1. Employers’ pension contributions save NICs. Where your employer pays you a salary which you invest in your pension, both you and your employer have to pay NICs. If your employer pays a contribution directly into your pension scheme, they receives tax relief for the contribution and there are no NICs to pay – saving both of you NICs. You could arrange with your employer to cover the cost of the contributions by foregoing part of your salary or bonus. However, HMRC is very particular about how this should be done in order to be tax-effective.
2. Taking advantage of your annual allowance for making pension contributions is worthwhile, because tax relief is available to your top tax rate. Your annual allowance for 2012/13 is £50,000 plus any unused allowance brought forward from the previous three tax years. This allowance must cover any pension contributions you make yourself and any contributions paid for you by your employer. Contributions made in excess of your annual allowance will attract a tax charge at your marginal rate.
3. Arrange for your company to buy your shares to help solve your business succession problem. On retirement, you may want your younger colleagues to make you a cash offer for your shares, but they may not have sufficient cash resources to do so. One solution is for the company itself to buy your shares and then cancel them, leaving the remaining shareholders controlling the company. You end up with cash and up to £10 million of the gain should be taxed at no more than 10%, assuming your disposal qualifies for ER.
4. Take advantage of the increased ISA investment limits and generate tax-free income and capital gains. The maximum annual amount which can be invested in an ISA is now £11,280 (2012/13). Up to half of the maximum limit can be in a cash ISA with the remainder being invested in a shares ISA. Transferring funds into an ISA early in the tax year will maximise the amount of tax-free income arising. As there are many ISAs on the market, it is worth shopping around to find the best deal, taking account of the rates of return and fees charged.
The Financial Conduct Authority (FCA) does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme.
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