Target Accounting offers tailored accounting services for high net worth individuals, ensuring their wealth is effectively managed and protected. As a financial advisor, we offer services such as financial advice, pension advice, investment advice, inheritance tax planning, and insurance advice. With a focus on personalised attention, we provide expert advice and strategic guidance to enhance your financial position, safeguarding your interests for the present and future.
Who is a high net worth individual?
A high net worth individual is often defined as someone with assets totaling £10 million or more, although there is no official definition. However, individuals with assets over £1 million or a substantial annual income in the six-figure range may also benefit from consulting a tax accountant. These professionals can provide valuable advice on tax planning and optimization strategies for such individuals. High net worth financial planning aims to assist individuals in achieving their financial objectives.
Being a high net worth individual why do you need an accountant?
Your accountant can provide valuable guidance on financial planning, protecting your assets, and offering tax-saving strategies to optimize your income and overall financial worth.
Clients who seek tax advice from accountancy firms often report several benefits. Firstly, they are kept informed about the latest changes in legislation, ensuring compliance. Additionally, they receive guidance on how to maximize tax efficiency, leading to potential cost savings. Professional accounting advice not only saves valuable time but also money in the long run. These advantages contribute to the overall value provided by accountancy firms in terms of tax assistance.
Wealth planning & protection
Optimising your financial and tax planning can significantly impact your wealth accumulation and asset management. By strategising and maximising opportunities, you can ensure a beneficial outcome for your financial future.
Investment management is a key component of wealth planning, helping to align investment portfolios with long-term financial goals.
Accountants can provide guidance on structuring asset purchases or sales in order to minimise Stamp Duty Land Tax and Capital Gains Tax liabilities. They can also offer ongoing strategies to manage Income Tax liabilities and advise on tax efficient shelters. Seeking their expertise can help individuals optimise their tax positions and maximise their financial outcomes.
High net worth estate planning
Estate planning is crucial to ensure your family’s financial security after your demise. Due to the freezing of Inheritance Tax thresholds, an increasing number of individuals, even those without substantial wealth, are now subject to this tax. Accordingly, it is vital to carefully review and devise strategies for inheritance tax planning to minimize the impact of Inheritance Tax and protect your loved ones’ inheritance. Seek professional advice to navigate this complex area effectively.
Planning your estate and managing your tax affairs is an increasingly important task to prevent excessive losses to HM Revenue and Customs. An experienced accountant can provide valuable tools, such as advice on minimising taxable assets while alive and assisting with will planning.
Investment portfolio
A well-rounded investment portfolio goes beyond just company shares and considers a mix of different assets. A skilled fund manager aims for a balanced portfolio that also addresses potential taxation concerns. This holistic approach helps maximize returns and manage risks effectively. Additionally, a well-rounded investment portfolio can generate income and capital gains that are free of income and capital gains tax when held within tax-efficient structures.
Tax friendly investments
Tax friendly investments are an effective way to minimise your tax liability. They can shield your funds from Income Tax and Capital Gains Tax or provide deductions to lower your tax bill.
Certain investments, such as pensions, can provide income tax relief on personal contributions.
Inheritance tax
Inheritance tax is imposed on individuals who possess assets totaling over £325,000 upon their demise. To minimize the tax burden upon death, individuals have various options, one being the transfer of assets while alive.
The tax threshold for paying Inheritance Tax (IHT) has remained unchanged for several years. This means that more individuals will be affected by IHT, even if they do not consider themselves as high net worth individuals. This freezing of the threshold will lead to an increase in the number of taxpayers impacted by IHT.
Capital gains tax
Capital Gains Tax (CGT) is a tax that applies to the profits earned from selling assets. Additionally, CGT can also be applicable to gifts made where no money is received. In such cases, the recipient is treated as having received Market Value for the gift. The annual tax free allowance for Capital Gains is currently set at £12,300. Any amount exceeding this allowance is subject to taxation, at a rate between 10% to 28%. The specific tax rate depends on the individual’s total income for the tax year and the type of asset that was sold.
Personal taxation
Personal tax is a payment made by individuals on their income and sometimes on their Capital Gains. Those earning less than £100,000 annually receive a tax-free allowance of £12,570 per year. Any income exceeding this allowance is subjected to tax rates ranging from 7.5% to 40%, depending on the type and amount of income received. Utilizing all available income tax allowances is crucial to achieve significant tax savings.
The personal allowance for individuals earning over £100,000 gradually diminishes until it is eliminated for those earning more than £125,000. Moreover, when income surpasses £150,000, the tax rate rises to either 45% or 38.1%, depending on the nature of the income.
Capital gains in excess of the annual allowance are included in a person’s taxable income to determine which tax bracket the gains will be taxed under. If the gains fall within the basic rate band, the tax rate is typically 10% or 18%. However, if the gains surpass the higher rate tax threshold, the tax rate increases to 20% or 28%.
High Net Worth Individuals Accounting
What is the difference between mass affluent and high net worth individuals?
The term ‘mass affluent’ generally refers to individuals who possess disposable wealth below £100k, which includes both cash reserves and sellable assets. According to HMRC, an individual is considered to have a high net worth if their assets exceed £10 Million. However, for tax planning purposes, individuals with a six figure income or disposable wealth exceeding £1 Million are generally regarded as high net worth.
What is personal tax planning?
Personal tax planning involves tailored tax planning strategies that can help individuals minimize the amount of tax they owe. By altering how assets are held and how income is received, people can potentially reduce their tax burden. Additionally, investing in tax-efficient options like pensions or ISAs can also contribute to lowering taxes. Overall, personal tax planning aims to optimize one’s financial situation while respecting legal frameworks.
What are limitations of tax planning?
Tax planning is a highly complex process with few limitations, but certain activities may necessitate the expertise of independent financial advisers or legal professionals.
Non UK residents will face additional complexities when planning for UK taxes, as they must consider the implications of their foreign affairs. Ensuring that such planning takes these factors into account is crucial for its effectiveness.
Tax planning can be advantageous for non UK domiciled individuals, but it is crucial to strike a balance between UK taxes and international obligations.
What is the difference between will planning and estate planning?
The term “will” is often used to refer to the document that distributes your estate after death. However, it can also serve additional purposes. It can include instructions for your funeral and designate guardians for minor children, among other things.
Estate planning is an important process aimed at managing and preserving your wealth. It may encompass strategies to reduce your net worth before death, ultimately allowing for a potential decrease in the amount of Inheritance Tax payable. Careful and effective estate planning can greatly impact the tax burden upon your passing.
How We can help
At Target Accounting, We offer comprehensive tax services to help clients maintain compliance, meet tax deadlines, and optimise their financial structure for tax efficiency. Our team focuses on tax planning for upcoming transactions, ensuring clients only pay the necessary amount of tax. Additionally, we provide expert advice to minimise Inheritance Tax liabilities, allowing clients to preserve their wealth.
Frequently Asked Questions – FAQs
Why do high net worth individuals need an accountant?
High net worth individuals often have complex financial portfolios, including investments, real estate, and business interests. An accountant can provide expert guidance on tax planning, wealth management, and financial strategy to optimize their finances.
What services can an accountant provide for high net worth individuals?
Accountants can offer a range of services, including tax planning, estate planning, risk management, financial reporting, and investment analysis tailored to the unique needs of high net worth individuals.
How can an accountant help with tax planning for high net worth individuals?
Accountants can help high net worth individuals navigate complex tax laws, minimize tax liabilities, and take advantage of tax-saving strategies to preserve and grow their wealth.
What are the benefits of hiring an accountant who specializes in high net worth individuals?
Specialised accountants can offer a deep understanding of the unique financial challenges and opportunities faced by high net worth individuals, providing tailored solutions and personalized attention.
How can an accountant assist with wealth management for high net worth individuals?
Accountants can work closely with high net worth individuals to develop comprehensive wealth management services, including investment analysis, asset protection, and succession planning to ensure long-term financial security.
What should high net worth individuals look for when choosing an accountant?
When selecting an accountant, high net worth individuals should consider factors such as experience working with similar clients, expertise in tax and wealth management, professional certifications, and a strong track record of success in serving high net worth individuals.
