With the right planning, it is possible to receive an income of around nearly £70,000 a year, but pay only basic-rate tax, says Alexandra Goss in The Sunday Times.
Those who have already retired should draw a pension up to the higher-rate threshold of £42,475 (those still working can keep their income below the higher-rate threshold by making a pension contribution). Then, use your other allowances.
A portfolio of £150,000 in assets such as unit trusts could realise a £10,600 gain tax-free (your annual CGT allowance), based on 7% growth a year. A £150,000 Isa portfolio could net you £6,000 a year tax-free, and a portfolio of offshore bonds worth £200,000 a further £10,000 a year tax-free (you are allowed to withdraw 5% a year from offshore bonds as a ‘return of capital’ with tax deferred until encashment).
When you encash your bonds, try to avoid 40% tax either by being in a lower-rate tax band (eg, when you retire), or by giving them to a spouse or child beforehand. The result? An ‘income’ of £69,075 and £7,000 tax (instead of £17,640).