What happens if I need to plan ahead for retirement?

Thinking very carefully about retirement planning is vital for anyone who wants to enjoy a financially comfortable life in their later years and eventually pass on their legacy to the next generation in a tax-efficient way.

However, there are a confusing array of retirement planning options available and savers are sure to face a number of complex tax challenges along the way. At a time when life expectancy is on the rise and healthcare is forever evolving, many Britons are living for 20 to 30 years after they retire, which is why making adequate preparations for retirement is now more important than ever before.

When it comes to exploring investment options, there are a number of different types of investments individuals can consider, ranging from ISAs and traditional savings products to property investments and pensions. However, each of these has its own tax and financial implications which investors need to plan for.

Firstly, those who decide to invest in property need to factor in the costs of Stamp Duty Land Tax (SDLT) on additional property purchases, and the phasing out of mortgage interest tax relief if they intend to let out a property in order to supplement their retirement income.

Similarly, anyone who is investing in a property with a view to selling it on needs to plan ahead for the Capital Gains Tax (CGT) implications of this.

Secondly, it is important to remember that pensions are one of the most important aspects of retirement planning – and therefore need to be considered. Equally important, however, is structuring your investments in a tax-efficient way and ensuring that the contributions you pay towards your pensions benefit from tax relief where appropriate.

It is also important to consider the benefits of life insurance, long-term care and medical insurance in order to safeguard yourself and ensure that you and your family are guaranteed a good quality of life.

Thirdly, if you are a business owner, you might wish to pass your business on to other members of your family when you retire, or sell the business on. Whatever your wishes, you will need to seek specialist tax advice and plan ahead accordingly from an early stage to avoid facing unfavourable tax consequences.

Finally, it is important to think ahead about the tax implications of passing on your legacy after death. Drafting a Will can help you to ensure that your estate is passed on in line with your wishes when you die. However, you will need to think about the Inheritance Tax (IHT) implications of passing on your legacy and plan ahead accordingly.

In England and Wales, each individual is entitled to a tax-free allowance of £325,000, above which estates will attract IHT at a rate of 40 per cent. Fortunately, there are various ways you can mitigate your IHT liability, such as by leaving money to a charity in your Will or passing property down to direct lineal descendants using the residence nil rate band (RNRB).

Good investment and future planning is hard work, which is why it is always best to seek specialist advice at the earliest possible opportunity.

To find out more, please get in touch with JW Hinks today.