EIGHT Tax Busting Tips to help you slash your tax bill this year:

TIP 1. Use your personal allowances.

Did you know that You are allowed to have income of £6,475 a year before you start to pay tax rising to £9,490 when you are aged 65?

It is important therefore to plan for making the best use of these tax allowances. Between a couple, you could receive around £19,000 of income per year, before you pay any tax!

You can do this by putting savings accounts into the name of the non-taxpayer. You can also make pension contributions for him or her as well (these contributions attract tax relief up to £3,600 per year).

TIP 2. Plan for capital gains.

Many people transfer assets to their spouse before selling them, which means you can use up both your CGT allowances of £10,100 each.

Capital Gains Tax is now only 18 per cent, compared to much higher income tax rates so it can make sense to to shelter your income-producing savings and investments in ISAs…

TIP 3. Invest in ISAs.

From April 2010, everyone can shelter £10,200 in cash, shares, bonds or investment funds within an (ISA) each year. ISA’s can be a good way to protect against tax on gains and income on some of your investments.

TIP 4. Make pension contributions.

The Government gives you tax relief at your highest rate on all your pension contributions. This means a £1,000 investment in a pension costs a higher-rate taxpayer just £600, and a basic-rate taxpayer £800.

You can invest 100 per cent of your income, up to a maximum of £235,000 across as many different pension accounts as you wish, including a mixture of occupational and personal pensions. Although you cannot access your money until you are 50 – rising to 55 after April 2010. 25% of the fund can be taken as a tax-free lump sum anytime after this.

TIP 5. Plan ahead for inheritance tax.

Up to £3,000 may be given away each year without falling within inheritance tax (IHT) rules. If you make gifts larger than £3,000, they become free of IHT provided you are still alive after seven years.

TIP 6. Go non-domiciled.

Many of Britain’s wealthiest people pay practically no tax. They also pay practically no capital-gains tax either. The UK is increasingly becoming an “onshore tax haven” for those who can establish “nondomicile status” for themselves, something that means they pay tax not on their worldwide assets, but purely on any they bring into the UK. Subject to certain conditions, it may be possible for you to go ‘non dom’.

TIP 7. Get a lodger.

You can earn up to £4,250 in rent without having to pay any income tax on the income earned.

TIP 8. Buy investment properties within the appropriate structure.

Consider whether you would be better off trading as a partnership, limited liability partnership or a limited company. Tax is not the only consideration, but you may save tax by incorporating your business in the right circumstances!

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