The 5 biggest financial planning mistakes that people make…
1. Not having a Will in place. Without a Will you lose control of what happens to your estate. Who looks after your children? What happens to your money and assets? How much more tax will your children end up paying? Is your Will still on your ‘To Do’ list?
2. Not taking advantage of your dwindling annual tax allowances...
i. Are you using your £10,200 annual ISA allowance? If you invested your full allowance ever year for 10 years (assuming a 5% annual growth) you could potentially have a capital sum of £142,510, which would be free of all personal tax.
ii. Sophisticated investors could consider their Venture Capital Trust (VCT) allowance. VCTs are one of the most tax efficient investments available. You get 30% relief on your contribution, tax free growth and income if you hold the investment for 5 years.
iii. Are you rebasing your portfolio on an annual basis to take advantage of your annual £10,100 Capital Gains Tax (CGT) allowance?
iv. Pensions are an often neglected tax mitigation vehicle. Did you know as a higher rate tax payer you can get a 66% return on your investment, day one, thanks to the tax man?
3. Trusts. How big is your children’s inheritance tax bill?
i. Very few people write their life cover policies into trust. For each £100,000 of life cover placed into trust you could potentially save your beneficiaries £40,000 in Inheritance Tax.
ii. Does your Death in Service benefit through work go direct to spouse or partner? If so this may not be structured in the most Inheritance Tax efficient manner.
4. Are you wasting money on a Joint Life Cover policy?
i. Most people tend to have a Joint Life Policy to cover their mortgage. By splitting this policy into two you get potentially double the benefit with a small increase in the premium. Thereby getting the policy to work for you rather than the insurance company.
ii. Splitting the cover also makes it a lot easier to put into trust to mitigate Inheritance Tax.
5. Not having clearly defined financial goals. As with almost everything else in life, not having goals or any specific plans for meeting them, can mean we drift along leaving our future to chance.
If you suffer from any of the above and would like to break out of your financial planning malaise please contact Thomas Paterson, Financial Adviser at Welbeck Consulting on 020 7776 2052 or send him an email at firstname.lastname@example.org
Welbeck Consulting is a trading name of Welbeck Consulting UK LLP, which is an appointed representative of Openwork Limited which is authorised and regulated by the Financial Services Authority. Any views or opinions expressed above are those of the author only and as such should not be used as the basis for any financial planning. We always recommend you seek professional assistance regarding your own specific financial affairs.