How to pay less tax (the legal way!)

That amount adds up to us wasting enough money to create a new millionaire every day for the next 21 years. Reducing the amount of tax you pay can cost nothing and take very little effort.

Here are MyEggNest's top tips to save on your tax bill: 

• Make provisions for inheritance – In the UK, it is estimated an £1.6 Billion is wasted through poor Inheritance Tax (IHT) planning. With the recent rapid increase in house prices, Lombard Street and Grant Thornton forecast 3.6 million estates would be liable for IHT by 2009. If you don’t make plans for your inheritance now, the Taxman is likely to take 40% of the value of your estate in the form of taxes.
• Don’t forget about your annual ISA allowance – Brits lose an estimated £170 million in tax to the Inland Revenue when they could have avoided it by moving their money from their banks and building societies accounts to tax saving schemes like Individual Savings Accounts (ISAs), Friendly Society’s Tax Efficient Saving Plan, and NS&I tax-efficient savings options like Premium Bonds.
• Maximise your charitable donation by using Gift Aid and Payroll Giving – According to a survey, UK donors gave away an estimated £8.9 billion in 2005.  However, £808 million was wasted to the Taxman because people are unaware of simple tax-efficient schemes like Gift Aid or Payroll Giving.
• Increase your pension contribution– Over the next thirty years, the proportion of the population over the age of 65 will rise from 16% to 25%, placing an ever increading strain on the government pension system.  This will have a huge impact on many of you in your 20s and 30s who can no longer depend on the state to support you in your post working life.  You will need to meet the shortfall in your pensions. On the whole, all Brits could be saving £656 million by optimising contributions to their personal or company pension schemes, or making Additional Voluntary Contributions. Why not start saving yourself and give your children the best possible start by investing in a Children’s Pension. You can invest up to £2,808 each year, net of tax, on behalf of your child. HM Revenue & Customs will add 22% basic rate tax relief to this, bringing the total amount invested up to a maximum of £3,600 a year. 
• Do your Self-Assessment early – We pay to the Inland Revenue an estimated £487 per year in fines because we fail to hand in the forms correctly on the 31st January deadline. Fines start at £100 and in some instances can increase to £60 a day.
• Use your Capital Gains Allowance – Are you wasting £389 million to the Taxman in extra Capital Gains Tax (CGT). For the year ending 2007/8, everyone is entitled to £9,200. Perhaps think about combining the allowance with your spouse. This means that the two of you could make £18,400 net gains before CGT would become due.
• Join your Company’s Employee Share Plan – If you are employed, you are granted the right to acquire a certain amount of shares in your company under the Employee Share Plan. If you purchase shares at full value, later gains will be taxed at potentially just 10 per cent. There is currently £207 million up for grabs with estimated 600,000 staff currently in Profit Related Pay schemes.
• Give your children a head start in life with a Child Trust Funds (CTF) – Three out of four you haven't banked the free £250 cheque the government gave as part of the CTF. Don’t procrastinate!!! Do it now!!!
• Maximise the family’s personal tax allowances – For the year ending 2009/10, everyone is entitled to a personal tax allowance of £6,475, even children. Have you filled out an Inland Revenue R85 for your children’s bank and building society’s account? If not, you have just wasted an estimated that £319 million (combined UK tax waste). Why not consider transferring your savings into your non-tax-paying spouse's account (where appropriate of course)?
• Claim your tax credits – Nine out of ten families with children can get tax credits, but you don't need children to qualify for Working Tax Credit. Look at your entitlements and you could be in for a surprise!!! There is a staggering £2.9 billion ‘free money’ up for grabs in the form of Child Tax Credits and Pension Credits.

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Source: Unbiased.co.uk

In recent years, the burden of responsibility for managing tax affairs has shifted increasingly to the individual.  However, lack of awareness and inaction is costing Brits thousands of pounds in lost taxation to the government. Tax is not our friend and there is little justification to pay more than we have to. Avoid fines and charges and claim what’s rightfully ours, take action now. 

It is important to acknowledge that your financial circumstances are unique, and so too will be the tax-efficient options open to you along with the most suitable combination to meet your needs. Discussing your financial planning situation with a local Independent Financial Advisor (IFA) is a great place to start, and should help cut your waste significantly. Find the Right IFA

Other related articles from MyEggNest

ISAs
Children and Taxation
Money Saving Tips
Children’s Pension
Friendly Society
NS&I tax-efficient savings

Join in the Children and Taxation forum  

Further Guidance

To find out more about how to reduce your tax burden, please speak to Steve where he'll be happy to help you. 

Steve Weisner
Independent Financial Adviser
Radcliffe & Newlands
5th Floor Crystal Gate
28-30 Worship Street
London
EC2A 2AH

Email: sweisner@myeggnest.com
Tel : 020 7382 0437
Fax : 020 73740462  

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