Private client

Structuring wealth to reduce tax and achieve your long-term financial goals

No matter what stage you're at in your career, it's important to understand how investments are taxed. Our strategic partner Barclays explains how investments can be structured to work more tax efficiently, and why this is crucial for investors working towards their long-term financial goals.

Investors will often take stock and review their savings and investment strategy throughout tax year, and many will be looking at their portfolios to understand how they are positioned.

As the coronavirus pandemic continues, we're beginning to understand that the government's approach to fixing public finances will include increasing taxes.

The chancellor, Rishi Sunak recently said, “coronavirus has been one of the largest… economic shocks this country has ever faced,” and the government has committed to £352 billion of fiscal support.

18 months since the beginning of the coronavirus pandemic, the UK finds itself with a total national debt of over £2 trillion and attention has turned to how will this debt be repaid.

Most of us aim to structure our wealth tax efficiently, whether that be investing into an ISA or a pension.

However, as part of a sensible long-term financial plan, it's important to have an acute understanding of all the various tax allowances available to an individual, how they interact and how they can be optimised to reduce the drag of taxation on investment returns.

A well-diversified investment approach should give an investor comfort in knowing that, regardless of changes made by the chancellor, they will be well positioned should future tax rises materialise.

A considered and well-thought-out financial plan will likely take account of a range of areas, including:

  • maximising annual allowances such as the personal allowance for income tax and the capital gains tax annual exemption
  • considering distributing investments across a partners/spouses to take advantage of more than one set of allowances and tax rates, potentially utilising spousal exemptions
  • ensuring that tax advantaged savings vehicles such as pensions and ISAs are maximised with unused pension allowances from previous tax years taken up where possible
  • diversifying into other investment wrappers such as offshore bonds which can allow for long-term tax deferral and other planning opportunities
  • exploring other tax advantaged investment opportunities such and enterprise investment schemes and venture capital trusts

Understanding what tax allowances are available and how best to utilise any existing tax wrappers and structures are the foundations of a resilient financial plan.

The way in which these fit with an individual’s financial objectives is important to achieving long-term financial goals.

The rules around areas such as pensions can be complex, and investors are advised to seek professional guidance before taking any action.

Wealth Planners at Barclays Wealth Management can help you understand the effect of tax on your wealth and offer tax efficient wrappers for your investments. They’ll be able to guide you towards making the right decision for your financial planning needs.

Wealth Planners cannot offer tax advice – you should seek that independently. Please bear in mind that tax rules can change in future and their effects on you will depend on your individual circumstances.

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