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Basic Tax Planning in the UK
pre 5 April 2012
The purpose of proper tax planning is to legitimately reduce your taxes and the time and trouble associated with completing and filing tax returns each year. You should review your tax planning every couple of years unless your tax situation or your wealth changes substantially.
At companydynamics we can assist you in so arranging your affairs so as to legally minimise your tax liabilities.
To begin with you should consider some or all of the following easy tax planning steps:
Use your full ISA allowances. Reduce your tax liabilities by making full use of your Individual Savings Accounts, known as ISAs. Each of you and your spouse can invest up of £10,200 annually into ISAs. These investments grow tax free - both as to income tax and from capital gains tax. There different types of investments available for these. A maximum of £5,100 of the £10,200 can be placed in a cash ISA (i.e., invested in simple bank deposits and the like). The rest can be invested in stocks, bonds or a combination of stocks and bonds. The tax relief given increases the net return you obtain.
Contribute into a pension scheme. You can invest in a pension fund and (within generous limits) your contributions will be tax deductable and your pension fund will grow tax free - both as to income tax and from capital gains tax. The higher the tax rate you pay the more likely and generous your tax relief will be.
As, effectively, the government is increasing the amount accumulating in your pension, contributing into a pension scheme is an excellent way to reduce your tax liability.
Capital Gains Taxes. An individual can make annual capital gains of up to £10,100 free of capital gains tax. There are other ways of reducing your exposure to capital gains tax by, for example, carefully choosing the dates when you buy or sell assets. You can also take care in how assets, and thus any eventual capital gains, are distributed between you and your spouse, thus taking advantage of each’s CGT allowances.
More sophisticated tax planningcan involve using Offshore Trust Schemes, thus changing where your assets are held and thus utilising the particular jurisdiction’s more favourable tax rules and rates. This can save all of Income Tax, Corporation Tax, Inheritance Tax and Capital Gains Tax.
Advice is essential. It is important that you fully understand any tax planning measure that you ate contemplating and that you seek our advice throughout.
companydynamics limitedIncorporated in England No. 5951395