Tax Saving Ideas
Albert Einsten is alleged to have said, "There is nothing so complicated as Income Tax". Whether he was right or wrong is beyond the scope of this page, but don't you owe it to yourself to reduce the amount of tax you pay?. After all, even the Taxman himself says he wants everyone to pay only the amount due. Here are some practical steps:
One |
Place money on deposit in the name of the person who pays the least tax (provided you can trust them). That way, you are less likely to pay higher rate income tax on the interest.
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Two |
Where possible, place deposit money in an ISA (Individual Savings Account), providing this does not preclude you from purchasing stocks and shares ISA holdings for the long term. (In the opinion of the writer there really should be two tax shelters — one for cash and one for equities as there used to be with PEPs and TESSAs. That would immediately remove the confusion caused by ISAs being able to invest in cash and equities).
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Three |
Take up your personal pension allowances as far as possible, expecially if a higher rate tax payer.
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Four |
Consider the use of an 'offset' mortgage. The tax avoided on deposit interest, especially if a higher rate tax payer, can be considerable. An 'offset' mortgage combines a deposit account with your mortgage account. Money on deposit is regarded as 'offsetting' interest charged on the mortgage. As mortgage interest charges are usually higher than interest earned on deposit there is a saving even before taking into account the tax avoided on the deposit interest.
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Take advice when filling in your Tax Return. Most people are honest to a fault, but by inadvertantly declaring income in the wrong way we can end up paying more tax. An example of this is the income paid from an investment bond. Technically, income from an investment bond is return of capital and there is a special section on the Tax Return in which this should be declared after receiving a Chargeable Event Certificate. If you have not received a CEC you do not need to declare the 'income'.
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In the weeks and months after retirement, ask the tax office responsible for your occupational pension to speak to your local tax office. Communication between the two offices may result in the prompt issue of a revised Tax Code that is more relevant to your new circumstances, possibly resulting in less tax being paid.
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Seven |
Consider purchasing any large-ticket items whilst the temporary reduction in VAT to 15% remains in force.
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Eight |
Check your Tax Code. HMRC is a large organisation dealing with millions of records. On the balance of probabilities it is inevitable that mistakes will occur.
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Nine |
Claim Tax Credits if you're entitled to them. The Children's Tax Credit is worth over £10 a week even when family incomes reach £50,000 and can still give some benefit for higher incomes.
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Ten |
Use your Child Trust Fund voucher if you have one.
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The Harvest Partnership is dedicated to helping clients achieve their financial objectives. So, whether you have a lump sum to invest for income and growth, or perhaps your pension funds are in need of review, we can offer professional and independent advice and then put that advice into effect in the most effective way.
We recognise that most individuals who need financial advice are often at a loss to know to whom they should turn. At The Harvest Partnership you will find dedicated and experienced professionals who will take you through the whole process in a friendly and caring manner and are always willing to answer your questions. Our job is to put you in an informed position so that you can make a quality decision. Our advice is delivered in writing, usually after a meeting in our Bromley office, and is then discussed at a subsequent meeting. These steps are important as it is only by knowing that we have got to grips with your situation can you be assured that our advice addresses your needs
