Maximising tax returns: Cutting through the jargon
Even for seasoned investors, financial terminology isn’t always accessible. Terms like tax wrappers, CGT harvesting, or pension tapering often come up in reviews – and it’s always worth revisiting what they mean in practice to ensure your strategy remains aligned with your long-term goals.
AT MCHARDY PRIVATE WEALTH, we know that many of our clients are financially literate – but that doesn’t mean the jargon can’t get in the way. Whether you’re already working with us or exploring how tailored advice could support your future, we believe in keeping things clear and relevant.
So here, we're taking a plain-English look at some of the key tax-related terms we use – and why they matter when it comes to preserving and growing your wealth.
Tax wrappers: Being strategic
ISAs, pensions, and investment bonds are all examples of ‘wrappers’ – accounts designed to protect your money from certain taxes. You might be familiar with the basics, but it’s easy to overlook just how powerful these can be when used proactively.
ISAs shield gains and income, with no tax on withdrawals. These are ideal for offering you flexibility.
Pensions offer upfront tax relief, and depending on age and drawdown status, can often be passed on free of inheritance tax.
Whether you’re just getting started or have built up a diverse portfolio, using these wrappers strategically is key. We regularly help clients review how they’re using their allowances – especially now that CGT and dividend limits have been tightened.
1. Capital Gains Tax (CGT): There to be used
‘Capital gains tax harvesting’ can sound counterintuitive – why trigger gains on purpose? But each tax year, you’re entitled to realise a certain amount of profit without paying CGT (profit from selling investments) – and it’s easy to let that opportunity pass by.
By realising modest gains (and potentially rebuying assets), you can reset your cost base and reduce future tax. It’s a strategy that’s especially valuable for anyone holding investments outside of ISAs or pensions – whether you're already being advised or exploring how advice might benefit your situation.
2. Dividends and asset location: Small changes, big impact
With recent reductions to dividend and savings allowances, it’s become easier to accidentally exceed them. That’s where ‘asset location’ matters; making sure income-producing investments are placed in the most tax-efficient accounts.
This isn’t about overhauling your strategy. It’s about fine-tuning where your assets sit, so they work smarter behind the scenes. We can review your portfolio and make adjustments to optimise tax efficiency without disrupting your overall plan.
3. Tapering and LTA: Still relevant
The Lifetime Allowance (LTA) may have been abolished, but for now, residual tax rules still apply, and the transition to a new regime remains in motion. Likewise, tapered annual allowances can catch high earners off guard, restricting how much can be contributed to pensions tax-efficiently.
Whether you're currently affected or unsure if these rules apply, we help clients model different scenarios to keep contributions in the most efficient range.
How we can help
At McHardy Private Wealth, we believe good financial planning is about more than investment performance – it’s about making sure your money is working as efficiently as possible, without more than necessary going to the taxman.
Whether you’re already working with us or are considering getting advice for the first time, we’re happy to walk you through how tax rules affect your position, using clear language and strategies aligned with your goals.
If you’d like to revisit how your plan is structured – or explore what a personalised strategy could look like – please get in touch. We're always happy to help.
