Working and saving

This section of our site contains guides on income tax and traditional savings products, such as bank, building society and deposit accounts as well as ISAs.

Income Tax

This is the most frequently encountered tax, and many people pay too much, either as a result of lack of knowledge or poor planning. We can help you ensure that you are paying the right amount of tax. We can help identify ways to save tax, and ensure that your affairs are run in a tax efficient manner. Tax planning is not regulated by the Financial Conduct Authority.

Our top tax-saving tips

There are many ways to save tax. When we assess your overall financial position, one of the key elements of our planning will be to ensure that your arrangements are tax-efficient.

    • Make sure that the married couple’s allowance goes to the person in the highest tax band (Note: only available if one partner was born before 6th April 1935)
    • Make sure that non-taxpayers are invested in areas where they either get paid without deduction of tax, or can reclaim any taxes that have been paid
    • Make sure that when a couple have investments, the income from those investments is classed as belonging to the partner in the lowest tax band. This can produce significant savings
    • For higher and additional rate taxpayers, seek to ensure effective use is made of any tax breaks and gross-paying, tax-free investments

Maximising pension contributions when relevant, producing instant savings through tax relief on your contributions. Consider also funding pensions for partners

  • Errors in the tax calculation. It is fair to say that for people whose tax affairs are simple (i.e. all dealt with through PAYE) errors are neither common nor significant. However for those whose affairs require them to complete self-assessment forms then errors do occur and it is worth having the figures checked.

The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future. This information is based on our understanding of current HMRC rules and practice. Tax rules and allowances are not guaranteed and may change in the future.

Taxation – residence and domicile

Some UK resident but non-domiciled individuals can elect to be taxed on their overseas income and gains on a remittance basis. Those who do not elect are taxed on their worldwide income and gains on an arising basis.

Non-UK domiciled individuals are deemed UK domiciled if they have been resident in the UK for 15 of the past 20 tax years and the remittance basis is no longer an option.

In addition individuals who were born in the UK and who have a UK domicile of origin revert to their UK domiciled status whilst they are resident in the UK.

Individuals who can use the remittance basis are charged according to how long they have been UK resident.

The charge is £60,000 for those who have been UK resident for at least 12 of the previous 14 tax years.

A £30,000 charge applies to those who have been resident for at least 7 of the preceding 9 tax years.

The tax charge will be removed when non-domiciled individuals remit foreign income or capital gain for the purpose of a qualifying investment in a qualifying company.

The rules relating to residence and domicile involve some quite complex tax principles, which have a potentially significant impact on a wide range of individuals and their tax liabilities. Contact us to discuss your own situation.

Rules relating to residence and domicile

The concept of residence in the UK for tax purposes determines to what extent an individual is liable to UK tax on their income.

If you have UK income you may need to pay UK tax even if you’re non-resident, eg if you have income from renting a property in the UK. The UK has ‘double taxation agreements’ with many countries to make sure you don’t pay tax twice.

When an individual is UK resident for tax purposes, they are also liable for tax on income arising anywhere else in the world, and this holds true for all UK residents. Eligible non-doms can choose the remittance basis in order not to be taxed on all their foreign income.

However, the basis on which some are taxed differs – this affects the amount of income chargeable to tax in any tax year.

The rules require individuals to claim the remittance basis in future, and for long-term residents when the unremitted income or gains exceed £2,000, the remittance basis will only be available on payment of £60,000 (£30,000 in some cases) per annum.

So, a non-domiciled individual with £5,000 of overseas investment income would be liable to pay UK income tax on his overseas income, as it would not be worth him paying the £60,000 tariff to avoid it.

In addition, those who claim a remittance basis will also lose their UK personal allowances and CGT annual allowance. The loss of personal allowances and annual exemption will affect the tax bill on UK income, even if no foreign income is remitted to the UK.

The remittance basis will apply automatically if an individual’s non-UK income and gains are less than £2,000 in the year, and the individual will not lose his UK allowances in this situation.

If the individual wishes to claim the remittance basis on income in excess of £2,000, he will lose his personal allowances and CGT annual allowance.

This will apply to all of those seeking to be taxed on a remittance basis, whether they are required to pay the flat fee or not.

Finally, for those who meet one of the longer-term residence tests, a tax charge (as detailed above) will be due in addition to the loss of personal allowances.

Tax will also be due on remitted income in addition to the flat charge, and if income is remitted to the UK to pay the flat charge, then further tax will arise on that remittance.

Paying the remittance basis charge with foreign income and gains is not a remittance if the payment is made from funds held outside the UK, directly to HMRC by cheque (drawn on a foreign bank account) or an electronic transfer of funds.

The remittance basis charge counts as UK income tax paid for the purpose of Gift Aid.

Statutory residence test

A statutory residence test determines whether you are UK resident for a particular tax year. This comprises 3 elements:

1. Is the individual automatically UK resident?

2. Is the individual automatically resident overseas?

3. If neither of these categories, are there sufficient ties to make them resident in the UK?

Please contact us to discuss your own situation with regard to your domicile and available tax planning opportunities.

This information is based on our understanding of current tax law and practice, which may change in the future. The way in which tax charges, reliefs and allowances are applied depends upon individual circumstances and may also be subject to change in the future. This document is solely for information purposes and nothing in this document is intended to constitute tax advice. You should take professional advice before making any tax planning decisions.

Bank and building society accounts

Bank and building society accounts offer a relatively secure way of saving and a means of earning interest on monies which are usually available on demand or at short notice. Higher rates of interest can be earned from larger deposits and by committing funds for a fixed period. The capital sum is fixed and if the interest is taken as income and spent, then the purchasing power of the remaining capital falls as inflation pushes prices upwards.

Tax treatment is based on individual circumstances and may be subject to change in the future.

Individual Savings Accounts (ISAs)

These are tax-efficient investment wrappers.

It is important to understand that the investments held within an ISA can be very different. They can range from the most speculative of shares in emerging economy stock markets, to cash in the bank.

The aim, when using ISAs, is to move your investments from a taxed environment into a more tax efficient environment and to ensure that new investment funds are invested, from the outset, in a way that minimises tax.

Investment limits

For the 2017/18 tax year, the annual investment limit for ISAs is £20,000.

Lifetime ISA

The Lifetime ISA is available to adults aged between 18 and 40 from the start of the 2017/18 tax year.

Individuals can save up to £4,000 per year up to the age of 50. Savers are entitled to the 25% bonus of up to £1,000 from the government each year.

Funds can be withdrawn at any time before the age of 60 to purchase a first home or to save for retirement. If the funds are removed before this age for any other reason, may lead to a 25% penalty charge.

Junior ISAs

Junior ISAs offer parents a tax-free way to save for their child’s future.

The features of the Junior ISA are:

  • People are able to put money into a cash account or ‘stocks and shares’ account
  • Each child is able to have one cash and one ‘stocks and shares’ Junior ISA at any one time
  • There is a total annual limit of £4,128 for all payments into these accounts for 2017/18
  • Accounts will become full ISAs when the child is 18
  • The accounts will belong to the child and they are not able to get the money out until they are 18
  • Any money the accounts make will be tax free
  • A range of banks, building societies, credit unions, friendly societies and stock brokers will offer Junior ISA accounts

Children who have a Child Trust Fund account are not eligible to have a Junior ISA.

ISA eligibility depends on personal circumstances. Tax rules and allowances are not guaranteed and may change in the future. The value of investments can fall as well as rise and you may not get back the amount you originally invested.

National savings and investments

National Savings products are Government backed, and are used by the Government as a means of borrowing. Because they are Government backed, they are seen as one of the most secure forms of saving and investment. To make them more attractive, they offer certain tax concessions with upper limits on the amount that can be invested.

We list the main products offered below, but in some cases an individual product might not be available when you want to buy. National Savings offers other products in addition to the ones listed below.

National Savings Bank Accounts – easy access savings accounts are available.

Cash ISA – tax efficient savings.

Fixed Interest National Savings Certificates – savings contracts with tax-free interest rates fixed for the length of the chosen term, so that you will know how much interest will be earned each year. If savings are withdrawn before the end of the first year they will not receive any interest. If savings are withdrawn before the end of the chosen term they will earn a lower rate of overall return.

National Savings Index Linked Certificates – offer a small return plus the rate of inflation each year as measured by the Retail Price Index, provided the Certificates are held for more than a year. The proceeds are completely tax-free.

National Savings Income Bonds – pay income monthly at a variable rate of interest. The interest is taxable, but paid without deduction of tax.

Children’s Bonus Bond – is a 5-year tax-free investment for children designed mainly to let parents invest for their children in their child’s name.

Premium Bonds – a chance to win up to a million pounds, although numerous smaller prizes are also available in the monthly draw. All prizes are tax-free.

National Savings offer other products in addition to those listed. Products may be changed, withdrawn or altered at any time. Always consult your financial adviser before investing.

The value of investments can fall as well as rise and you may not get back the amount you originally invested. Past performance is not a guide to future performance.

Most National Savings and Investment products are not regulated by the Financial Conduct Authority.

Deposit accounts

Money deposited in a bank or building society etc. Generally considered very safe (although banks and building societies can default – see below for protection rules), with interest earned being taxable, depending upon personal circumstances. May be instant access or require notice.

However, unless your net interest is GREATER than inflation, any money on deposit is slowly losing value. For this reason it is generally unwise to have large sums on deposit, unless they are set aside for a purpose – house deposit, care fees etc.

As a rule of thumb it’s good to have several months’ income requirements available on deposit, as an emergency or floating fund. If you have more than a year’s income in deposit accounts, however, then you may be missing out on more appropriate opportunities.

Deposits are protected for the first £85,000 per account holder and £170,000 for joint accounts per regulated institution*.

The way in which this protection operates can be complex and subject to change. If your total deposit funds across all your accounts exceed these limits, you should talk to your financial adviser.

*When the organisation is UK authorised and regulated. We can check that your money is with such properly regulated organisations. Be aware that if you are dealing with any kind of offshore jurisdiction – including the Isle of Man and the Channel Islands – you might be beyond the jurisdiction of the UK system. Other countries within the EU are obliged to operate deposit protection schemes, although the financial limits and claim criteria may vary from country to country.


MPA Financial Management Ltd
98 High Street
Henley in Arden
B95 5BY

Tel:  01564 795 997
Monday – Thursday 9am to 5pm
Friday 8.30am to 4pm
Saturday & Sunday Closed