1. Make sure you tell HM Revenue & Customs (HMRC) which of your properties should be treated as your main home for tax purposes when you buy a second (or even third) home. The property that has always been your main home is free of capital gains tax (CGT). Any other property where you have lived for part of the time will attract tax exemption for the periods you have lived there and have elected for it to be your main home. If a property has been your nominated main home at any time, the gain for the last three years of ownership is free of tax, even if you do not live there during that final period.
2. If you are getting married or entering into a civil partnership, and you both own separate properties which you continue to occupy for some periods, you need to nominate one of them as your main home within two years of the marriage/civil partnership. Once married, you can have only one main home between you for tax purposes. So nominate the one that is likely to make the best use of your CGT exemption, otherwise HMRC will designate the property you occupy most.
3. If you own a company, then you can reduce any tax on a future sale by spreading the shares between yourself and your spouse. If you both hold at least 5% of the ordinary shares, and hold the position of either director or company secretary, you should both qualify for entrepreneurs’ relief on any gains made when the company is sold. This relief reduces the effective rate of CGT down from 18% to 10% on the first £1 million of gains made per person.
4. Contribute up to £1,200 each year into your child’s tax-free Child Trust Fund savings account. The fund builds up free of tax on investment income and capital gains until the child reaches 18, when the funds can be withdrawn or rolled into a tax-free ISA. Every child living in the UK and born after 31 August 2002 should receive a voucher from HMRC to open a Child Trust Fund.
5. Maximise your age allowance. Once you are aged 65 you may qualify for an extra tax allowance of £3,015, or £3,165 if you are aged 75 or over (for 2009/10). Note though that if your total income exceeds £22,900, this extra age-related allowance is reduced by £1 for every £2 over that limit. One way to reduce the restriction of the age allowance and minimise your tax liability is to make a pension contribution if you are under 75. There are several other possible strategies.
6. Check your PAYE tax code. Up to a quarter of all PAYE tax codes are incorrect when issued. HMRC may have included an estimate of your unearned income that means you will pay tax on that income earlier than you would if it was assessed through your self-assessment tax return. You can ask HMRC to remove this estimated income and also correct any other errors.
7. If your marriage is permanently breaking up, aim to divide up the valuable assets, such as shares and land, as soon as possible. If you complete any such asset swaps in the tax year in which you separate, you will not have to pay CGT based on the market value of those items. If you delay until the next tax year, the tax charge could be painful.
8. Check how much National Insurance Contributions (NICs) you are paying. If you have more than one job, or if you are both employed and self-employed at the same time, you may overpay NICs during the tax year. You can then reclaim any overpaid NICs from HMRC after the end of the tax year. You can also avoid the overpayment arising by deferring payment of NICs on one of your jobs if you complete the form in the HMRC leaflet CA72A (employees) or CA72B (self-employed).Last Updated
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