Tax and Estate Planning

Tax could be one of your biggest single costs. So it is not surprising that tax planning is one of the key aspects of formulating a financial plan. There is often a considerable amount that can be done to reduce the impact of taxation.

The main types of tax are:

  • Tax on your earnings 
  • Tax on your earnings can have a major impact in the form of income tax and national insurance contributions as well as the corporation tax levied on a company’s profits. Planning can be very effective encompassing such areas as pensions and employee benefits and the use of alternative methods of drawing profits from your company.

  • Tax on your investments
  • Tax on your investments can erode a high proportion of your income and gains. Tax should not be the main driver of investment strategy, but planning can make a considerable difference to our after-tax returns.

  • Tax on your estate
  • Tax on your estate can take up to 40% over and above the nil rate bands. It was perhaps excessively harsh of a previous Chancellor of the Exchequer to describe inheritance tax as a levy on people who disliked their families even more than they disliked the Inland Revenue. Nevertheless, the scope for effective and totally legal tax planning is very considerable.

    Estate planning involves tax, but it encompasses much more. As with most tax planning, the key is to know what you want to achieve – who should benefit after your death and what they should receive, but also whom you might want to make gifts to now and in what form.

    Inheritance tax is then likely to become the main issue, with a flat rate of 40% at death to the extent that an estate exceeds the nil rate band – currently maintained at the relatively low level of £325,000. This is still the nil rate band. In the 2007 Pre-Budget Report, however, it was announced that widows and widowers (and surviving civil partners) could inherit their late spouses unused nil rate bands. This is still the case today.  So, many people will find that this year their nil rate bands are effectively £650,000 if they died this year. But you cannot afford to ignore the impact of other taxes such as capital gains tax, stamp duty and income tax in this context.

    Most business assets escape the inheritance tax net under the current rules, but private homes, investment properties as well as stocks, shares and cash are generally taxable regardless of where they are situated. As your circumstances and the tax rules change, it is important to keep your estate planning under review. The earlier you start planning, the easier it may be to achieve your objectives.

    If you need access to accountants who specialise in tax planning, we would be pleased to make a recommendation.


The FCA does not regulate tax advice as such. Tax rules are subject to change.