Someone else in your shoes
Eight people like you, with the tax worked out both ways. Pick the closest and change what differs.
Margaret, 68, Devon
Her sister died and left her 180,000. She has a small pension, owns her cottage outright, and is terrified of doing the wrong thing.
The catch: She owes nothing on the inheritance itself, but if she just leaves it in a savings account she will start paying tax on the interest, and the money will sit inside her own estate for her children to be taxed on later.
Tax now
£100,000
After the plan
£99,680
Kept
£2,900
The first three moves
- Use the yearly gift exemptions and the seven year rule
- Check your tax code is right
- Shelter 20,000 in an ISA
Dan, 41, Manchester
Salary of 95,000 with a 20,000 bonus landing in March. First time he has been near six figures.
The catch: The bonus pushes him past 100,000, where his personal allowance is taken away at a rate that makes that slice of pay effectively 60% taxed. Timing and pension contributions fix it almost entirely.
Tax now
£39,893
After the plan
£15,181
Kept
£25,117
The first three moves
- Put 22,000 into your pension
- Bring your income back under 100,000
- Make that pension payment by salary sacrifice instead
Priya, 34, Leeds
Freelance designer, second full year, profit around 72,000 and growing.
The catch: She is paying higher rate tax and National Insurance on everything, has never claimed home working costs, and is at the point where a limited company starts to make sense.
Tax now
£18,659
After the plan
£12,407
Kept
£8,707
The first three moves
- Put 10,000 into your pension
- Look at trading through a limited company
- Claim everything the business actually costs you
Alan, 59, Bristol
Selling the engineering firm he built for around 900,000 and retiring.
The catch: Business Asset Disposal Relief could cut the rate on a large slice of the gain, but only if the conditions have been met for long enough. This is a case for an adviser well before signing.
Tax now
£428,469
After the plan
£393,567
Kept
£44,007
The first three moves
- Put 60,000 into your pension
- Look at trading through a limited company
- Transfer part of the asset to your husband, wife or civil partner first