Taxation Topic 6 - Tax Planning

Question 1

The financial life cycle is often split into 3 phases

Answer 1

• Wealth creation - income tax whilst saving for retirement
• Retirement - switch to income-creating investments, potential CGT liability
• Legacy planning – IHT liabilities

Question 2

For very high earners, when do they begin to lose the pension contribution allowance

Answer 2

for every £2 of their income gross (before any pension contributions) that is over £240k, they will lose £1 of the tax-free contribution allowance to a minimum of £4k a year

Question 3

If a spouse dies with money in an ISA, how much can the surviving spouse invest back into their ISA tax-free

Answer 3

the spouse is able to invest their own annual allowance as well as the amount that the spouse had upon death.

Question 4

The Seed Enterprise Investment Scheme (SEIS) gives ….. tax relief

Answer 4

50% tax relief annually up to £100k

Question 5

CGT planning revolves mainly around utilising allowances and reliefs, such as:

Answer 5

• Transferring assets between spouses
• Spreading the sale of assets over a number of years
• Investing in tax-free products
• Maximising all tax deduction claims – professional fees
• Claiming all reliefs – business asset disposal, private residence etc.
• Using previous capital losses and bringing them forward

Question 6

Business tax planning significantly reduces taxes, examples being:

Answer 6

• Sponsoring a retirement plan
• Writing off company assets
• Claiming capital allowances
• Deducting office expenses
• Employer-sponsored childcare resources
• Using a home office for the company