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Act now on these tax saving tips
With the end of the tax year fast approaching on 5 April, savers, employees and couples have a last chance to make the most of their annual allowances and tax concessions.
With tax rises in the pipeline, there’s even more reason to capitalise on your allowances. Here are some ways you can save on tax in these final few weeks.
Top up your Isas: an Isa allows you to pay money into a tax-free deposit account or to be invested in shares or bonds. No tax is paid on income or growth. As a saver, you can invest up to £10,200 per annum in an Isa, rising to £10,680 from April 6. The proceeds from your Isa can be left off your tax return and do not count as income against any tax allowances.
Switch your assets: everyone has a personal income allowance – the portion of income you can earn before tax. If you pay tax but your partner does not, it makes sense to give them some of your income-producing assets to help use up their tax allowance. There may also be a saving if you pay tax at 40 or 50 per cent but your spouse pays at 20 per cent. With tax rises pending, and the threshold for those paying tax at 40 per cent dropping from £37,401 to £35,001 on April 6, there is further impetus to implement these asset swapping measures.
Make gains from Capital Gains Tax: did you know that each person is entitled to make profits of £10,100 per tax year from selling investments before Capital Gains Tax is paid? It’s worth looking to see whether there is anything you can sell off to bank a profit and possibly spread the gains over a number of tax years. The proceeds can be reinvested in a similar asset after 30 days, or used to provide a tax-efficient income.
Be venturous with Venture Capital Trusts: these investment funds attract tax concessions as a way of compensating savers for the risks they take backing the funds. As a Venture Capital Trust investor, you can claim up to 30 per cent income tax relief, but you will have to retain your shares for at least five years to secure the tax benefits. But with options to save into pensions becoming more restricted, Venture Capital Trusts offer an increasingly attractive alternative, with a wide choice on investments available at the moment.
Paul Dixon – Chartered Financial Planner