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UK tax tips to save YOU money…

by John Westwood features@algarveresident.com

John Westwood is the Managing Director of Blacktower Financial Management Group.

It is that time of year once again – the filing deadline for the 2009/10 tax year has only just passed and we are now rushing headlong towards the end of the current UK tax year.

This tax year is the first that the 50% tax rate will bite and as such, it is likely that you will only now be realising what this increase in rate may mean!

As ever, the key to sound tax planning is ensuring that the non-contentious reliefs that are available are being utilised.

Are you using your personal allowance, capital gains annual exemption and your ISA subscription?

If you have surplus income, and this is a recurring theme, is there the opportunity for you to undertake inheritance tax planning to use up this surplus income and ensure that your chargeable estate does not increase? Is now the time for you to look at a nil rate band trust? 

Charitable gifts are a popular way to minimise a tax liability – an often overlooked point is to ensure that if you are a married couple making a charitable donation and there is a discrepancy in your tax rates, that the higher rate taxpayer makes the gift to ensure that the relief can be claimed.

VCTs, EIS

Tax efficient investments such as Venture Capital Trusts and Enterprise Investment Schemes are always useful to minimise a tax liability.

You must be comfortable with the level of investment risk you are taking and the lock-in period, but from a purely tax perspective, these are attractive offering 30%/20% upfront income tax reductions respectively.

It is also worth noting that EIS investment can be made after the end of the tax year and carried back if you do not get around to making the investment before April 5.

The pension rules have changed again in this tax year, so it is worth checking to ensure you have maximised your available relief as far as you can afford.

The rules change from April 6, so although the rules have become less attractive in terms of relief on pension contributions, the tax-free environment offered by a pension wrapper is still appealing.

If you have benefits tied up in an employee benefit trust, the consultation period following the draft changes has now closed and we await the final legislation with interest.

Currently we would advise you to do nothing and wait to see what the changes to the draft rules will be.

There may be a limited planning window between the publication of the updated changes and the beginning of the new tax year, so if you are affected you should be reviewing your position now and thinking about what you wish to do with funds comprised within this type of structure.

For non-domiciled individuals, if you have chargeable gains to remit, have you reviewed your affairs? There may be scope to remit gains now and pay 18% capital gains tax rather than 28% if remitted in the next tax year.

Similarly, for trustees of non-resident trusts, if gains are treated as arising to a UK resident settlor or beneficiary (under the anti-avoidance provisions), is there scope for these gains to be realised and distributed before the end of the tax year to crystallise a gain at 18%?

Timing is key at the end of the tax year. If you are looking to realise gains, you should consider the timing of any disposal – a disposal on April 6 gives an extra year before the tax is payable, which can be valuable for cash-flow planning.

Individuals looking to leave/return to the UK should be mindful of the tax year – while some of the tax rules follow day counting, rules such as the deemed domicile provisions look at tax years of residency. 

Waiting until after the start of the new tax year will give someone moving back to the UK extra time before they are treated as deemed domiciled in the UK in the future.

This advice is not suitable for all expatriates and we recommend that advice is sought before one makes any commitment.

As an independent financial adviser, Blacktower seeks to ensure that our clients receive the advice suitable for their specific circumstances.  

Blacktower Financial Management Group – Telephone 289 355 685.

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