The Tax Action Report 2013* revealed that consumers are set to unnecessarily gift £4.6 billion to the taxman through inefficient tax planning. But there’s no reason for you to be part of this statistic. This article explains where you stand and provides guidance that may help you become more tax-efficient.
* Source: The Tax Action Report, unbiased.co.uk 2013
Tax-efficient savings and investments
Most people think that HM Revenue & Customs (HMRC) just receive taxes, but there are plenty of ways they offer tax relief too.
For example on 6 April 2013, the ISA limit increased again to £11,520, up to £5,760 of this overall limit can be saved in a cash ISA with one provider. The remainder of the limit can be invested in a Stocks and Shares ISA with either the same or another provider. Alternatively the full £11,520 can be invested in a Stocks and Shares ISA with one provider.
You enjoy a tax saving if you pay money into a pension too. Basic-rate taxpayers enjoy income tax relief at 20%, which means that for every £80 you pay into your pension, you end up with £100 paid in to your fund. Taxpayers who pay more than the basic rate receive income tax relief at their highest marginal rate subject to certain limits. So if you’re a higher-rate tax payer, you can receive 40% or even 45% tax relief this tax year, making the attraction of paying into a pension clear.
Your tax code shouldn't be an enigma
Your tax code is simply the code your employer or pension provider uses to calculate the amount of tax to deduct from your pay or pension. It's that simple. But if you need to know more than that it's best to talk to a tax specialist or contact HMRC directly.
It also helps if you know the personal allowances for the tax band that you’re in. The amount of income anyone can have without paying income tax is £9,440, the 40% threshold for higher earners is currently £32,010 with the 45% threshold at over £150,000. If your income is more than £100,000 you lose £1 of allowance for every £2 of income.
Your best approach may change with age
The way you approach tax and how it will affect you will vary depending on where you are in life.
If you're starting a family, you might be interested to know that your children also have a tax-free allowance of £9,440. If you're looking to the long term, make sure you're not missing out on all the tax-efficient incentives HMRC offers you with a pension. Or if you're near retirement perhaps you might prefer something that lets you get your hands on your money quickly, like a cash ISA.
Make it your business to be tax-efficient
If you're setting up your own business, your tax circumstances change according to whether you’re self-employed, a company or a partnership and, of course, how much money you expect to make.
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.
*Our opening hours are Monday to Friday 8am to 9pm and 9:30am to 7pm on Saturday. Calls may be monitored or recorded.
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 pages or;
- Call us on 0800 328 1298 to book an initial no-obligation consultation with a Premier Client Manager. 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.
The value of investments (and any income received from them) can fall as well as rise and you may not get back what you invested. For some investments this can also happen as a result of exchange rate fluctuations as shares and funds may have an exposure to overseas markets. You should aim to invest for at least five years.
Pensions are not normally accessible until retirement benefits are taken.
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.
