The tax man takes as much as £4 out of every £10 we earn, or save. But if you think this is inevitable, you’re wrong. In fact last year we paid out over £6bn in tax we need not have. A few simple steps could help you save yourself hundreds of pounds a year.
Rule one: Divide your assets
You don't have to be single to make the most of your personal tax allowance. In the 12 months ending 6 April 2009, you can earn £6,035 - or £9,030 if you are over 65 - before having to pay tax.
If you are married or in a civil partnership and one of you is not earning or on a lower income you can make the most of this personal allowance by spreading your earnings. It's not only your salary you pay tax on interest on bank and building society accounts as well as income from bonuses and investments all counts towards your allowance.
Rule two: Put it away
Pensions are one of the most tax-friendly savings schemes. Make sure you put in the maximum possible pension contributions before the end of the tax year to gain tax relief and benefit from the tax efficient treatment of pension funds.
Don't forget that you can save up to £7,200 a year into an Individual Savings Account. If you are looking for something a little more short-term to invest in Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) have tax benefits, but they are not for the faint hearted. Contact a tax-friendly lump sum investments advisor.
Rule three: Get what you are entitled to
If you are putting money into a pension you should be claiming your full 40 per cent back on any contributions. You'll automatically get tax at the standard rate tax paid into your pension but to get the extra 18 per cent you need to fill in a self assessment form.
Rule four: Make a 'gift'
If your partner isn't earning, and therefore not able to pay into a pension plan, you could put money in on their behalf.
Find a pensions advisor who can help you do this.
Rule five: Beware of stealth taxes.
Capital gains tax is payable if you sell, give away, exchange or otherwise dispose of an asset or part of an asset or receive money from an asset such as shares or property such as a buy to let investment or second home. The annual exempt (tax-free) amount you can realise before paying CGT is £9,600 for every individual in the tax year 2008-2009. If you are in a couple, married or civil partnership, you can transfer assets to your partner without having to pay CGT. However you can't give assets to your children.
Other things you can do:
Check your tax code, you could be paying too much.
Downsize - the smaller a company car is, the less tax you will pay.
Look after your loved ones - get advice on setting up a trust for children or grandchildren.
Make the most of it now by connecting to a financial advisor who can help you
with ‘tax planning’, ‘pensions’, ‘investments’ and ‘saving plans’.
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