Don’t let the taxman take it either!

SHIFTING up the risk spectrum and rearranging your investment portfolio may help to lessen the impact of inflation on your wealth, but it’s also worth checking that the taxman isn’t taking more than necessary.

Laith Khalaf, head of investment analysis at wealth manager AJ Bell, says: ‘Squirrelling away as much as possible into tax shelters is a simple way to protect investment returns – and mitigate the impact of inflation.’

Holding investments in an Isa or pension are the best way forward. You can save up to £20,000 in an Isa this tax year, with all returns and withdrawals free of tax. A maximum of £40,000 per tax year can be put into a pension with contributions boosted by tax relief. Tax is only payable when the pension fund is accessed to provide a regular or irregular income.

There is also a dividend allowance that means £2,000 of dividend income in the current tax year is tax free. Income above this amount is taxable – with tax rates rising in April next year to partly fund the Government’s rebooting of the National Health Service.