It’s coming up to tax year end time, so it’s time to consider how you can reduce that looming tax bill.
Here’s 7 top tips you should be considering….
1. Investing in pensions has always been a great way to save tax. In the current year, the maximum you can invest into a pension is £40,000. If you’ve invested in a pension previously at some point in your life, you can also use up spare allowance from the previous 3 years. So, you may be able to put up to £120,000 into a pension this year. That’d be a whopping £24,000 tax saved!
Getting your limited company to make the contribution as an employer contribution makes sense. £40,000 invested saves £8,000 in Corporation tax and is another route for getting money out of the company.
2. Using EIS & VCT to save tax is a great idea if you are a higher rate taxpayer. You can immediately gain from a 30% reduction in income tax on the amount invested (Put £10,000 in and save £3,000 in income tax). You need to keep the investment for 4-5 years, but then any increase in the value of the investment is tax free too!
3. Make full use of your ISA allowances, including those of your kids. This year you can invest up to £20,000 into an ISA and receive the interest tax free. Don’t forget the kids ISA’s too – this year you can invest up to £4,128 on behalf of your kids. If you invested £2,880 a year for a child aged 10, the fund would be worth £1.25 million by the time they are 68!
4. Watch out for the £100,000 earnings level. Once you exceed the £100,000 then your personal allowance gets reduced.
The allowance gets reduced by £1 for every £2 you go over £100,000. If this applies to you, make sure you are using ideas 1&2 properly
5. Sell your assets wisely. You have a £11,300 capital gains exemption each year. If you plan your disposals wisely, you could use the allowances for both this year and next
6. Invest in a Business Unit Trust. Ok, this isn’t technically a tax saving idea, but it’s worth considering if you have a significant cash balance in the business that you don’t want to withdraw. The fund we have worked with has returned 5% over the last 3 years – we’ll happily help you achieve similar returns for your cash
7. Make sure your will is up to date to avoid inheritance tax at 40%. If you don’t have a will, then the state can decide how to distribute your assets and that might not be in line with your wishes. That of course includes the shares in your business!
Feel free to drop me a line at the office and we can explore how these options could work for you.