By BILL BLEVINS [email protected]
Bill Blevins is the Managing Director of Blevins Franks. He has specialised in expatriate investment and tax planning for over 35 years. He has written books and gives lectures on this subject in Southern Europe and the UK.
Tax increases are impacting most of us in Europe, but the extent to which they affect you often depends on how much attention you pay to tax planning. It still surprises me sometimes how some people worry about every little fall in their investment returns but fail to consider what detrimental impact tax is having on their capital and income.
Whether your investment objective is to preserve your wealth, or to provide an income, or to provide capital growth, for the most effective results you need to protect your capital and income from being eroded by taxation. Paying more tax than you need to could undo some of what your investment strategy has achieved.
You only need to pay unto Caesar that which is due to Caesar, and yet many investors pay more than strictly necessary because they have not structured their investable assets, including their pensions, in the most tax efficient way. The way you hold your capital can make a significant difference to how much tax you pay.
While tax should not necessarily wag the investment dog, you should always talk to a wealth manager to establish what your options are so you can make the most informed decision.
It doesn’t make sense to buy investments one way and pay a high tax on them when you can hold them in a different way, which provides relatively similar results but with a lower tax liability.
Tax mitigation has become more difficult in recent years as governments look to increase tax revenue, but nevertheless opportunities still exist. One of the key things I have learned from over 40 years in this business is that where one door closes, another door opens, albeit in varying degrees.
It’s hard to keep up with it all, so it’s important to seek advice from a professional who keeps fully up to date and who understands how tax changes affect investors like yourself.
I believe that tax planning is a fundamental part of investment planning and your general wealth management. At the end of the day, what matters is not what returns your investment portfolio is showing, but how much of these returns you get to keep after tax.
You should therefore not tackle investment planning without tax planning or tax planning without investment planning. The two are inextricably linked and ideally you want to find a wealth manager who can provide both investment and tax expertise.
There are various benefits to strategic tax planning.
It can reduce income and capital gains tax on your savings, investments and pensions. Many people pay more tax than necessary, such as income tax on bank interest they are not even withdrawing and capital gains tax when switching between investments. You may be able to avoid this.
The less tax you pay, the more you have to spend or save for your future or leave to your heirs.
You may be able to lower the inheritance/succession tax liability for your heirs. Most people would rather leave their wealth to their children or grandchildren than the taxman, yet it’s surprising how many don’t take steps to avoid inheritance taxes.
Tax planning may also be able to make life easier for your heirs. For example, if you hold your investments within the tax efficient structure of an insurance bond and fill in a beneficiary nomination form, your assets should pass directly to your chosen beneficiaries without the need to go through the long and costly probate process.
Last but certainly not least, taking professional advice on your tax planning will give you peace of mind. It’s fairly easy to get DIY tax planning wrong, especially with the goalposts changing all the time, and you may end up with an unexpected tax bill, or worse, facing a tax investigation.
Alternatively your heirs could face this when they inherit your assets. If your financial affairs are set up correctly, legitimately and with the right advice, you won’t have to worry if the taxman does comes calling. Your finances will be set up to work as efficiently as possible and you’ll know you are not leaving your family any tax headaches after you’re gone.
If you are an expatriate living here in Portugal, your tax planning needs to be designed around the local tax rules, but you should also consider what your future circumstances may be.
For example, if you are a British expatriate, do you think there’s any chance you’ll return to the UK in future? If so there are steps you can take now to make your investments tax efficient when you return to the UK, that would not be available after you return.
In summary, you need to protect your wealth in real terms. Professional advice from a firm like Blevins Franks, which combines effective tax planning strategies with investment advice, would maximise your wealth preservation opportunities.
Professional wealth management advice is more important than ever before if you want to protect and grow your wealth, legitimately mitigate the amount of tax that you pay and control when and where you pay it and ensure your wealth will be distributed on your death according to your wishes and with as little inheritance tax as possible.
You’ve worked hard to build up your current wealth, much of it accumulated out of post-tax income, don’t risk losing any more to tax now than you have to.
To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com