Financial Planning | How to Plan For a High TAX FREE Income WITHOUT Using Your ISA!

Getting a high TAX FREE income without even needing to dip into your tax free ISA pot in retirement is achievable, and in this video I provide a step by step guide to the allowances and investments that make it possible.

The UK taxation system is one of the most complicated in the world, but with the right financial planning, a tax free income can be produced by using the tax allowances available.

THE TAX SYSTEM AND ALLOWANCES CAN CHANGE AT ANY TIME, but using a variety of investment vehicles will always be sensible and certainly based on the current rules, this is how you can plan to receive a high tax free income without using your ISA.

In order to achieve a high tax free retirement income, it is necessary to understand the order of taxation (which type of income is taxed first):

1. Earned Income
2. Interest
3. Dividends
4. Life Policy Gains
5. Capital Gains

When you know this, it is possible to structure your financial investments to utilise the following allowances:

1. Personal Allowance - for your first £12,500 earned income
2. Starter Rate for Savings Band - for your first £5,000 of savings income (reduces if income exceeds £12,500 until disappearing after £17,500.
3. Personal Savings Allowance - for interest; allows first £1,000 of interest to be tax free if you are a basic rate tax payer and £500 if you are a higher rate tax payer.
4. Dividend allowance - allows first £2,000 dividends to be tax free.
5. Capital Gains Tax Exemption - shelters first £12,300 of capital gains from tax

An ISA (Individual Savings Account) shelters all income and gains from tax, but we can access the above allowances with the following investment vehicles, which I call the four 'buckets':

Pension
Offshore Bond
General Investment Account (GIA)

I am currently obtaining an income of over £73,000 a year for a client TAX FREE, without him having to withdraw from his ISA by taking the following amounts from the above accounts:

Pension - withdrawal of £16,667 (£12,500 income covered by Personal Allowance + £4,167 tax free pension commencement lump sum)

Offshore bond - £6,000 gain utilising the Starter Rate for Savings Band and Personal Savings Allowance + approximately £12,000 return of original capital

GIA - £2,000 dividends

GIA - approximately £37,000 from surrendering holdings (£12,300 gains and remaining £24,700 returned capital).

This produces a £73,000+ tax free withdrawal.

If £100,000 was drawn just from the pension (assuming all pension commencement lump sum had been taken), there would be £27,500 tax on this. Hence a large TAX SAVING is made by spreading the investments between different 'buckets'.

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0:00 Start
1:16 UK Tax System
2:22 Order of Taxation in the UK
3:00 Main Tax Allowances
5:14 Four Investment Vehicles (The Four 'Buckets')
7:34 Providing a £73k+ Tax Free Income
11:12 The Reason Allowances Exist
12:08 What is the Total Tax Saving?
12:58 Applying to Your Own Situation

Видео Financial Planning | How to Plan For a High TAX FREE Income WITHOUT Using Your ISA! канала Chris Bourne - Tax Free Investing Expert