Minimising Your Personal Tax Liabilities

April 4, 2012 by  Filed under: Taxes 

The personal tax deadlines have passed and hopefully you or your personal tax adviser filed your self assessment return on time and avoided any penalties. Even more to hope for is that your tax bill for 2010 – 2011 is not too high.

If your tax bill does seem a little high this time around, we hope it is high simply because you have had a good year. However, we often find that tax bills are too high not because of raised personal income but because many people still turn to their accountants for tax advice.

That is not to say that accountants can’t proficiently give tax advice, they can. The fact remains however that what accountants are best at is accounting, whilst the best people to give tax advice are tax advisers.

If you are one of the many people out there that still uses an accountant to calculate your tax rather than a tax adviser, here are five tips to help minimise next years personal tax liability.

1. Allowances, reliefs and credits

It seems such an obvious thing to say, but make sure that you are taking advantage of personal allowances and credits available to you, whether it is as an individual or as a family. So many individuals are unaware of exactly how and where allowances or reliefs can be made.

2. Income – What, when and how

How you receive can impact upon your tax liability. The typical method of reducing a tax liability is take dividends over normal salary where possible, but there are a great many other options available to us. Increasing your pension contributions will lower the current year’s income tax and NIC and by combining this with some specialist retirement tax planning could see you paying less now and in the future.

3. Investing in a tax efficient manner

If you have the available surplus funds, it can be beneficial to utilise tax efficient vehicles such as Enterprise Investment Schemes or Venture Capital Trusts, or even the humble ISA.

Any form of investment carries a degree of risk, but they offer reduced tax incentives and as part of a broader tax planning strategy can greatly reduce your income tax liability.

4. Domicile taxation

Where you live, reside and are domiciled makes huge differences to your liabilities and options to utilise domicile tax planning should always be investigated. The remittance basis charge might be a less costly option for you or perhaps a dual contract agreement could mean your tax bill is reduced. Even considerations of where you want to retire could positively impact upon your tax bill.

5. Bespoke tax planning

If you are one of those earning more than £150,000 per annum, then bespoke tax planning might well open your eyes to what great tax planning actually is.

Offshore tax planning and wealth planning can offer fantastic opportunities for tax efficient wealth maximisation and this form of planning is far more accessible than you might think.

For the risk averse, simple forward planning can make great differences. Even passing wealth on to the next generation will reduce your personal tax bill later on, although of course it is not likely to be of concern you by then.

Thanks for reading!

Tax Innovations

Article Source:
http://EzineArticles.com/?expert=Chris_Pitt

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