UK Year End Planning – Using your UK Capital Gains Tax (CGT) Allowance

The 2016/17 UK tax year will come to a close on 5 April 2017. Each year UK resident individuals paying tax on the Arising Basis are provided a capital gains tax allowance whereby the capital gains are exempt from tax until surpassing the relevant threshold for the year. For the 2016/17 tax year, the UK CGT allowance is £11,100. So, from a UK perspective, the first £11,100 of gains realised per individual is excluded from tax regardless of income levels.

How an Excluded Property Trust can help a US person living in the UK plan for UK IHT

Many Americans living in the UK are considered to be non-domiciled for UK inheritance tax purposes. Under new rules set to take effect in April this year, a non-domiciled individual becomes deemed domicile for inheritance tax purposes when they have been resident in the UK for more than 15 out of the last 20 years. When an individual is deemed domicile for UK inheritance tax purposes, the UK will generally apply its inheritance tax rules on an individual’s worldwide assets.

Ensure you have a tax-efficient investment and saving plan

Having clearly defined personal wealth goals and objectives is the first step towards determining an appropriate investment strategy and asset allocation. The additional value add comes with giving proper consideration as to how to meet your goals in the most tax-efficient and optimal manner. As a US person living in the UK, you want to make sure that you avoid the tax traps that are littered within the investment world to mitigate any overall costs of investing.

Below are some general planning considerations for optimising tax-efficiency. You should consider with a US-UK tax adviser on which strategies may make sense for your individual needs.

The Big Questions About Trump’s Estate Tax Plans

President-elect Trump has promised a tax overhaul within the first 100 days of his presidency.  As wealth managers/planners, it’s important to understand the proposed changes and how they could impact our clients’ lives.  To that end, below are some questions that will help whiten our hair even more…at least until we have some clarity.  It’s very difficult to plan if there are no concrete conclusions.

US Year End Planning: Pay your UK taxes before 31 December

As you plan for year-end, one of the important things for US persons living overseas to pay attention to is matching their foreign taxes paid to when the income will be recognised as taxable in the US. This is especially important for those living in the UK as the tax years differ which can result in a timing difference in when taxes are paid. As many already know, the US tax year is based on the calendar year and the UK tax year runs from 6 April to 5 April with taxes due by 31 January of the following year.

Year End Planning – Check off your RMDs from your “To Do” list

It’s that time of the year again. Time to make sure that any year-end financial items are taken care of before the end of the US tax year. I know, it is one more thing to do on the never ending list that always seems to grow longer as opposed to shrink. But, there are some things that are very important to take care of due to the potential high cost of not doing so.

One of those items is making sure that any Required Minimum Distributions, otherwise known as RMDs, are taken from US retirement accounts each year. If you do not take your required distributions, or if the distributions do not end up being large enough, you may have to pay a 50% excise tax on the amount not distributed as required.

Saving for your children’s education

As the costs of education continue to rise, many parents say that they want to think about how they can save towards their children’s anticipated education expenses to help lessen the future burden. Even if you are unable to save substantial sums of money, putting money aside early can help create a sizable nest egg to put towards university costs. After all, the more time you have on your side, the more the savings have the ability to benefit from compound growth.

Rather than looking to set aside larger sums of money each year, it can sometimes be beneficial to work out a monthly amount that is feasible to set aside for savings. This tactic allows the savings process to become part of your regular expenses and for many people will not noticeably impact day-to-day living. Many times grandparents and other close family members are keen to help contribute towards savings through monetary gifts while the child is very young and generally unaware of what presents they are getting for special occasions.

A planning opportunity for US 401(k) distributions

There is much focus around the years spent saving for retirement and the ways to accumulate assets in a tax-efficient manner. However, there tends to be less focus around how to distribute retirement assets efficiently. There are the usual rules of thumb: draw down taxable assets first, then tax deferred, then tax exempt. But, there can also be unique opportunities to create buckets of pre-tax and post-tax assets within tax deferred and tax exempt accounts to help facilitate drawdown.

An old IKEA advert reminds everyone what children really want this Christmas

As the holiday season has officially been in full swing for a few weeks now, it is hard not to get caught up in the gift buying for friends and family. Everyone wants to put a smile on the faces of their loved ones during the holidays and it’s often hard to beat watching the joyful expressions of little ones as they unwrap new toys.

However, we were recently reminded of a heart-warming advert produced by IKEA that provides some interesting insight into what children really want during the holiday season (and all year long). The advert was filmed in Spain with English subtitles. It asks children to write two letters – one to the Three Kings (their equivalent of Santa) and one to their parents – listing out what they want for Christmas. Not surprisingly, the letter to Santa asked for many of the normal materialistic things.

It was the letter to their parents that revealed a much deeper meaning to the holiday season. The children universally asked to have more time with their families. And, when they were told that they could only send one of the letters, the children chose to send the letter to their parents. This inevitably stirred an emotional reaction and serves as a timely reminder that there are many more things that will bring that joyful expression to children’s faces this holiday season.

Watch the full advert here…

For more wealth planning tips and tidbits from MASECO read our 39 Steps to Smart Living in the UK