How to avoid a hefty tax burden when you come into fortune.
"Nothing in this world is certain, except death and taxes- (Benjamin Franklin). Although this statement is true, there are ways to lessen the amount of tax paid within a lifetime without breaking the law. This is called tax avoidance and is the legal arrangement of the taxpayer's affairs in order to minimise their tax liability. .
I am a 40 year old accountant, married, with two children and have become the fortuitous winner of this week's £3million lottery jackpot. I jointly own a 3 bedroom house with my wife in the UK which we have lived in for 2 years has been valued at £250,000. .
In this essay I will explore tax avoidance methods, ways of investing money and protecting it from the clutches of the taxman. .
Offshore Banking.
Offshore bank accounts are often believed to be illegal or immoral but this is far from the truth. An offshore account is simply an account held in any country outside the UK, preferably where the tax rates are lower then in the UK and tax will not automatically be deducted from interest paid on the account. There are many places where it is beneficial to open an offshore account, from the Channel Islands and Isle of Man to more exotic locations such as Bermuda and the Cayman Islands. Once the offshore account with the highest interest rate is found, when interest is paid gross, it will be the most advantageous means of getting at the money while paying the least amount of tax. UK residents living at home will not benefit from an offshore account, as if the money is to be used in the UK it must be declared on your tax return. However, UK residents living abroad can choose when and where to pay taxes as taxes aren't paid to a particular tax haven. Therefore the individual is allowed to secure the best rates at any given time.
Property.
Capital gains tax is a tax imposed on profit on the sale of capital assets.