When planning your finances it is important to distinguish between savings and investments.

For our purposes, “Savings” generally means an amount of money that you set aside, which you can access relatively quickly, often for a specific need or purchase, like a holiday, a new car or too serve as your 'rainy day' fund. The most common way of saving is using a bank or building society deposit account, where your money can earn some interest.

The term “Investments,” on the other hand, means money that is set aside to grow for a longer period, - usually at least 5 years. You need to be comfortable with committing investment money for this length of time, and shouldn't consider investing until you have enough savings in place to cover potential emergencies first.

The amount of profits (or the ‘return') you're seeking, balanced by the risk you are prepared to accept and the length of time you can envisage leaving the money invested, are the main factors that your adviser will agree with you before they suggest the most suitable product or plan for you to invest in. He (or she) will discuss with you in detail all the relevant issues before making any recommendations. If you are not sure about anything, don't proceed, but ask for further explanation.

Savings and Investment products range from bank accounts, cash ISA's and Government-backed products such as National Savings, through collective investment schemes, from commercial property funds, equity ISAs, unit trusts and investment bonds, to company shares. The level of ‘return' or profit you can reasonably expect varies widely, and so does the ‘risk' associated with each, and it is vital you take independent advice from advisers who are experienced in this specialist area of financial planning.

Remember, the value of investments can fall as well as rise and you may not get back all of your original investment.

INHERITANCE TAX

In the eighties and nineties Inheritance Tax (or IHT) was more of an issue for a minority of people, those we would call ‘wealthy'. However, the steady increase in house prices over the years has meant that IHT is becoming a serious issue for more and more people every year, and to ignore it could be the biggest and most costly mistake you could make.

Inheritance Tax is quite a complex aspect of financial planning, but in simple terms it is a ‘wealth tax', paid on death, at a flat rate of 40% on the value of everything you own above a total of £285,000. This figure increases a little each year and is known as the Nil Rate Band threshold. So, if you're a UK resident the IHT total includes all your worldwide assets, your house, any other property, cash, savings, and investments.

Somebody dying with assets worth £500,000 could mean their heirs are faced with an IHT bill of £86,000, which has to be paid before the deceased's estate can change hands, which works out at 17.2% of everything they owned.

There are various allowances, ‘exemptions', and other very effective financial planning methods that can be used to reduce (or mitigate) this tax, and it has been said that for many people “Inheritance Tax is a voluntary tax”, if you know how to plan effectively. One of our advisers will be happy to assess your potential tax liability and discuss the ways in which this may be reduced or possibly avoided altogether

The easy way to arrange a consultation with us:

Call us on FREEPHONE 0800 980 1795

or

email ifa@haltoninsurance.co.uk