It may be one of life's certainties, but you shouldn't pay more tax than you need to.
Tax can erode the income from your assets, whether savings, stock market investments, or property. But with careful planning you can cut your tax bill. You're entitled to a range of tax allowances, and it makes sense to make the most of these allowances and reduce the amount of tax you have to pay.
Start by making the tax system work for you. With an ordinary savings account, interest you earn is taxed at 20% if you're a basic-rate taxpayer, 40% if you're a higher-rate taxpayer and 50% if you're an additional-rate taxpayer.
Here are five tips for cutting your tax bill:
-
Make the most of tax-exempt ISAs
ISAs are subject to annual subscription limits. For the tax year ending 5 April 2012 the maximum subscription allowed is £10,680, of which up to £5,340 can be subscribed to a cash ISA. Subscription up to those amounts can be made at any time during the 2011/12 tax year.
-
Pensions are tax friendly
By saving for a pension you're effectively being given tax back from the government. Pension planning can be very tax efficient, and can also represent a tax efficient way of saving and providing for grandchildren via a stakeholder pension.
-
Consider your tax status
If you are married or hold joint savings with a partner and they pay less tax than you or none at all then you could consider transferring cash to an account in your partner's sole name. Interest on such an account can be paid gross if your partner's total income is less than their personal tax allowance.
-
National Savings
The Government backed National Savings and Investment scheme offers indexed linked and fixed interest savings certificates together with premium bonds all of which are exempt from tax.
-
Reduce your Capital Gains Tax
When you sell or give away an asset which has gone up in value you may be liable to pay Capital Gains Tax. Some assets are exempt. For example moveable items such as jewellery, works of art or furniture are exempt if the item is worth £6,000 or less.
Gains on disposing of other assets such as a second home, stocks and shares or business assets are not exempt. However no tax will be payable if your net (after deducting losses) gains for a tax year are less than your annual exemption. The exemption for 2011/12 is £10,600. Unused annual exemption cannot be carried forward to cover gains in future years.
Where capital gains are exposed to tax the rate charged will depend on the level of your taxable income. Where the aggregate of your taxable income plus taxable gains amounts to less than the basic rate band, £35,000 for 2011/12, you will pay tax at 18% on those gains. To the extent that the aggregate of taxable income and gains exceeds £35,000 gains are taxed at 28%.
Check if you qualify for advice
If you have £50,000 or more in savings and investments, you may be eligible for HSBC Premier Financial Advice. See the full eligibility criteria.
If you don't qualify for HSBC Premier Financial Advice or if you'd rather not pay for advice, see other ways we can help.
*Our opening hours are Monday to Friday 8am to 9pm and 9:30am to 7pm on Saturday. Calls may be monitored or recorded.
Eligibility requirements
HSBC Premier Financial Advice is available to UK residents who have £50,000 or more in Savings and Investments and who are at least 18 years old at the time of the initial consultation.
You'll also need to have an HSBC Current Account or Savings Account for us to be able to deduct your fee. We can accept payment from a first direct Current or Savings Account too.
To find out more:
- See our HSBC Premier Financial Advice pages or;
- Call us on 0800 328 1298 to book an initial no-obligation consultation with a Premier Client Manager. Lines are open Monday to Friday 8am to 9pm and 9:30am to 7pm on Saturday. (Textphone: 18001 0800 028 0126).
If you don't qualify for HSBC Premier Financial Advice, or if you'd prefer not to pay for advice, see other ways we can help.
If you are not a UK resident, see our HSBC Expat service.
The value of any tax benefits described depends on your individual circumstances. Tax rules may change in the future.
