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Starting your tax planning early  Although the end of the 2006-07 financial year may seem on the distant horizon, if you start your tax planning early, you have a much better chance of keeping the taxman at bay, as there is always room to make your affairs more tax-efficient.
Here are some tax tips: Check your tax code One in four tax codes are incorrect, according to the Public Accounts Committee. The codes are adjusted to take account of employee benefits, such as company cars and medical insurance. Mistakes often occur when staff stop taking these benefits, but continue to be taxed on them. Transfer assets to your spouse Everyone has a personal income-tax allowance of £5,035 (under 65s) in the 2006-07 tax year. This is the income on which you pay no tax. If you are a higher-rate taxpayer but your spouse has no income, or if it falls below the personal allowance, consider shifting income-producing assets into your spouse’s name. This could cut the tax on income from savings or a buy-to-let from 40 per cent to nothing. Use your spouse’s capital gains tax exemption Everyone can make profits of £8,800 this tax year without paying capital gains tax (CGT). If you want to sell assets that have produced strong gains – a buy-to-let flat or a share portfolio, for example – consider putting half the assets in your spouse’s name before you sell, to use his or her CGT allowance. In that way, you can realise profits of £17,600 between you without paying tax. There is nothing to stop you having assets in your spouse’s name for income-tax purposes, but then switching them back into joint names when you want to sell. Be careful, though, because HM Revenue & Customs does not like anything that smacks of deliberate tax avoidance. Plan to make gifts Everyone can make gifts of up to £3,000 a year exempt from inheritance tax (IHT). You can also make small gifts of up to £250 to any number of individuals over and above your gift allowance. And you can make regular gifts out of income as long as they do not reduce your standard of living. If you have surplus income, it may be worth making regular payments to a beneficiary – to pay your grandchildren’s school fees, perhaps – so the money will not be hit by IHT. Claim child tax credit The family element of the child tax credit, worth £545 a year and not taxable, is paid to households with incomes of up to £58,000. However, it tapers off between £50,000 and £58,000. Find out if your company offers a share scheme Many companies offer save-as-you-earn (SAYE) schemes, which can offer a risk-free way of investing in its shares – with several tax benefits. If you require any further information about the services that we provide or would like to review your financial planning position, please contact us |