Top (legal) tips to beat the taxman in 2013 from Wow and MiNetwork
As the end of the financial year looms, Simon Weeks, tax partner and founder at specialist creative industries accountancy firm The Wow Company,offers his five top tips to Beat The Taxman this year.
So, 2012 was supposed to signal the end of tax planning as we know it. That may well be the case for people involved in contentious schemes.
However, there are a whole load of tax planning opportunities that are not only allowed, but are actively encouraged by the Government & HMRC - so you can take advantage of them and sleep well too.
As we approach the 5th April, here are The Wow Company's Top 5 Year End Tax Planning Tips. This is all simple stuff that works - and until you have exhausted all of these ideas, you definitely won't be needing to chat to Jimmy Carr....
Also, if you are an agency owner and you would like a confidential chat about any tax issues then The Wow Company has joined forces with MiNetwork to offer agency owners an private one-to-one session, either by telephone or Skype, where you can speak to me, Simon Weeks, tax partner at The Wow Company, so I can help you Beat The Taxman before 5 April:
To book your FREE session click this link: Beat The Taxman - Wednesday 6th March
Top Five Tips To Beat The Taxman
1) Double your money using pensions
If you earn over £150,000 in the tax year, you can get up to 50% tax relief on your pension contributions. Whether you like pensions or not, this is not to be sniffed at. This means that if you invest £10,000 into a pension, it only costs you £5,000. So you have doubled your money already.
If you earn between £100,000 and £116,000, then you can reclaim your personal allowance by making a pension contribution. The net effect of this is tax relief of 60%. So, a £10,000 contribution has a net cost of £4,000. This is a no-brainer.
Earn less than £100,000? Our next tip explains how you can get some of the action too....
2) Get your child benefit back
Changes came into effect on 7 January 2013 which meant that people earning over £50,000 will have child benefit reduced. Earn over £60,000 and you lose it altogether. Pension contributions are a great way of getting this back. Making a pension contribution reduces your assessable income, so not only will you get 40% tax relief on your contribution anyway, you will also re-instate all or some of your child benefit.
Therefore, if you are in the £50,000 to £60,000 income band & in receipt of child benefit, you could be getting up to 50% tax relief on your pension contributions.
3) Don't pay tax when you don't need to
This one is aimed at married couples & civil partners who can move assets between themselves without incurring any tax charges. We still see higher earner spouses holding onto share portfolios when the lower earning spouse could earn the dividends without paying any additional tax.
It is the same deal with bank accounts, rental properties & other income-producing assets. Simply changing the ownership of certain assets can save huge amounts of tax. Have a think about whether this could apply to you.
It helps if your investments are held in an organised way, ideally online, so you can easily switch holdings between spouses when tax positions change. We have an online platform which can help with this, so please get in touch if you want to find out more about how this could work for you - or just click here.
4) Never pay capital gains tax again
Whilst there are times when you might still have to pay it, there are also plenty of times that you can legitimately avoid paying it. Many people sit on share portfolios or investments and only really pay attention to them when it is time to cash them in. By that time you might be facing a large CGT bill and there is little you can do about it.
By moving existing investments into ISAs each tax year, you effectively use up some of your annual CGT exemption each year and ensure future gains are protected from CGT.
Regular and careful planning with investment portfolios can usually ensure that CGT need never be an issue. Again, an online platform can really help with this kind of management and reporting, to ensure you are optimising the tax position every year.
5) Take advantage of The Taxman's generosity
HMRC do actually provide some reasonably generous tax breaks if you want them - & not just in the form of pensions. An increasingly popular option is Enterprise Investment Schemes (EIS) which allow investors to invest in smaller companies & receive tax relief of 30%.
This means that £10,000 invested will reduce your tax liability by £3,000, so the net cost is £7,000. You need to leave your money invested for 3 years - so not as long as a pension - and these kind of investments are not without risks. However, for the right type of person they should at least be considered, well before any contentious tax schemes. Either way, you should definitely take professional advice before investing in an EIS.
Tax-planning cannot be "one-size fits all" so our advice would always be to get some proper advice first - but hopefully these ideas have at least got you thinking.
If you'd like to chat to an expert about your situation, book your one-to-one session to help you Beat The Taxman before 5 April..... afterwards is too late!
To book your FREE session click this link: Beat The Taxman - Wednesday 6th March