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Ways couples can seek to reduce taxation liabilities on investments and savings

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economics
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  1. Introduction
  2. Discussion
  3. The Civil Partnership Act
  4. Conclusion

The need for financial security and independence are a predominant concern for most citizens globally. In its very definition the ability to earn and willfully spend one's income is at the core of maturity as defined by social norms. This is also the case for governments and institutions. So the question is therefore how such a financial stability can be achieved? The most obvious answer to this is by investing. Investing refers to the deliberate and calculated directing of funds into revenue generating activities.

Almost invariably not all individuals are born into financial security. As a result they must therefore find ways to channel their finances such that they can grow significantly unto the future. Usually investments are made directly out of savings; savings out of personal income. The economic model for this relationship is given as i f (s); s f (y). This therefore means that investments are a consequence of foregone present consumption of personal income. This may perhaps be the elusive point to most young people eyeing for immediate financial prosperity without the sacrifice of and discipline regarding present consumption.

[...] However, this needs to be done rationally through opening of a business bank account where all rental income will be deposited and expenses regarding the mortgage be paid out of. Furthermore, profits from the rental income can be used to reduce the mortgage liability. The married couples and civil partners can lower their tax obligation through charitable donations to UK based charities or Community Armature Sports Club on Gift Aid by claiming a basic tax rate of 20% on the amount of donations during the tax period. [...]


[...] The current annual investment is 11,280 and individual investors can acquire a tax deduction amounting to 5,640 in cash investment with one provider. Insurance is another avenue with which married couples and civil partners can reduce their tax obligation. Life insurance can be bought to cover the individual or both the spouses. Presently, joint insurance is available for ?first death? insurance policies. This means that the policy covers the death of one of the couples after which the surviving partner is no longer covered by the policy. This rule however becomes extinguished where both the partners are covered by separate policies. [...]


[...] Therefore by jointly owning property, married couples can avoid the high IHT tax rate under the transfer or inheritance of property clause. For example where a couple has assets amounting to 600,000 and where the distribution of the assets is in the ratio of 2:1. When there is a transfer of property through inheritance or conveyance, the couple will incur a tax of 40% directly. However they can avoid this tax incidence through two major ways. Firstly, by equalizing the assets; this means that the partners agree to own the total assets on a ratio of 1:1. [...]


[...] Previously, same-sex spouses were forced to endure severe tax obligations since the tax law failed to recognize same-sex relationships. For instance, where one partner inherited property following the demise of the partner, the surviving partner would be forced to sell the property in order to inheritance tax as prescribed under the inheritance tax (IHT) bill. The effect of this law was to confer the tax privileges and treatments as under marriages to couples of the opposite sex. For instance Jane and Lucy are in a same-sex civil union. [...]


[...] Economists present a direct relationship between investments and the interest rates for the underlined security i.e. i f Both households and institutions will make their investment decisions based on the expected rate of returns as expressed in relation to the prevailing interest rates in the market. Another influencing factor in investment determination (both the amount and area of investment) is the risk level associated with the investment. The Capital Asset Pricing mock-up postulates that the anticipated returns for any asset or investment is a function of the investor's risk tolerance level as expressed through the variation in the realized from expected returns within the market. [...]

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