Tips & Advice

Ten tips for Relief from Personal Taxation
(Posted 6th January 2010)

As promised, here are some of the more complicated tax saving ideas. These are not recommendations, just something for you to think about. Because of the technical nature of the ideas, further professional advice is essential. Remember that tax law is changing all the time.

1. There is still room for Lifetime and Will Trusts in any estate or tax planning, or would you rather pay 40% IHT ? Using trusts depends entirely on your circumstances. Talk to your solicitor about updating your Will and ask about trusts at the same time.

2. Use the pension scheme regime for tax planning. But be quick, because higher rate tax relief will be withdrawn from 5th April 2011 and there are anti-forestalling rules to prevent you from making large one off contributions. Think about this also in the pre 5th April 2010 context.

3. Would you like to make £10,000 tax free and only pay 18% on the balance? Capital Gains Tax is really attractive at the moment. This suggests that you should invest for capital growth rather than income, but beware of CGT being increased after the election. HMRC will be on the lookout for artificial schemes which convert income into capital gains for this very reason.

4. Keep an eye on the changes to the ‘holiday/2nd home‘ tax. In trying to combat misuse by our MPs, the Treasury is suggesting that holiday homes are treated as a property business. Do they mean that profits will be treated as income or capital. Watch this space, because trading losses are also useful !!!

5. Enterprise Investment Scheme (EIS) – a way to incentivise higher end risk investment into small and medium sized companies. There are clear tax advantages and any gains after three years are tax free.

6. 100% capital allowances have been available since 2001 for converting disused flats above High Street shops and offices. You can also invest indirectly through a number of Funds.

7. The discounted gift scheme still works for IHT using investment bonds placed into a trust for the donor’s beneficiaries. Obviously however, the underlying investment performance will be essential for a satisfactory outcome. Equity release schemes can be used to free up the funds for investment.

8. Link a VCT investment to a pension scheme. Now this is starting to get complicated – but do it properly and pay £3,000 for a £10,000 investment – very clever, but VCT investments are high risk, usually.

9. Wind up your own company and pay only 10% tax on the final distribution. HMRC are intending to withdraw this concession so do your research properly – you have been warned !!!

10.   Emigrate !!!!! A serious alternative to paying CGT but the conditions are tough for this to work, and this is not for the feint hearted or the casual traveler.

Happy New Year.