IFA charges - are they paid from taxed income

RetireU2

Hi,

I am looking to invest in a SIPP, probably via AJ Bell, and would like to know if I have to pay any investment related charges out of taxed income.

I understand that charges for platforms and funds charges are taken from within the SIPP and are therefore not taken from taxed income.

What is the position for IFA charges? As I am new to investing I am considering using an IFA for a couple of years and wanted to check if I would have to pay the IFA fees out of taxed income.

Thanks

Aegis

The choice should be yours. As long as the fee is in respect of pension work, the fee can be settled via a pension policy (though not all pensions facilitate this) and can therefore be taken out of pre-tax income. If you want to pay your adviser in this way, mention it up front to make sure that you aren't put into a contract that doesn't allow it!

RetireU2

Thanks Aegis.

I assume it is beneficial to pay the IFA fees out of pre-tax income because paying it out of taken income would mean in effect paying 20% tax plus the IFA fees.

dunstonh

IFA charges are nearly always best taken from the pension as you are effectively getting tax relief on the fee.

i.e. £1000 fee by cheque costs you £1000. Whereas pay £1000 into a pension to cover the fee and it costs you £800 if you are basic rate taxpayer. Company directors may prefer to pay the fee via the company as it is a business expense allowing them to get more out of the company without paying tax and NI.

RetireU2

Hi dunstonh,

Thanks for confirming my thoughts. I am not a company director and do pay tax so will seek to get IFA charges paid from the pension.