Biting Back at the Taxman!

At Haven IFA, we worked with many individuals with different needs in different stages of their life. As independent advisers, we can tailor each client’s circumstances to the right solutions open to them.

Ray, recently came to us with a dramatic change in his circumstances. After being employed long-term by the same employer, he was presented with an early retirement and redundancy package, signalling the end of his long-term commitment to the company.

Fortunately, Ray was completely debt free at this point in his life. His final salary pension exceeded the lifetime allowance limits of the time, and he had historically fully used his ISA allowances every year. With this, Ray believed there were no other options for investing tax efficiently or having any avenues to negate the tax take hanging over his severance payment.

The first £30,000 of his redundancy package would be tax-free, but the amount exceeding would be subject to income tax at the marginal rate. As it stood, Ray was subject to a 40% tax charge on his redundancy sum.

Our adviser sat down with Ray to evaluate his financial situation and find a solution. Upon delving into his overall balanced portfolio, we saw an avenue that would help. We recommended that he invest in Venture Capital Trusts.

This solution presented an avenue to not only increase his portfolio but also enable Ray to reclaim much of the income tax placed on the redundancy payment that he would pay out. VCTs are proven reducers for income tax liability. If held for five years, the relief would be 30% of the investment amount.

Ray took the advice and invested in VCTs, forever thankful that his sudden life change didn’t leave him with a deep hole in his financial outlook. In all likelihood, Ray would continue onwards as a higher-rate taxpayer throughout his retirement because of his pension income alone. Our advice and guidance have provided the extremely-helpful additional benefit in the tax-free dividends targeted at 5% per annum.

Thanks to our expertise in planning and financial advice, Ray’s future is much brighter, meaning he can enjoy his retirement without the taxman taking a bite out of his rightful earnings.

If you or anyone you know require help and advice on reducing hefty tax liabilities and guidance on VCT investment, talk with our trusted advisers at Haven IFA today.