Five Top Tips for Last Minute Tax Planning

The end of the tax year is looming on Friday 5 April, but there is still time to save tax for 2012/13.

Our top five tax-saving tips:

Maximise Pension Contributions

A pension remains one of the single most tax-efficient vehicles for long-term saving, particularly for higher rate taxpayers, where effective rates of tax relief can be up to 60% for high earners.

There is the additional prospect of saving National Insurance, 12% for employees and 13.8% for employers.

Maximise ISAs

Transfer savings of up to £11,280 into a tax-free ISA to reduce income and capital gains tax.

Venture Capital Trusts

Venture Capital Trusts (VCTs) give 30% Income tax relief up-front based on a 5 year holding period as well as tax-free dividends. Whilst care is needed to select appropriate VCTs, they can form a valuable plank of an Income tax mitigation strategy.

Enterprise Investment Schemes

Enterprise Investment Schemes (EISs) give 30% Income tax relief up-front based on a 3 year holding period, relief from Inheritance tax after just 2 years, and CGT deferral. Whilst care is needed to select appropriate EISs, they can form a valuable plank of an Income tax, Inheritance tax and CGT mitigation strategy.

Personal Tax Planning

Where one spouse pays tax at a lower rate, ensure that best use is made of personal allowances, age-related personal allowances and the CGT Annual Exemption of £10,600. With the Inheritance Tax Nil Rate Band now frozen at £325,000, ensure that gift allowances are maximised and any outright gifts or gifts to trusts are made to start a 7-year clock running.

[Matthew Clark, 5 Top Tips for Last Minute Tax Planning 2012/13, 2 April 2013]

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