Personal tax planning for High-Net-Worth Individuals (HNWI)

When it comes to personal tax planning, High-Net-Worth Individuals (HNWI) require the skills of experienced, specialised chartered accountants to ensure their wealth is working for, not against them.

Seeking the advice of an IFA alongside that of an accountant is also hugely beneficial to help HNWI plan and manage their wealth, both for now and in the future.

At CTT Accountancy, we not only have experience providing HNWI with a comprehensive, personalised accounting service, we also have the expertise of CTT’s in-house Private Client team to provide our HNW clients with professional independent financial advice under one roof.

In this article, we’ll look at the benefits of personal tax planning for HNWI and the advantages of using an accountancy practice that works closely with your IFA.

What is a High-Net-Worth Individual (HNWI)?

While there isn’t a precise definition for high-net-worth individuals, HMRC generally regards those with assets totalling £10 million or above as falling into this category. Nonetheless, if your assets exceed £1 million or you possess a six-figure annual income, seeking guidance from an experienced chartered accountant is advantageous for personal tax planning purposes.

What is personal tax planning?

The aim of personal tax planning is to lower the taxes you owe on your income or assets, depending on your unique financial situation. This is especially significant for those with six-figure salaries and HNWI benefitting from other sources of income such as interest on cash reserves.

Personal tax planning involves a chartered accountant analysing how your assets are held or your income is received and making adjustments to achieve the most tax-efficient solution for you. As this is subject to change, it’s important you choose a pro-active accountant who will ensure your tax strategy is kept up to date.

Additionally, it could involve seeking the advice of an IFA to invest funds in a tax-efficient vehicle like a pension or an ISA.

How can an accountant help with personal tax planning for HNWI?

A chartered accountant with experience of working with HNWI can help you protect your assets and ensure you benefit from the best tax-allowances, tax-relief, and expenses options available to you. This includes savings on annual taxes, such as Income Tax, and those that arise through business transactions, such as Capital Gains Tax and VAT.

Working with a professional accountancy firm ensures you will always be kept up to date with the latest legislative changes in tax law and that your wealth is continually protected. It will also save you time and expense in the long term and means you can rest assured you are always HMRC compliant.

At CTT Accountancy, we believe strongly in getting to know our clients and understanding their unique needs. You will have the benefit of working closely with a member of our elite team who is assigned specifically to your accounts, so you always speak to the same professional.

You will also have access to our IFA partners within CTT’s Private Client team and enjoy the ease and simplicity of synergising your tax and wealth planning under one roof.

Which areas of tax are primed for personal planning?

An accountant can help you maximise benefits and savings on the following UK taxes:

Income Tax

Individuals earning below £100,000 receive a yearly tax-free allowance, presently set at £12,570. Income surpassing this allowance is taxed at rates ranging from 7.5% to 40%, contingent on the amount and nature of the income received.

When income exceeds £100,000, the personal allowance gradually diminishes and is fully eliminated when income reaches £125,000. Beyond the £150,000 threshold, the tax rate rises to either 45% or 38.1%, depending on the type of income.

Accountants can help you find ways to reduce your Income Tax liabilities by choosing the most tax-efficient routes to income.

Dividend Tax

As a business owner, one way of sourcing an income through your business is through dividends.

In the tax year 2023/24, the allowance is £1,000 (half of its value in 2022/23) and it is anticipated to decrease to £500 in 2024/25. Dividends exceeding this allowance are subject to taxation based on the applicable income tax rate.

Accountants can help you plan your income from dividends to minimise the amount of tax due.

Property Tax

Buying and selling property is an excellent way of investing and diversifying your wealth, but it also comes with associated costs such as Stamp Duty. An accountant can suggest ways in which you can save on Stamp Duty, especially if you have multiple properties within your portfolio.

VAT

Operating a business incurs diverse costs, including travel expenses, insurance, telephone charges, and internet fees. An accountant can deduct these expenses from company profits, effectively lowering your VAT liability.

Capital Gains Tax

The process of buying and selling assets can impact Capital Gains Tax (CGT) responsibilities you incur. Accountants can provide guidance on the most tax-efficient methods for structuring these transactions.

Inheritance tax (IHT)

Working closely with our partners at CTT Private Client, the experts at CTT Accountancy can help you develop a long-term plan to reduce your IHT bill during your lifetime. This will ensure you have a coherent IHT strategy that works in line with your portfolio, estate plans and will to preserve your wealth for future generations.

Why choose CTT Accountancy?

The overlap between accountancy advice and IFA can be confusing, and in some cases, conflicting.

One of the biggest advantages of choosing an experienced chartered accountancy service such as CTT Accountancy is we can also offer the expertise of our Private Client team to further enhance your overall wealth planning strategy. We work closely with our partners to ensure you receive a holistic approach to manging your wealth and finances, both for the current tax year and in the future.

To find out more about the benefits of working with CTT Accountancy for HNWI, contact a member of the team today.