1. Use your tax allowances

Clever use of your tax allowances can help you make the most of your investments. If your partner is a non-taxpayer, use their £6,475 annual tax-free personal allowance, by shifting savings into their name. If they pay basic rate tax and you pay the top rate, again, you should still benefit. However, don’t do this if your relationship is rocky, as you might not see the money again!

You can shelter up to £10,200 (£10,680 from April 1) from the taxman each financial year in stocks and shares, cash and life insurance through your ISA allowance. Anybody with cash to spare should at least use their £5,100 (soon to be £5,340) mini-cash ISA allowance. Rates are more competitive than deposit accounts and the interest is free of tax.

Those with larger sums should consider venture capital trusts (VCTs) or the enterprise investment scheme (EIS). These are both designed to boost investment in fledgling British industry and offer a healthy range of tax breaks.

You can invest up to £200,000 in a VCT, and receive 30% income tax relief; in the an EIS, there is no limit on the amount you can invest, and income tax relief equates to 20%.

2. Pay your tax bill on time

Around nine million Britons are responsible for declaring their own income and paying tax under self-assessment.

HMRC stipulates that all paper tax returns must be submitted by October 31, and all online returns by January 31. If you miss the January 31 deadline, you will be eligible for a £100 fine, plus automatic interest of 3%, calculated on a daily basis. Please note that, if you don’t pay any tax, the late payment penalty does not apply to you. 

Hundreds of thousands of people count the cost of late payment every year; it is thought that around 10% of the 9.3 million people who have to fill in a self-assessment tax return miss the deadline each January. costing them, as a group,  a total of £116m in fines, according to advice unbiased.co.uk

3. Review your tax planning

Inheritance tax (IHT) and capital gains tax (CGT) can eat up your family and business wealth, but with careful planning you can beat the taxman. When you die, the Inland Revenue will take 40% of everything you own above the IHT threshold, or Nil Rate Band, which currently stands at £325,000.

You can move money outside your estate by making gifts (known as potentially exempt transfers), either inside or outside a trust, and it will escape IHT if you survive for a further seven years.

It’s also worth noting that you can transfer all, or part, of your Nil Rate Band to your spouse or partner. That way, in the event of your dying before your spouse or partner, your allowance will transfer to them, for use upon their death.

If you wish to pass family and business assets onto your loved ones in as flexible and tax-efficient manner as possible, set up a trust. Remember though, that these are complex, so take advice from a tax and legal specialist. You may feel healthy, but the earlier you plan the better.

CGT is charged at up to 40% on financial gains above the current annual exemption threshold of £10,100. Couples can make annual gains of £20,200 and pay no tax.

If you pass shares in your business to a family member (other than your spouse), you could face an immediate CGT bill. But if you apply for holdover relief, you can pass on qualifying shares in a private trading company, inside or outside a trust, and defer tax until the beneficiaries or trustees finally dispose of the shares. They would pay the CGT at that point.

4. Review your pension planning

Pensions mis-selling, collapsing final salary schemes, crashing stock markets, the Equitable Life fiasco and meagre state benefits have all spelled disaster for millions of people. Annuity rates have been hit by low interest rates and growing life expectancy. A 65-year-old married man with a £100,000 pension pot would get around £6,590 a year, index-linked, with half that sum going to his wife after he dies. If your planning is in a mess, sort it out now and don’t assume your business will give you the nest egg you need to retire in comfort.

You can take control of your pension planning with a self-invested personal pension (SIPP). This puts you in charge of your pension pot, and you can put money into a range of investments, including unit trusts, bonds, life insurance, cash deposits and even commercial property. The SIPP market has grown at an exponential rate over the past two decades – the industry broke the £75m barrier in 2009, , and conservative forecasters estimate year-on-year growth will continue at 20%.


Stakeholder pensions offer a flexible, low-cost way of putting money aside for your retirement, and you can claim 40% tax relief on any contributions.

5. Balance your investments

The key to successful long-term investing is to build a balanced portfolio across different asset classes, such as stocks and shares, bonds, cash and property, says Philippa Gee, head of Philippa Gee Welath Management. According to Philippa, “different asset classes are more or less attractive than they were a few years ago, depending on what each asset class is, which is why you have to keep regularly reviewing your investments.  The overriding concern of establishing a well diversified portfolio is still key, but how that portfolio is spread out is an essential consideration.

You also need to make sure you have a good blend of equities. “Don’t pour all your money into, say, UK smaller companies or Japanese technology stocks, but spread it across a diverse range of sectors and markets,” advises Gee.

A fair balance should see 50% invested in the UK, around 20% in the US and Europe, and the remaining 10% in racier areas such as technology, the Far East and emerging markets.

Assess your attitude to risk – are you a cautious or aggressive investor? The longer you invest for the more risks you can take, in the hope of getting greater returns.

6. Use a discount broker


There are two ways to buy equity funds and corporate bonds for your ISA allowance – the expensive way and the cheap way.

If you buy a unit trust direct from a fund manager, such as Fidelity, Gartmore, Henderson, Jupiteror Schroders, you can expect to pay initial charges of around 5%. That means you have immediately lost up to £367 of your annual £10,200 ISA allowance.

You will also pay those initial charges if you buy through an independent financial adviser, who will keep them as commission. However, if you buy a trust through a discount broker you could slash that charge to as little as 0%.

Discount brokers sell without financial advice on an execution-only basis, which means they can afford to rebate initial charges to you. Bestinvest, Chelsea Financial Services, Chartwell Direct, Hargreaves Lansdown and Torquil Clark all offer large discounts on thousands of ISA funds. But only use a discount broker if you are confident to invest without financial advice.

7. Change banks


It has long been asserted that high street banks offer customers less interest than other financial outlets, particularly internet banks, and poor customer service. This appears to be backed up by the figures; last September, the Financial Services Authority published a ‘league table’ ranking Britain’s banks according to the number of complaints they received. High street giants Lloyds, Barclays and Santander took the top three places.

If you have a significant cash balance in your bank account, then it’s time you shopped around for someone who can offer you more in the way of service and value.

If you have yet to bank your first six-figure dividend or are simply unhappy with a basic high street service, you may want to consider banking with Smile, the One Account or First Direct; these were ranked one, two and three in the customer satisfaction report published by consumer watchdog Which? last year.

Furthermore, if you are running your own business, the chances are that you will want more of a comprehensive and tailored service than the high street banks can offer. Some, like Barclays, give special banking services for wealthier clients, but for those of you with more complex needs it’s best to look beyond the mass market for a specialist like Coutts.

8. Remortgage

Sainsbury’s Bank estimates UK homeowners could save £7bn a year in interest payments if they switched to a better rate. So if you have a mortgage it’s time to shop around, especially given that mortgage interest rates are at an all-time low. However, you should scour the market for the best deals as rates are changing all the time.

9. Save for your children

The total cost of raising a child is now more than £210,000 including childcare, school fees, food and clothes and further education, according to the Guardian.

This means the earlier you start saving, the better. Most banks and building societies aim to get children into the saving habit early with specially targeted accounts. It’s also worth considering investing £25 a month in a tax-free baby bonds with a friendly society such as the Children’s Mutual. However, you will need to put away far more money than that. There’s a number of investment companies who target parents saving for their children with specially-designed investment funds – www.myeggnest.com offers comprehensive guidance on the various funds available.

10. Make a will

Your Will may be one of the most important documents you can write, yet around two-thirds of people in the UK still haven’t got one, storing massive potential problems for their loved ones. Don’t leave it any longer. Many people assume if you are married and die intestate, your worldly goods automatically go to your partner. But brothers, sisters and even parents may also have a claim. If you have a long-term partner, but are not married, you will be treated as a single person and without a Will, your partner only has a right to assets held jointly.