‘Turbulent times and tax changes provide excellent opportunity for advisers to show their worth’
- On September 13, 2023
- By GrowthInvest Marketing
The start of this tax year marked the second year of a six-year freeze in the cash value of income tax thresholds in the UK, which is scheduled to last until the 2027-28 tax year.
It’s not good news for many peoples’ living standards, but it does represent an opportunity for financial advisers to demonstrate the role of tax efficiency in investing and to put consumer duty rules into effective action.
Under consumer duty, advisers need to understand the value they deliver and consider not only fees but also the benefits and advice they offer.
Tax-efficient investments can add enormous value to clients’ financial planning, particularly when the rising tax burden is top of everyone’s financial agenda.
Fiscal drag and a tax freeze
Major taxation measures include the personal allowance – when income tax begins to be due – being frozen at £12,570 and the higher rate threshold – when individuals start paying the 40 per cent rate – remaining at £50,270. The threshold at which the 45 per cent additional rate begins being paid has been cut from £150,000 to £125,140.
Given rising inflation and the need for rising wages to keep pace, plus the rising cost of living in general, millions of people in the UK are becoming more familiar with the term ‘fiscal drag’ and its effects.
Fiscal drag happens when the income level at which taxes start to be collected and the amount of income that can be earned tax-free do not increase at the same rate as inflation or income growth.
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