TEN SIMPLE PERSONAL PLANNING STEPS TO CUT YOUR TAX BILL
Released On 11th Dec 2021
No one wants to pay more tax than they have to and yet many savers miss out on important opportunities to reduce their tax bill every year.
Paying more tax than you need to could reduce the amount you can invest and save.
What’s more, the act of investing in tax-efficient products, such as ISAs, could in itself help taxpayers to save in more than one way.
Here are ten quick tax planning tips to consider for the new year:
- Inter-spouse transfers – You can maximise capital gains and income tax allowances as well as minimise rates through these exempt transfers.
- Salary vs Benefits – Exchanging part of your salary for payments into an approved share scheme or additional pension contributions could minimise liabilities.
- Inheritance Tax – Have you used your maximum gift allowances? You can give up to £3,000 per year without it being added to the value of your estate on death. Not given in previous years? You can backdate this exemption by up to a year, doubling the amount you can give in a single year.
- Charitable and personal gifts – If you leave at least 10 per cent of your net estate to charity a reduced rate of 36 per cent rather than 40 per cent applies.
- Charitable donations – Charity donations are tax-free and offer tax relief if you donate through Gift Aid or straight from your wages or pension, through Payroll Giving.
- Passing on your pension – Update your Will to ensure that your family receives the full benefit of any remaining pension fund.
- Trusts – There have been several changes to the treatment of trust funds recently, which are complex – so seek help.
- Boost your pension – You can invest up to £40,000 a year into a pension tax-free up to the Lifetime Allowance, which currently stands at £1,073,100 for 2021/22.
- Stakeholder pension – All UK residents, including children, can make annual net contributions of £2,880 per year (£3,600 gross) regardless of whether they have any earnings.
- Pension drawdown – If you are 55 or over, you may be able to start drawing down pension benefits now from a personal pension such as a SIPP, even if you are still working.
There is also a wide range of tax-efficient investment options, which can help to reduce your liabilities. Are you using, or have you considered the following?
- ISAs
- Share Schemes
- EIS and SEIS
- Venture Capital Trust investment
- Community investments
- Social Enterprise investments
- Life Assurance bonds
- Offshore bonds.
Reducing your tax bill is an essential element of improving your wealth generation and should form part of your investment plan to maximise the money you earn and save. To find out how we can help you reduce your tax bill, please speak to Milsted Langdon.
