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How one of our advisers saved a client £14,000 in tax

Hugh Breach, Financial Adviser, describes how he advised a client and how they paid less tax as a result.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

As tax year end approaches, my colleagues and I are regularly asked about how to pay less tax. It’s an area we specialise in.

Saving tax isn’t a once a year job. We can look under the bonnet of your finances at any time and look for ways to reduce your tax bill.

But, with the Budget looming, now could be the last time to take advantage of some of the current tax allowances.

Everyone’s circumstances and needs are different, but here’s how I helped one of my clients save £14,000 in tax.

My client’s background

My client got in touch for advice on investing some of the cash savings she’d built up. Her aim was to invest this money so it could help fund a retirement chock full of things to look forward to.

She planned to retire in around 5 to 10 years’ time – a good amount of time for her portfolio to make a difference. Like many clients I speak to, she found investing interesting, but wanted some one-off advice to be confident she was making the right decisions. She was happy to manage her investments after we parted ways, safe in the knowledge she could call on me again at a later date - without being locked in to paying for yearly reviews.

How I helped her save £14,000 in tax

An in-depth understanding of the rules can result in big tax savings. And these savings, coupled with having more money in your pension, could add up to a big difference when you come to retire.

My client was a higher–rate Scottish taxpayer, so the most obvious place for her to achieve both these things, was to use the tax relief available on pension contributions.

But the opportunities didn’t stop there.

In our quest to boost her pension in the most tax efficient way, the ‘carry forward’ rule was a handy weapon to have in our arsenal. This rule effectively allows a second bite at unused pension annual allowance from the previous three tax years.

So we took a dip into her pension history, where I uncovered a gem hiding in plain sight: £42,000 left in unused annual allowance. She was in a strong position and earned enough to allow her to contribute this amount in full to her pension. She did this by contributing more to her workplace pension via salary sacrifice, so she also made a National Insurance saving – all things considered, a good day at the office.

My client managed to save an impressive £14,000 in income tax which means her £42,000 pension contribution effectively only cost her £28,000.

I had one last parting gift. Because she had used her full ISA allowance, I helped her invest some leftover excess cash in an HL Fund and Share Account. I advised her she could move these investments into a more tax efficient account such as an HL Stocks and Shares ISA in the future, via our ‘Bed and ISA’ service. This allows her to take advantage of next year’s ISA allowance without committing more cash.

By working with my client, I was able to give her a clear view on the present and a strong plan for the future. She is now self-sufficient, but is free to call on me again if she needs a helping hand in the future.

This article is not personal advice. Tax rules can change and any benefits depend on personal circumstances. Unlike the security of cash, investments fall as well as rise in value so you could get back less than you put in. If unsure, please seek advice. We can advise you on how to make use of your tax allowances through financial planning but if you need complex tax calculations, we recommend consulting an accountant. Once money is in a pension you cannot usually access it until age 55 (57 from 2028).

New year financial advice offer – No minimum charge

If, like Hugh’s client, you’d like to explore how you might save on your tax bill, now could be the perfect time to seek financial advice from HL.

We’re waiving our minimum advice charge (normally £495+ VAT for telephone advice or £1,495 +VAT for face to face advice) when you book a call with us by 28 February and take (and pay for) advice by 31 August; making expert advice even more accessible and affordable. Book your call to qualify and we’ll call you back at a time that suits you. No personal advice can be given in the initial phone call. Full terms are below.

Book your call

Terms of the offer

What are the full terms of the offer?

1. This offer is that, subject to these terms and conditions, where you contact our Advisory Helpdesk between 2 January 2020 and the close of business 28 February 2020, and decide that you wish to receive advice from us, we will waive our minimum charge of our telephone and face-to-face advice.

2. If you decide that you wish to receive advice from us, we will waive our usual minimum charge of £495 (+VAT) for telephone advice or £1,495 (+VAT) for face-to-face advice, however you will still be charged at our standard rate of 1-2% of the portfolio value being advised upon. For more information regarding our financial advice charges, please visit our website at www.hl.co.uk/financial-advice/advisory-charges.

3. To be eligible you must contact our Advisory Helpdesk if you are interested in taking advice between 2 January 2020 and the close of business 28 February 2020 by calling 0117 317 1690 or by booking a call back with us by our usual close of business on 28 February 2020. You must also decide that you wish to receive advisory services from us, and pay us for advisory services, by our usual close of business on 31 August 2020.

4. You must not be an employee of, or any such employee’s immediate family or household of any Hargreaves Lansdown Group company.

Please note:

5. The offer is limited to one waiver of the minimum charge per client.

6. Only one waiver will be made per address. This means that if more than one person from a single address takes financial advice, you’ll only receive one waiver of the minimum charge.

7. This offer excludes advice provided in respect of Defined Benefit scheme transfers.

8. This offer excludes on-going advice charges.

9. Where any other discount is applied to our advisory charges the voucher will not be valid.

10. Where you qualify for the offer, your Financial Adviser will apply the waiver of the minimum charge to your financial advice agreement.

11. We may amend, extend or withdraw this offer at any time. Details of any such amendment, extension or withdrawal will be posted on our website at www.hl.co.uk/financial-advice

12. This offer will be governed by English law and, in participating, you submit to the jurisdiction of the English courts.

13. References in these terms and conditions to “Hargreaves Lansdown”, “our”, “us” or “we” are to Hargreaves Lansdown Advisory Services Limited (company number 03509545), authorised and regulated by the Financial Conduct Authority (FCA Register number 189627), whose registered office is at 1 College Square South, Anchor Road, Bristol, BS1 5HL. References to the “Hargreaves Lansdown Group” are to Hargreaves Lansdown plc (company number 02122142) and its subsidiaries from time to time.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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