Saving you tax
Paula Hodge, Partner
The Budget 2012 will be on 21st March. As has been the case for the last few years there are not expected to be any surprises but with Austerity still the main objective there may be changes that affect our clients adversely.
Rumours abound, but the 50% rate of income tax seems likely to remain for the foreseeable future and the potential loss of higher rate tax relief on pensions is being discussed yet again.
Let’s have a look at some practical ways for you to reduce your tax liability.
Income Tax Personal Allowances In April the Income Tax personal allowance will increase by £630 to £8,105. Higher Rate taxpayers will not benefit from this as the level at which Higher Rate tax is paid will be lowered by the same amount.
It’s therefore more important than ever before to ensure you are maximising the allowances you have, or using suitable tax shelters, some of which we’ll discuss below.
Capital Gains Tax (CGT) Annual Exemption You have a tax free allowance of up to £10,600 each year (£21,200 for couples), so it is important to ensure that this is used.
One key part of our managing your investments is to use this allowance whenever possible so that you pay less tax.
Annual Individual Savings Account (ISA) Allowance
ISAs allow your investments to grow free of both Income Tax and Capital Gains Tax, so can now save you up to 50% Income Tax and 28% Capital Gains Tax.
The annual amount you can invest from April will be £11,280. This allowance now increases each year in April in line with Retail Prices (RPI) which will enable you to shelter more from tax in the future.
Do you wait until the last minute to take out an ISA? There is always the risk that you leave it too late and miss out. We would encourage you to invest into an ISA early in the new tax year which will allow you to benefit from the potential tax saving much earlier in the year. Also, remember that new Junior ISAs are available (£3,600 per annum) for the purposes of long-term investment, on behalf of qualifying children or grandchildren.
Inheritance Tax Annual allowances Inheritance Tax planning can be complicated, but there are some simple things you should remember to do. You are able to give away £3,000 each tax year and it is immediately outside your estate.
If your child or grandchild gets married in a tax year there is an additional allowance of up to £5,000 you are able to give away with an immediate tax saving.
Investment allowances
Some tax planning schemes offer attractive tax relief as an incentive for investment into smaller trading companies.
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