#12 Don't pay too much tax!

by Jane Baker on 17 July 2009  |  0 comments
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Paying more tax than you should is one of worst financial sins!

Today's nugget of 'what not to do with money' advice is rather an important one...

#12 Don't pay too much tax!

Strangely, I find the subject of tax quite interesting. No, really, I do. Or rather, what I find interesting is discovering as many ways to pay as little of it as possible.

I'm not talking about dodgy tax avoidance schemes here, of course. But there are lots of perfectly legitimate ways to cut your tax bill. And, believe it or not, some of them are actually pretty easy to do.

Like cash ISAs, for instance. If you're going to put some money aside, it's really no more difficult to open an ISA than it is to start an ordinary, taxable savings account. So, no excuses!

And pensions are also a highly tax-efficient way of saving for the future. After all, the taxman kindly gives you back the income tax you have already paid when you pop some money in a pension scheme. Better still, if you don't actually pay tax at all, the government will give you a bit of tax relief anyway. Excellent!

But it's true, the more money you have, the more complex tax becomes. For example, if your estate is  likely to be worth more than £325K (or what's otherwise known as the nil rate band) then you should be thinking about inheritance tax - or more precisely, avoiding it. And, if you haven't already done so, write a will now so you can make sure your estate is dealt with properly.

IHT is charged at an astonishingly high rate of 40%. Yes, FORTY PER CENT! And that could apply to everything above the £325K limit. But there are clever ways you can keep some - if not all - of it out of the taxman's greedy mitts.

But IHT planning isn't easy. My advice? Seek the help of a professional.

And now for the boring - albeit important - bit: get help from a properly qualified adviser. In other words, choose someone who has the Advanced Diploma in Financial Planning (AFPC) qualification. And make sure they have the AF1 - Personal Tax and Trust Planning exam under their belt too.

This should give you confidence in their skills.

You could save thousands of pounds, so getting the right advice is an absolute must.

Good luck!