Pay Less Tax (2)

Let us help you before it's too late

With 5 April deadline beckoning, the prudent financial planner should now be finalising ways to mitigate the amount of tax due for the 2002/03 tax year. Follow our guide to some of the key areas you should consider.

Making the most of your tax allowances

These apply each tax year and run from April 6 to April 5.

Personal allowance Everyone receives a personal allowance, which is the amount of income you can earn before you start paying income tax. Your personal allowance is not transferable; however, couples can hold income-producing savings or investments in the name of a non-earning partner.

Age allowance If you are over 65, you receive an extra age allowance on top of your personal allowance. You are only entitled to the full allowance if your income is below a set amount (£17,900 in 2002/03). Once it goes over that limit, the age allowance gradually slides away until you are back to the basic personal allowance.

Married couple's allowance If you are a married couple where at least one of you was 65 on or before 5 April 2000, you should still receive the married couple's allowance. This was abolished for all other married couples from 5 April 2000

Allowances	2001/02	2002/03
Personal allowance
Under 65	£4,535	£4,615
65-74	£5,990	£6,100
75 and over	£6,260	£6,370
Married couple's allowance
65-74	£5,365	£5,465
75 and over	£5,435	£5,535
Minimum	£2,070	£2,110
Blind Person's allowance	£1,450	£1,480
Children's tax credit	£5,200	£5,290
Children's tax credit - baby rate -		£10,490

Capital gains tax allowance Everyone gets a capital gains tax allowance, set at £7,700 for 2002/03. You can make profits up to this sum each year without paying any tax - have you utilised this?

Rent a room scheme Under this scheme, property owners prepared to let out a room in their home can earn £4,250 a year tax free from a lodger.

Pension allowance Have you funded your pension to the maximum allowed? You receive full tax relief at your highest rate on payments made into a pension scheme up to the earnings cap limit of £97,200 (2002/03). From 5 April 2001, everyone (except members of occupational pension schemes earning more than £30,000 a year and company directors) can now put up to £2,808 into a stakeholder pension each year net of basic rate tax. The addition of basic rate tax relief (which the product provider would obtain from the Inland Revenue) would increase this contribution to £3,600.

Tax-friendly investments

ISA allowance You can put up to £7,000 (2002/2003) into an Individual Savings Account (ISA) to earn tax-efficient income and gains. Have you used up your allowance?

Life insurance bonds These include with-profits bonds and unit-linked investment bonds. You can withdraw 5 per cent a year of your original capital for 20 years with no immediate higher-rate tax liability.

Enterprise Investment Schemes and Venture Capital Trusts These types of investments in small and unquoted companies allow deferment of capital gains tax. They also carry sizeable income tax relief.

Buying an interest in an industrial or commercial building within an enterprise zone You can purchase interests in an Enterprise Zone (EZ) either directly or through a property trust set up for that purpose. The cost of the building, where it exceeds rental income in the tax assessment year, can be set off against income - but not against capital gains. The net cost after tax relief can be as little as 60 per cent of the cost of the building.

Offshore roll-up funds These may be useful if you are planning to move overseas before you cash them in, or if you are expecting a drop in your income, perhaps on retirement. They roll up income and gains within the fund, and there is no tax to pay until you sell.

Time is running out if you haven't started to prepare for the end of the 2002/03 tax year. Don't leave it until it's too late - e-mail or contact us and let us consider how you could end up with a bigger slice of the wealth cake.

Investments in Enterprise Investment Schemes, Venture Capital Trusts and Enterprise Zones can involve a high level of risk and are not suitable for the cautious investor. You should seek independent advice before considering investing in any of these schemes.

The Financial Services Authority does not regulate all forms of offshore plans, tax advice and some forms of the products or services we provide. Levels and bases of, and reliefs from taxation are subject to change.