Be Prepared as 50p Tax Rate Looms

Weybridge-based TWP Accounting LLP has issued money saving advice to Britain’s high earners in anticipation of the increased 50% tax rate, as the new tax year approaches.

Due to be implemented on April 5 2010, and applicable only to those with annual earnings of over £150,000, the rise is 5% higher than first thought and is being imposed a year earlier than expected due to the global credit crunch.

However, TWP advises that with a little careful planning, people can protect their assets somewhat by making the most of their pensions, savings and trust funds.

Although the tax rate is increasing this April, the restrictions on pension tax relief do not come in to force until April 2011. This means that there is still over a year left to make the most of decent tax relief on your pension accumulated between now and then. People in the higher tax bracket should increase pension contributions in 2010 and 2011, decreasing their monthly taxable income, as well as increasing their pension payments while tax relief is still relatively high.

They should also consider paying money into the pension fund of a spouse, if it is not financially viable to pay into their own.

Trustees should also consider converting any discretionary trusts they have in to interest in possession trusts, as this type of fund is not taxable in line with the national trust tax rate, which will also be raised to 50% from April.

Additional ways to avoid the tax rise include moving any assets in to Offshore Bonds, or contemplating Venture Capital Trusts.

TWP Accounting partner Mike Dawes said: “This increase not only applies to people on higher incomes, but many trusts are also affected and certainly so far as the trusts are concerned, positive action can be taken to reduce the tax cost. In this case, it really is best to be prepared.”

For more information, contact TWP Accounting on 01932 855049.