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Tax planning: why it is important to get it right from a young age

If you have ambitions of accumulating significant assets over the next ten, 20 or 30 years, or aim to work hard in the hope of enjoying an early retirement, the decisions you make early on in relation to tax and financial planning will make a real difference further down the line.

Tax planning is essential in the formation of an effective financial plan, especially given the complexity of the subject. Tax legislation rarely stands still - it is very fluid and changes regularly and it is often dependent on your own individual circumstances. It is therefore essential you stay ahead of the curve and do not suffer simply because changes have passed you by.

Through effective tax planning, you can ensure you keep on top of regulatory change and do not pay more than you are required to. Income tax and capital gains tax each have their own intricacies, and people will often need assistance to safely navigate these complex waters.

Investment portfolio tax planning

Tax planning with regard to investment portfolios is an often-overlooked area of financial advice. However, we feel it is essential this gap is plugged - especially when it comes to high-net-worth clients or those aiming to become one in the future. 

This is because tax planning is increasingly important with larger portfolios. People are often not aware of changes in relation to tax, and it can be difficult to actively manage tax on an ongoing basis. As a consequence, individuals may pay more tax than they are required to - and this can have a huge impact on high-net-worth individuals.

Tax mitigation strategy

A simple tax mitigation strategy, flexible enough to deal with change, can help you stay one step ahead, ensuring tax continues to work for and not against you. It is important to use the right tax wrapper best suited to your needs. Indeed, there are various tax wrappers compatible with larger portfolios, but these would prove far less tax efficient if used for smaller portfolios. By selecting the right tax wrapper for the right investment, you can go a long way to ensuring your tax planning delivers the best results.

In particular, a young person with aspirations of building assets and cementing their position as a high-net-worth individual, need to think a little differently when putting a financial plan together. There is no one-size-fits-all approach in wealth management - strategies must be tailored to the individual, based on numerous factors.

The information provided through the Equilibrium website is based on our opinion and is for general information purposes only. It is not, and should not be construed as financial advice.