Legitimate ways to beat the Taxman
8th Oct 2010
You don’t have to be devious, move abroad or be a multi-millionaire to save tax. Emma Glover, tax partner in Rowlands, explains some simple and legitimate ideas to reduce your tax bills. Use your family Husbands, wives, partners and children all have allowances, exemptions and a basic rate band. You may be able to reduce the tax you pay by re-arranging your finances. Share income and capital gains with other family members. Note that minor children cannot be taxed on income from their parents’ assets, but they can be taxed on capital gains in their own right. This can produce a significant saving as they have their own annual exemption and basic rate band. You do need to be careful about incurring tax on the transfers of assets but with the correct advice significant savings can be achieved. Plan early for Inheritance Tax Every individual can make gifts of up to £3,000 per annum, plus any number of ‘small’ gifts of up to £250 per gift. These will fall immediately outside of your estate. You can also make regular gifts out of your ‘surplus’ income, as long as you are left with sufficient funds to keep your normal standard of living. Any larger gifts will take seven years to fall completely outside of your estate, so the earlier you make such gifts the more likely the Inheritance Tax will be avoided. Tax Efficient Investments Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) involve investment in small private (or some AIM listed) companies. These investments give various tax advantages including an income tax credit. They are well worth considering if you are making investments in stocks and shares in any event. Pension and ISA investments receive income tax free, and pension contributions receive tax relief. Make use of these as a part of your overall tax reduction strategy. Advice should always be taken to ensure the optimum savings are achieved in your own circumstances. Emma can be contacted on 0191 411 2468 or emma.glover@rowlandsaccountants.co.uk. Emma can be contacted on 0191 411 2468 or emma.glover@rowlandsaccountants.co.uk if you require further detailed information.
Author: Emma Glover (emma.glover@rowlandsaccountants.co.uk)