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How to Reduce Taxation Liabilities on Investments and Savings - Essay Example

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How to Reduce Taxation Liabilities on Investments and Savings

It is evidently clear from the discussion that 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 into 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. After the establishing the origin of investments, a need arises to examine what the deciding and influencing factors for investments are. Economists present a direct relationship between investments and the interest rates for the underlined security i.e. i  = f (r).  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 Model postulates that the expected returns for any asset or investment are a function of the investor’s risk tolerance level as expressed through the variation in the realized from expected returns within the market. This means that the investments have a risk-reward mechanism where the investor’s tolerance to market uncertainties will primarily determine how much returns they shall get from chosen investments. Thirdly, the tax treatment on investment is also a crucial determinant for investment ventures. Investors would like to know what percentage of their earnings from investment would be paid out as a tax. The tax treatment on investments made by singles, married couples, and partners in civil unions is different. For this reason, this essay examines ways in which the tax obligation on investments made by married couples or those in civil partnerships in the United Kingdom can be reduced. ...Show more

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This research is being carried out to evaluate and present ways in which couples can seek to reduce taxation liabilities on investments and savings …
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