If you are currently paying tax at the top rate of 50% then you’ll undoubtedly welcome the cut to 45% which comes in from next April.
Are you planning to maximise the tax saving from this? What can you do?
The cut takes effect from 6 April 2013. Can you move any income from the current year into next tax year so that you save 5% tax?
Investment income will usually be somewhere where you can look to make the saving. Is there an opportunity to switch investments or deposits with banks and building societies so that no further interest is credited until after 5 April 2013? Perhaps you need to speak to your investment adviser or bank/building society to see if they can recommend a suitable switch.
Directors and shareholders of limited companies are probably in a position to determine the levels of salary, bonus and dividends voted in any given tax year. Deferring some income beyond 5 April 2013 will produce the saving. Self Employed individuals may not have such flexibility but it may be worth looking at adjusting accounting periods to see if this can produce the right result.
Surprisingly there is also an argument for doing some things earlier; a prime example of this would be paying pension contributions. If possible within pension limits then it will be worthwhile paying contributions normally due to be paid post 5 April 2013 earlier so as to obtain relief at 50% rather than at 45%. The same may apply to charitable gift aid payments.
If you would like any further assistance with this, please contact Darrell Booth.