Act now before the Budget Bites you !

It should not be forgotten that the Budget takes place on 23 March 2011 which is a few days before the end of the tax year, so rather than to rush your end of year tax planning from after that date I have decided to share a couple of tax planning tips for you now in order for you to potentially take advantage of prior to any potential changes being made in the Budget.

The first being to take advantage of ISA’s. Individual savings accounts – the maximum investment for 2010/11 is £10,200, of which £5,100 can be in cash. These accounts usually have good rates of interest and the interest earned in not taxable !

Secondly if one spouse has a much lower level of income than the other, consider transferring income-producing assets to the low income spouse to maximise the use of the basic and higher-rate tax bands rather than the top rate of 50%. This can also be effective if one spouse/partner would otherwise have income between £100,000 and £112,950 where, because of the withdrawal of personal allowances, the marginal rate is 60%.

Finally, you should be making sure you utilise your capital gains tax annual exemption of £10,100 and remember that transfers between spouses and civil partners produce neither a gain nor a loss – the inherent gain or loss is effectively transferred with the asset.

There are of course more 'advance' planning steps that you could take prior to the budget that include pension contributions as this area is the biggest area of change. Other tips include potential asking or forwarding any dividend or bonus payments to avoid the increase of National Insurance.

Most people don't often think about tax planning or they might wait for their accountant to suggest/contact them, this rarely happens as accountants take on more or more clients the first thing to get neglected is tax planning. If you want any advice on this or want to know more just drop  me an email and we will be happy to help !

The Budget is on 23 March 2011, so don't wait !!! Act Now !!