10 Ways to Beat the Chancellor’s Fall Declaration Tax Grab

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Getting your finances in order has never been more important and households that act early can protect more of their hard-earned money from the tax authorities.

Here we look at ways to protect yourself from the impending robbery.

1. As safe as Isas

The threshold for paying the top rate of 45 per cent of income tax will be lowered from £150,000 to £125,140 in April, dragging hundreds of thousands into the top tax bracket. It comes along with an extended freeze on income tax and national insurance contributions until April 2028.

One of the most efficient ways to limit the tax onslaught is to keep saving with Isas, which has an annual tax-free allowance of £20,000.

Tom Evennett, from accounting firm EY, said: “Getting the most out of Isas requires consistent deposits over the long term as annual dividends from stocks and shares will become substantial over time and remain tax-free. ”

He added: “However, if you are considering liquidating a portfolio of stocks and shares, please note that you could trigger capital gains tax by suddenly disposing of these assets if the profit exceeds the annual exempt amount of £ 12,300.”

Brokers use a system called “Bed and Isa” that helps reduce this.

2. Startups back

Those stung by Mr Hunt’s raid on income tax and the lifetime pension benefit freeze, which will remain in place until 2026, may also find safe haven in venture capital funds.

VCTs invest in early stage UK companies and return a portion of their returns to investors through tax-free dividends, also coming in at 30pc. income tax relief if held for five years. Capital gains from VCTs are also tax free and there is an investment limit of £200,000.

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3. Share with your partner

Marriage Benefit is a tax break that can save married couples or people in a civil partnership up to £252 a year.

But the aid is underused, with less than half of eligible couples claiming it. It allows a wife, husband or partner to transfer up to £1,260 of their personal tax deduction to their lower earning other half.

The personal allowance is the amount a person can earn before paying income tax and currently stands at £12,570. A claim can be submitted retroactively for up to four years, even if your partner died after 2016. The receiving partner must have an income below their personal allowance and the highest earning partner must be a base taxpayer earning less than £50,270.

4. Check your council tax bracket

Local authorities have been given the power to increase municipal taxes by 5 percent per year from April without the need for a referendum. But the charges are based on property appraisals made in 1991, so it’s worth checking if you’re overpaying.

Nearly 50,000 people in England and Wales questioned their council tax bills in 2021-2022 by officially challenging the Valuation Office, the department that oversees local charges. Nearly one in three of them won a discount last year.

But be warned: some challenges backfire and can result in properties being placed in a higher band. It can also result in houses on the same street being saddled with higher municipal taxes.

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5. Deposit your pension

Pension contributions increase your pension savings and are an efficient way of reducing tax.

A taxpayer can contribute up to £40,000 a year towards their pension and qualify for tax relief. But any contributions, including those from your employer, above this threshold are not eligible for exemption and may incur additional costs.

If you want to contribute more than the annual deduction, you can retroactive contributions by taking advantage of unused tax credits from up to three tax years prior. However, they cannot exceed your income in the current tax year.

6. Donate to charity

All charitable donations benefit from a 100% exemption. of estate taxes, including cash. If you donate more than one-tenth of your worldly possessions to charity after your death, you will also receive additional tax credits, reducing the rate at which any outstanding taxes will be levied from 40 to 36 percent.

Persons liable for higher and additional tax can claim tax relief on donations to charities or amateur sports associations each year with their tax return.

7. Get knowledge of estate taxes

The zero rate brackets for inheritance tax will remain frozen until 2028. You can make tax-free gifts of unlimited size, as long as you survive the gift for seven years; if you die within the set period, the money will be included in your estate.

Gifts from your “regular income” can be unlimited and tax-exempt, as long as you can prove it has had no effect on your lifestyle. You can give away up to £3,000 in tax-free gifts each year, or £6,000 between a couple, and you can carry your allowance over to the next tax year if you haven’t used it, but only for one year. After that, the donation amount will be reset.

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Parents can also give up to £5,000 to their children as a wedding gift, or £2,500 for grandchildren and great-grandchildren who tie the knot.

8. Pay into a trust

Wealthier parents can deposit into a discretionary trust every seven years, up to the zero-rate bond threshold of £650,000 per married couple.

Nimesh Shah, of accounting firm Blick Rothenberg said: “You can build significant value in a trust, which is non-probate and exempt from IHT. But trusts are not for everyone and can involve costs and periodic tax charges.”

9. Beat the capital gains heist

The Chancellor has slashed the annual capital gains allowance, which will be cut from £12,300 to £6,000 in 2023-24 and cut again to £3,000 in 2024-25.

It will cost anyone selling a second home, buy-to-let or inherited estate, and experts have suggested that anyone looking to sell these assets should do so before the tax rules change in April.

Married couples or registered partnerships can combine their CGT deduction. Currently this means a couple can get a combined allowance of £24,600, but this will be reduced to £12,000 from April 2023 and £6,000 from April 2024.