax you have to pay and optimise the amount of disposable income you have.

How Can Tax Planning Help Me?

There are many areas in which effective tax planning can help you, including the following:

Investments

Effective tax planning could help you to ensure you get the most out of your investments. This may include your Dividend Allowance, your Capital Gains Tax Annual Exemption, and your remaining Individual Savings Account (ISA) allowance.  

Pensions

Planning the way that you will ultimately take your pension can be really advantageous. Good tax planning could allow you to benefit from a tax-free lump sum. By making the most of your annual and lifetime allowances, you’ll be able to manage how your pension pays out, and to organise it in an income tax efficient way.

Income Tax

Tax planning is also a good way of mitigating income tax, which is payable on income, bank interest, dividends, and more.

Inheritance Tax

Inheritance tax is another example of how important tax planning is. But it’s not always simple. If your estate is valued in excess of the Nil Rate Band at the time of death, tax is charged at 40%. However, careful Will planning and other investment strategies can help you to mitigate this tax, ensuring that the people that you leave your money to benefit from it fully.

Tax Planning for Peace of Mind

Due to the complicated nature of the tax system in the UK, it’s often quite difficult to get your head around it all and understand exactly how tax will affect you and your finances. That’s why it pays to seek professional tax planning advice.

Whether you need immediate help or long-term planning for peace of mind, our team is on hand to provide professional, friendly advice on tax planning. Contact our Wills, Trusts, Tax & Probate team today by telephoning Bradford 01274 735511, Ilkley 01943 601173 or Bingley 01274 723858.  Please note we do not provide financial advice.  If you require advice on finance and accountancy or financial services, you should contact a suitably qualified expert.

*Please note we do not provide financial advice.  If you require advice on finance and accountancy or financial services, you should contact a suitably qualified expert.

RDC Solicitors is a trading name of Read Dunn Connell Limited registered in England and Wales with Company Number 9559492.
Registered office: 30 Park Road, Bingley, Bradford BD16 4JD. We are solicitors practising in England and Wales, authorised and regulated by the Solicitors Regulation Authority. SRA Number 622886. A copy of the SRA Standards and Regulations can be found at www.sra.org.uk.. VAT No: 708421255.

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