Income and Capital Gains Tax
We all benefit from government services such as hospitals, roads and schools, so we all need to make a contribution. Nearly everyone who is resident in the UK for tax purposes receives a 'Personal Allowance', which is an amount of taxable income you're allowed to earn or receive each year tax-free.
This tax year income in excess of the personal tax allowance, £9,440 is taxed at 20%. This rises to 40% for income above £32,010 and to 45% for income above £150,000 - and that's before National Insurance contributions.
Individuals who are drawing their pension are still liable for Income Tax, National Insurance Contributions are not payable on pension income. Anyone aged 65 or over at the end of a tax year may be entitled to a higher personal tax allowance, depending on the level of their income.
Capital Gains Tax (CGT) is charged at 18% or 28%, depending on the level of your income, on gains realised from the sale of assets, such as investment properties or shares. However, everyone has an annual CGT allowance, which is currently £10,900 for 2013/2014. If your net gains (after deducting losses) for the year are less than the allowance, no tax is payable.
Inheritance Tax
The Roman Emperor Caesar Augustus broke new ground when he introduced Inheritance Tax (IHT) to provide retirement funds for the military. A modest charge of 5% was levied on inheritances, except legacies left to spouses and children.
In 2013/2014, IHT is still with us and most people can still leave as much as they like to a spouse or registered civil partner. You can leave £325,000 to other beneficiaries, but anything beyond that is taxed at 40%. Any unused part of the 'nil-rate band' on the first death can be added to the 'nil-rate band' of the second, to leave a maximum of £650,000 without incurring any tax.
From 6 April 2012, a reduced rate of IHT of 36% was introduced where 10% of more of the net estate is left to charity.
VAT
Taxes on goods have been popular for hundreds of years. In 1795, for example, Prime Minister William Pitt levied a tax on wig powder to annoy the French, whose fashion for wearing wigs had spread across Europe.
These days, VAT adds 20% to the cost of almost everything that we buy. There are some notable exceptions, such as food, which are zero-rated. There are also some other taxes that cost individuals hundreds of pounds a year, including Council Tax and Road Tax.
Please be aware that the value of tax benefits will depend on individual circumstances and tax rules can change. If you are in any doubt, please seek professional advice.
Check if you qualify for advice
If you have £50,000 or more in savings and investments, you may be eligible for HSBC Premier Financial Advice. See the full eligibility criteria.
If you don't qualify for HSBC Premier Financial Advice or if you'd rather not pay for advice, see other ways we can help.
Eligibility requirements
HSBC Premier Financial Advice is available to UK residents who have £50,000 or more in Savings and Investments and who are at least 18 years old at the time of the initial consultation.
You'll also need to have an HSBC Current Account or Savings Account for us to be able to deduct your fee. We can accept payment from a first direct Current or Savings Account too.
To find out more:
- See our HSBC Premier Financial Advice
- Call us on 0800 328 1298 to book an initial no-obligation consultation with an adviser. Lines are open Monday to Friday 8am to 9pm and 9:30am to 7pm on Saturday. (Textphone: 18001 0800 028 0126).
If you don't qualify for HSBC Premier Financial Advice, or if you'd prefer not to pay for advice, see other ways we can help.
If you are not a UK resident, see our HSBC Expat service.
