The Importance of Tax Planning

23th April 2014: Tax increases are impacting most of us in Europe, but the extent to which they affect you often depends on how much attention you pay to tax planning.  It still surprises me sometimes how some people worry about every little fall in their investment returns but fail to consider what detrimental impact tax is having on their capital and income.

Whether your investment objective is to preserve your wealth, or to provide an income, or to provide capital growth, for the most effective results you need to protect your capital and income from being eroded by taxation.  Paying more tax than you need to could undo some of what your investment strategy has achieved.

You only need to pay unto Caesar that which is due to Caesar, and yet many investors pay more than strictly necessary because they have not structured their investable assets, including their pensions, in the most tax efficient way.  The way you hold your capital can make a significant difference to how much tax you pay.

While tax should not necessarily wag the investment dog, you should always talk to a wealth manager to establish what your options are so you can make the most informed decision.  It doesn’t make sense to buy investments one way and pay a high tax on them when you can hold them in a different way which provides relatively similar results but with a lower tax liability.

There are various benefits to strategic tax planning. It can reduce income and capital gains tax on your savings, investments and pensions.  Many people pay more tax than necessary, such as income tax on bank interest they are not even withdrawing and capital gains tax when switching between investments.  You may be able to avoid this.

The less tax you pay, the more you have to spend or save for your future or leave to your heirs.

If you are an expatriate living here in Spain your tax planning needs to be designed around the local tax rules, but you should also consider what your future circumstances may be.  For example, if you are a British expatriate, do you think there’s any chance you’ll return to the UK in future?  If so there are steps you can take now to make your investments tax efficient when you return to the UK, that you would not be available after you return.

In summary, you need to protect your wealth in real terms.  Professional advice from a firm like Blevins Franks which combines effective tax planning strategies with investment advice would maximise your wealth preservation opportunities.

For more information:

Holly Veneman 

Business Development Manager

Tel. +34 971 867 781 Email: