Tax-Aware Planning: Three Client Scenarios That Demand Better Tools
When you sit down with your clients for a financial planning review, they want to make informed decisions based on the most complete information available. While all forecasts have limitations, providing the most accurate projections possible, alongside meaningful scenarios that illustrate different outcomes, gives clients the clarity they need.
If you’re still relying on planning tools that oversimplify the tax implications of financial decisions, the gap between projected outcomes and reality will continue to widen.
Let's examine three common client scenarios where tax-aware planning makes a profound difference, and how FE CashCalc's enhanced Gross Cashflow features now make this possible without multiple tools or complex workarounds.
Scenario 1: The Retirement Income Blend
The Client
James and Sarah, both 58, are approaching retirement with pensions totalling £820,000, ISAs worth £230,000, and a general investment account holding £175,000.
The Challenge
Creating an optimal withdrawal strategy that maximises tax efficiency while meeting income needs of £52,000 annually.
Retirement to State pension
Pensions: 2 x £16760 = £33,520 - zero tax assuming PCLS
Say GIA has 2% dividends and Joint £3,500. £2000 tax free rest at 8.75% = £131.25 tax
Take £12,000 from ISAs
Move £6000 tax free from GIA to top up ISAs to reduce GIA tax.
Need £3k more plus tax – take from pensions at average of 15% tax. Tax £617.
£52,000 tax for £617 tax.
State Pension age to mortality
Two state pensions = £11,973 which takes most of Personal allowance
Need £23,946 from other sources after tax.
£6k tax free from GIA
Dividends 3500 at 8.75%
£14,000 from pension as largest pot at 15% plus another £2200 or so to pay tax I(GIA 18% tax – save ISA for later to help keep pensions under Basic rate when GIA gone
£52,000 with about £2200 tax.
How would you compare with other withdrawal options?
Without Tax-Aware Planning
A simplified approach might suggest drawing primarily from pensions to the basic rate threshold, then supplementing with ISA withdrawals. This seems logical but fails to account for the nuanced tax treatment of different income sources.
With Enhanced Gross Cashflow
The picture changes dramatically. Using FE CashCalc's new dividend and savings taxation features, plus Capital Gains calculations, advisers can now:
- Model the precise tax impact of dividends from the GIA, accounting for the dividend allowance and rate differentials
- Compare sequencing strategies that prioritise different wrappers at different life stages
- Visualise the long-term sustainability of various withdrawal strategies with actual post-tax income
Scenario 2: The Career Peak Contribution Strategy
The Client
Amelia, 45, a senior executive earning £145,000 with employer pension contributions available through salary sacrifice.
The Challenge
Maximising retirement savings while managing income tax and National Insurance through appropriate remuneration-based contributions.
Without Tax-Aware Planning
Basic modelling might not distinguish between different pension contribution methods (salary sacrifice vs. Net Pay arrangements) and their distinct tax implications.
With Enhanced Gross Cashflow
FE CashCalc now allows advisers to:
- Accurately model both salary sacrifice and Net Pay arrangements
- Calculate the precise tax benefits of renumeration-based contributions
- Compare options to identify the most advantageous approach
- Project the combined impact of these strategies over decades
For Amelia, the difference is meaningful: while the National Insurance savings between salary sacrifice and Net Pay at her income level are modest (approximately 2% NI savings on pension contributions), the ability to accurately model these different contribution methods enables her adviser to properly quantify the tax benefits and select the optimal approach for her circumstances.
Scenario 3: The Decumulation Capital Gains Strategy
The Client
Robert, 67, retired with a substantial general investment account (£550,000) that has significant embedded gains.
The Challenge
Drawing from this portfolio while accurately accounting for capital gains tax liabilities over a 20+ year retirement horizon.
Without Tax-Aware Planning
Standard tools might recommend a flat withdrawal rate, failing to account for the complexities of capital gains calculations—including weighted average unit costs for accumulation funds, previously taxed reinvested dividends, and varying purchase dates.
With Enhanced Gross Cashflow
FE CashCalc's new capital gains tax modelling capabilities enable advisers to:
- Accurately calculate CGT based on weighted average unit costs over time
- Account for reinvested dividends and savings that have already been taxed
- Time withdrawals to maximise annual CGT allowances
By modelling Robert's capital gains liabilities accurately, his adviser can provide him with a truly accurate projection of his after-tax retirement income, showing what his money will actually do for him rather than presenting an unrealistic pre-tax view that could lead to financial shortfalls.
From better calculations to better conversations
These scenarios highlight something crucial: tax-aware planning isn't just about more accurate numbers, it's about better client conversations. When clients can see exactly how tax-efficient strategies improve their outcomes, they become more engaged, and their perceived value of advice rises dramatically. That means happier clients, and happier advisers.
FE CashCalc's enhanced Gross Cashflow features help transform conversations by bringing sophisticated tax modelling directly into your familiar planning environment. No separate systems, no manual workarounds, no compromises; it’s all delivered through the complete research and planning platform you already use and trust.