Reduce tax bill

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    Reduce tax bill

    Once again this year, I am annoyed to have crept over the £100k limit. This gives a shockingly high rate of income tax up to I believe £115k because allowances are withdrawn at £1 for every £2 over the £100k.

    Have any other landlords gone in for EIS schemes, or have you any other ideas for reducing rental income or CGT?

    #2
    Could you make extra pension contributions to take you below the magic number?

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      #3
      Thanks Emwithme. Not being in paid work, I can only contribute £240 per month, which I already do.

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        #4
        Originally posted by JK0 View Post
        Thanks Emwithme. Not being in paid work, I can only contribute £240 per month, which I already do.

        Hi JKO - sorry I don't understand what you mean about £100k limit? What is the EIS scheme?

        The best way to make use of any tax breaks and therefore reduce your bill is to employ a really good 'property accountant'. If I was getting near a tax band that I didn't like, I would employ my son - even though he is a minor, to do admin work. This way the money stays within the household but keeps the tax bill down.

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          #5
          Thanks Claymore. Oh, I've had the same accountant for nearly 20 years, and he is technically very competent.

          £100k is when they start removing your 10k tax free allowance. Thus if you earn £100k, you will pay 0% on £10k, 20% on £21,865, and 40% on £68135, a total of £31,627.

          However, if you earn £120k, you will pay 20% on £31,865, and 40% on £88,135, a total of £41,627. Thus, you can see that the £20k between £100k and £120k is taxed at 50%.

          See here about EIS: http://www.hmrc.gov.uk/eis/

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            #6
            Originally posted by JK0 View Post
            Thanks Claymore. Oh, I've had the same accountant for nearly 20 years, and he is technically very competent.

            £100k is when they start removing your 10k tax free allowance. Thus if you earn £100k, you will pay 0% on £10k, 20% on £21,865, and 40% on £68135, a total of £31,627.

            However, if you earn £120k, you will pay 20% on £31,865, and 40% on £88,135, a total of £41,627. Thus, you can see that the £20k between £100k and £120k is taxed at 50%.

            See here about EIS: http://www.hmrc.gov.uk/eis/

            Coolio ! If ever I become successful I shall probably be asking the same questions as you. Perhaps a Limited Company could come into play - don't know if that would offer anymore tax savings. I'm sure you would be able to pay more into your pension.

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              #7
              VCT?

              I'd ask a couple of other accountants if they can help.
              I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

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                #8
                Gift Aid?

                Create a trust to pass income to heirs?
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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