Preserving your wealth

I have always been a dreamer, rather than a man of action. It is one of the burdens of a middle class upbringing, life is comfortable, you want for nothing. True you are bombarded with stories of other peoples success 24 hours a day, and exposure to success is similar to exposure to radiation. It burns, its all you can think about. You think about it when you get up in the morning, you think about it at work, and you think about it at night.

There are loads of coping strategies. Some people find value in non fiscal assets like charity (good), family (good), religion (can be good...) and politics (probably bad). Others sink into self loathing and resign themselves to a mediocre life. Those of us with something to prove are inspired and motivated by the success stories and double our efforts.

I have found with age that I am less and less jealous of the captains of industry and the high earners. Don't get me wrong I am still envious of the bank accounts, but I now realise that they have earned every penny, and I am not quite jealous enough to work 80 hours a week trying to make it myself. True I have a young family to feed and it would be irresponsible of me to to gamble away our security in pursuit riches that we don't need. What my kids need is their Dad at home to play with them before putting them to bed.

None of the above means that I don't work hard. I do, but I prefer to work smart, to earn what I need to provide for the lifestyle I want to live.

I manage wealth for a living (UK) and spend my working hours optimising my clients money so it works hard for them. While I cannot necessarily help you in obtaining wealth, I can help optimise and preserve it. The following is a brief financial plan that everyone should be following:

It's all about tax:
There are 2 tax wrappers that every UK citizen should be using, your Pension and your Instant Savings Account (ISA), both of which benefit from generous tax treatment.

To understand the benefits you need to understand the taxes you pay:
Income tax: the 1st £11,000 you earn a year is free, the next £37,500 is taxed at 20%. The next £112,500 is taxed at 40% (although their is an additional complication of losing your original £11k tax free allowance after £100k), anything after that is taxed at 45%

Capital Gains Tax (CGT): If you buy something and then sell it at a high price, you have made a capital gain. The first £11,000 is free. After that its either 18% tax or 28% tax depending on how much income tax you are paying. CGT applies to pretty much everything (apart from you own home)

Dividend tax: Any company shares you own that pay an income (dividend) will be taxed at 10% as an absolute minimum, 32.5% for higher rate income tax payers and 37.5% for additional rate tax payers

The options:
Whenever you save money you should put it into an ISA. The only tax your ISA pays is 10% dividend tax. Everything else is completely tax free. You can put £15,000 a year into an ISA and most of them offer a decent range of funds and investments. Below are some ISA providers that you might want to look at
Hargreaves Lansdown: http://www.hl.co.uk/investment-services/isa
Charles Stanley: https://www.charles-stanley-direct.co.uk/Our_Services/ISA/
Selftrade/Equitini: https://selftrade.co.uk

I use Selftrade for no particular reason.
To keep it simple I would consider investing in the Vanguard Lifestrategy funds (https://www.vanguard.co.uk/documents/adv/literature/lifestrategy-brochure.pdf). There are 5 funds to choose from, the higher the number the higher the risk. I like them because they are cheap, really cheap. They are what we call 'passive funds' which means that there is no fund manager making decisions. All they do is follow a benchmark

£15,000 a year into an ISA is more than most people can afford. However it is solid tax efficient shelter for your money

Most of you will already have a pension because the government made it the law for all companies to pay into one for their employees. Pensions are generous because whatever you invest benefits from a 'gross roll up'. This means you pau into your pension before you tax is taken. If you pay £800 then its rolled up to £1,000 by the government. It's even more if you are a higher rate tax payer. Pensions are designed to provide you with an income in retirement so you can't access yours before you are 55 without serious penalties or risks. Once you are 55 you can usually get 25% tax free if you want and use the rest to buy an annuity (guaranteed income) or to use its however you want. Your pension is not tax free when you draw from it but by the time you are retired you income will likely have plummeted quite a bit so the tax won't be so bad.

You can invest £3,600 a year into your pension if you have no income or 100% of your income (subject to a £40k cap).

If you are maxing out your pension and ISA every year then you really should be talking to a professional financial adviser about what else you can do. There are loads of products and strategies out there to meet your needs. The above is just a few steps to consider should you have £100k sitting in Bitcoin.

Thats me done for now. Obviously I'm taking now responsibility for anything I said above, they are just suggestions. If you are really worried then speak to a financial adviser, most of them are ok.

Happy to answer questions in the comments below