An effective tax plan can go a long way towards reducing any potential liability for your clients and help them ensure they stay ahead of major deadlines on the tax calendar.
However, it is easier said than done, and many individuals fall foul of tax planning missteps that can affect the efficiency of their overall plan.
One individual your clients are unlikely to want to slip up in front of is foul-mouthed, celebrity chef Gordon Ramsay.
Hell’s Kitchen, Ramsay’s popular cooking competition, could be the key to drilling in some beneficial lessons that could help your clients avoid making costly mistakes.
Read on to discover four simple tax planning tips your clients can learn from the chefs at Hell’s Kitchen.
1. Don’t forget the basics — your clients should educate themselves on taxes that apply to them
One of the fastest ways aspiring chefs are ejected from Hell’s Kitchen is by making simple, easy to avoid mistakes — such as not knowing their kitchen jargon basics, meat cooking timings, or basic culinary skills.
A study commissioned by the Post Office found that 7 in 10 Brits felt overwhelmed by financial jargon surrounding money and savings. The research also showed that 3 in 10 Brits do not understand tax.
Meanwhile, FT Adviser reports findings that show:
- 1 in 3 Brits earning over £50,000 do not know their current Income Tax bracket
- More than 1 in 4 earning over £100,000 do not know the threshold for needing to complete a self-assessment tax return.
Taking the steps to educate themselves on important tax terminology and how it might apply to them could have a significant boost on your clients’ emotional and financial wellbeing.
2. Learn from mistakes — your clients could carry forward unused allowances
One of the biggest mistakes chefs on Hell’s Kitchen make is not taking the time to “learn the lesson”. Mistakes happen and your clients may overlook a beneficial opportunity or fail to utilise the full amount of an allowance or exemption from time to time.
However, a new tax year gives them an opportunity to learn from the past and make better choices in the future.
Luckily, there are some allowances that can be carried forward into future tax years.
For example, it is possible to take advantage of unused pension Annual Allowance in up to three subsequent tax years, as shown by the table below:
Source: Hargreaves Lansdown
It is also possible to report losses up to four tax years after the tax year in which your clients disposed of an asset, which can be used to their advantage when seeking to reduce their Capital Gains Tax (CGT) liability.
3. Know your ingredients — your clients should learn how to best use various tax-efficient vehicles
One of the rookie mistakes seasoned chefs commonly make on Hell’s Kitchen is simply not knowing their ingredients or how they pair together. On a rare occasion a mystery combination can result in genius, but most of the time it leads to disaster.
Your clients’ tax plans are likely to utilise a wide range of tax-efficient vehicles, such as:
- Pensions
- ISAs
- National Savings & Investments, including Premium Bonds
- The Enterprise Investment Scheme (EIS) or Venture Capital Trusts (VCTs).
Your clients should understand the tools, or “ingredients”, at their disposal and how to best utilise them across their greater tax plan to gain the maximum amount of tax relief.
4. Remember: timing is important — your clients should circle key tax dates on their calendars
Timings can make or break a service in Hell’s Kitchen. Chefs need to know how long a dish needs to cook, when it might need turning, how long any accompaniments might need on their respective stations, and when it’s the right time to bring the dish to the pass.
Similarly, the tax calendar has two major dates that your clients will likely want to build their plans around — the self-assessment deadline and the end of the tax year.
Timing can also be important in knowing when to invest their funds.
For example, according to Hargreaves Lansdown, a few of the perks of investing in an ISA at the start of a tax year rather than the end of it include:
- Gaining an extra year of shelter from tax
- Spreading your investment over the year rather than in one lump sum
- Benefiting from potential “compound returns” from having your money invested longer.
Get in touch
A well-run kitchen has a head chef leading the brigade. If your clients have their heads down tackling their respective tax plans, a simple step to ease the pressure might be seeking out the advice of someone with greater knowledge and experience.
This could help them reduce any liabilities and leave them with more funds leftover to pay for key outgoings such as valuable protection or investing in the growth of their business.
To learn how we might be able to help, they should email info@grey-parrot.co.uk or call 02039 871782 to begin taking steps to optimise their tax situation for the year ahead.
Please note
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
Production
