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Old Mutual Wealth: Five tax tips that demonstrate the value of advice

Tax Trust and ISA news for Financial Advisers and Paraplanners

27 Feb 2019

Old Mutual Wealth: Five tax tips that demonstrate the value of advice

Never has it been more important to clearly demonstrate the value of advice. Peace of mind is hard to quantify. The amount of tax saved is not.

1.      Claiming the marriage allowance

The marriage allowance is a simple way of reducing a married couple’s income tax bill. It is an allowance that isn’t readily known by the public. Helping clients claim it gets the value of your advice off to a great start.

To benefit, the following conditions need to be met:

  • The couple are married or in civil partnership
  • The lowest earning of the couple does not pay income tax or their income is below the personal allowance (£11,850 for the 2018/19 tax year and, £12,500 for the 2019/20 tax year)
  • The highest earning of the couple pays income tax at the basic rate (which usually means their income is between £11,851 and £46,350 for the 2018/19 tax year or between £12,501 and £50,000 for the 2019/20 tax year). In Scotland, this is equivalent to them paying income tax at the starter, basic or intermediate rate.

The marriage allowance lets you transfer £1,190 (for the 2018/19 tax year) of personal allowance from the non/low earner to their partner. It can reduce their annual tax bill by up to £238 (for the 2018/19 tax year).

You can backdate a claim to any tax year since 6 April 2015.

Many retired couples have retirement plans skewed to pension income from one of the couple. So it is not uncommon for advisers to have this type of client. If this client has a DC pension, phasing tax free cash in conjunction with this increase in their personal allowance can generate £17,386 before any income tax is payable (by crystallising £17,386 you withdraw 13,040 of tax free income and £4,346 of tax free cash).

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