Careful Planning - New Tax Laws

Those with taxable income in excess of £100,000 per annum face a significant increase in personal taxation as from 6 April 2010. An individual’s Personal Allowance (£6,475 – 2010/11) will be reduced by £1 for every £2 of taxable income over this figure. A new “top tier” of Income Tax will be introduced for those with taxable incomes in excess of £150,000.

Here are some financial planning opportunities which could be considered for those affected wishing to mitigate some of the inevitable tax increase:

  1. Delaying expenditure such as Charitable Gift Aided Payments and other allowable deductions.
  2. Where available, the use of a lower earning spouse’s lower rate tax band.
  3. Contributions to tax efficient investments such as Individual Savings Accounts.
  4. For investors wishing to adopt an adventurous approach towards investment, Venture Capital Trusts and Enterprise Investment Scheme provide valuable tax breaks.
  5. Reviewing Pension Contributions. Although higher rate Income Tax relief on new pension contributions paid will be removed as from April 2011 for individuals with taxable incomes of £150,000 per annum or more, there are still opportunities for higher earners to make tax efficient savings for their retirement.
  6. The timing of dividend payments received from Limited Companies.
  7. Investing for Capital Gains rather than Income.
  8. Long term plans on residence and domicile status.

For further advice, please contact a member of the Financial Services Team on 01206 217309.