Later Life Planning: How can I build wealth for retirement?
29 Sep 2022
Retirement is said to be the golden years of someone’s life.
It should be a time for leisure activities, hobbies, or simply doing things that you didn’t have time for whilst working.
That being said, you might be worried about the financial implications of retirement and beyond.
Having a plan to achieve your retirement goals is paramount.
In this article, we’ll be discussing two legitimate ways you can build wealth for retirement:
- Through investment
- Tax-free pensions contributions
We’ll be considering the above in terms of careful tax planning. Without knowing where to start, it can be difficult to know if a particular course of action is the most tax-efficient way to build wealth for your retirement.
The wrong course of action can also create unwanted tax problems later down the line.
What is the Enterprise Investment Scheme (EIS)?
The EIS is a great way to not only build a portfolio of investments but also take advantage of the numerous tax breaks the scheme offers.
The scheme is designed to promote investment in early-stage companies that are not on a stock exchange.
It is in your best interests to start looking into the EIS as soon as possible, as many of the aforementioned tax breaks are based on the amount of time the investment is held.
For example, if you hold an investment through the EIS for three years, you won’t pay Capital Gains Tax on gains realised on the disposal of the investment.
If you hold the investment for two years, you will be eligible for Inheritance Tax relief.
EIS offers investors Income Tax relief of 30 per cent.
What is the Seed Enterprise Investment Scheme (SEIS)?
Much like the EIS, the Seed Enterprise Investment Scheme offers a selection of generous tax breaks.
It is designed to stimulate investment into start-up companies that are raising their first £150,000 in external equity capital.
From April 2023, companies can raise £250,000 in SEIS and can raise SEIS within their first three years of trading compared to the previous two years.
The Income Tax relief on SEIS investments is 50 per cent.
Tax-free pension contributions
Putting your money into a pension is a tax-efficient strategy that you should consider.
Capital gains tax and investment income are tax-free within pension accounts. The Government will also provide tax relief if you pay into a pension.
This tax relief is paid on your pension contributions at the highest rate of the Income Tax you pay. So, for example, if you are a higher-rate taxpayer you will receive 40 per cent tax relief.
Contact us today to see how we help you achieve your retirement goals.