how does one avoid paying too much income tax? Is there anything that can be claimed back to avoid extra tax?

Question

what types of investments give you the tax benifit apart from tax free interest on ISA? For the higher rate tax payer, i presume it will be 2.5 times the amount one wants to avoid paying tax of. Please suggest such options and if anything that can be applied retrospectively say for financial year 05-06.

Answer 1

Retrospectively, pension contributions made before 31 Jan 07 can be claimed as relating to 2005/06, giving a higher rate taxpayer extra tax relief retrospectively. The carry back election must be made at the time of, or earlier than, the pension contribution is made - it will not be effective otherwise.

If pension contributions do not suit you, eg because your money will not be accessible until you are around retirement age, there are limited other options available. Subscriptions for EIS (enterprise investment schemes) or VCT shares can potentially be carried back to 2005/06 where the investment is made by 5 October 2007, so you haven't got much time left! I do not know how you would go about this - it tends to be a relatively high risk area though so beware!

Safest bet is pensions. Speak to an IFA though - the pension rules are changing this year, I believe the carry back election is still available but you will have to confim that with a professional!

Answer 2

Income tax is the hardest tax to avoid, except you really want to stop earning altogether. Most people who try avoiding income tax end up evading it; the consequences of which getting caught are not at all pleasant. It is difficult to advise you without having details of your income and how much you are looking to reduce your tax by. I strongly suggest you look at tax beneficial investments first such as ISA's, contributions to your private pension and try not to invest your income in investments that are likely to attract more tax (CGT, IHT) at a later date.

See a tax advisor for tailored advise.

Answer 3

Municipal bond
Treasury bond
Health Saving Account
Deposit your money outside of the country.
If you are married, try not to divorce
If you are single, marry someone

Answer 4

Unemployment and claim for welfare benefits, that way you'll be saving all the extra tax. Ha,ha.

Answer 5

Try an independent financial adviser if you do overpay you will get a rebate

Answer 6

buy the book " tax for dummies "

or come to my office for a consultation