Top Tax Tips

If you are married then make sure you aren’t paying unnecessary tax. Many couples have money in banks and building societies, often in joint names. This means one of them isn’t using their full personal allowance where they would be able to receive some or all of the interest tax free or perhaps at 10% rather than 20% if they moved that money into their sole name. Money is hard enough earned, don’t hand it to the taxman on a plate!

Make sure you use your ISA allowances. If you use Cash ISAs the interest is tax efficient. If you have corporate bond ISAs the income you receive is tax efficient and with all ISAs, any profits are free from Capital Gains Tax

The government allows everyone under 75 to invest £3,600 into a stakeholder pension. This can be really attractive especially for non tax payers who are retired because they will not only get tax relief on the investment (worth £720), they can get an immediate return of a tax free cash sum of £900 and a guaranteed tax free income for life.

For older people buying an annuity can still be a very tax efficient way of providing a guaranteed income as only part of the money will be taxed (the rest is deemed to be a return of your capital). It has another potential advantage for some people in that it reduces the size of the estate for Inheritance Tax (IHT) purposes and this could mean a saving of 40% of the capital!

Higher earners can reduce or remove their liability to pay Higher Rate Income Tax by taking advantage of the changes in the pension rules that came into force in April 2006. You are allowed to contribute up to your salary (with a cap) and get tax relief on the investment into a pension (subject to your pension fund not being more than £1.8 million!) even if you are a member of a company scheme. Given the choice of giving the taxman 40% (possibly even 50%) or increasing your future income in retirement, you can see why pensions are so popular!  However, the 2009/10 Budget did limit the Tax Relief for very high earners so seeking advice is most important to ensure you take advantage of the reliefs available. 

National Savings & Investments (NS&I) offer Tax Free returns on Fixed Interest & Index Linked Savings Certificates as well as Premium Bonds & ISAs, which can be very attractive especially to higher rate tax payers

Taxation can be very complicated and it’s very difficult to keep up with all the changes that keep happening and the above are only a few examples of what can be achieved. A simple way to make sure that you’re making the most of the tax saving opportunities that are out there is to have a review with one of our Independent Financial Advisers who can help you.

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