Getting a bonus? Don’t lose it to the taxman!

 In Financial Planning, Investments, Investments and Tax Planning

Event Date:

If you are an employee, you may be fortunate enough to receive a bonus, a reflection of your contribution to your employer. If you are expecting a bonus sometime soon, you may already have mentally accounted for the money. This is the modern term for what previous generations did when they put the money in ‘pots’, (either virtually or physically) and allocated it for certain bills or activities.

You may have already ‘spent’ your bonus before you have received it. For example, you may have split the bonus to:

• Pay off debts, especially the high interest expensive ones,
• Put toward a holiday, and /or
• Put aside into that ‘rainy day’ or retirement pot.

All of the above are sensible ways of you ‘spending’ your bonus. There are, however, valuable tax allowances which, if used efficiently, can increase the effectiveness of your ‘spending’, both legally and ethically. The clock is, however ticking. You will need to consider your options as you may need to take action before you receive your bonus.

Tax efficient investments

Many people have heard of and invested in tax efficient Individual Savings Accounts (ISAs) or one of their many variations. Investment options for ISAs range from deposit accounts like building society accounts to equity-based choices. Using part of your bonus to fund an ISA now will keep future growth free from income and capital gains tax.

Pension contributions

You could allocate part, or all, of your bonus towards the greatest holiday of your lifetime, your retirement, whilst getting the taxman and possibly your employer, to add to your retirement pot. Regulations mean you can now get tax relief on pensions contributions of up to 100% of your salary each year (subject to annual and lifetime limits). You could use your bonus and the taxman’s allowances to maximise your pension contributions, so you don’t lose out on your holiday of a lifetime.

Inheritance Tax

Inheritance Tax is often referred to as a ‘voluntary’ tax. Current tax legislation allows people a number of legal and ethical ways to help reduce or avoid Inheritance Tax. One of those ways is to gift money to beneficiaries and doing so out of a bonus payment may be an efficient option for you to consider. Now, perhaps, might be the right time to start planning on how to stop your beneficiaries losing money to the taxman, unnecessarily.

Next steps

If the clock is ticking to your next bonus payment, let me help you reduce the taxman’s take of your hard-earned money so you don’t lose out and keep it where it belongs.

If you’d like to learn more, please get in touch now and stop losing money to the taxman unnecessarily.

Tax treatment varies according to individual circumstances and is subject to change.

Contact us today for an initial, no-obligation meeting around your financial planning needs.

During our discussions with our clients, we take the time to understand their feelings about responsible investing and its importance to them. This can range from being generally aware through to being completely dedicated.

We approach all conversations ethically and take great pride in working within the remit that feels most comfortable to a client when it comes to investing.

If you would like to know more about how we can incorporate your feelings in to your investments, then please get in touch.

Jessica McGowan
Jessica began her career in Financial Services in 2001 and has gained a wide range of experience working with clients from all walks of life, guiding them through the many complex aspects of financial planning to ensure that they fully understand their objectives, options and desired outcomes. Jessica prides herself on delivering an excellent service for her clients ensuring that they are well looked after through every stage of the financial planning process, firmly believing in the empathetic and emotional side of the process as much as the facts and financials. What the Riverfall team say: “Jess has to be the most organised person on the planet! Her Outlook calendar is a thing of beauty!