There are plenty of opportunities for reducing the amount of income tax you pay. To do so, you need intelligent tax planning. For a lot of investors planning for taxation can be quite impulsive. Although there are some obvious choices but there are different features, dynamics, yields, lock-in periods associated with each tax-saving product. Often investors tend to ignore the nuances and invest in a product for the wrong reasons. Hence it is imperative that you seek independent tax advice.
Tax planning is the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency, with the elements of the financial plan working together in the most tax-efficient manner possible. Tax planning is an important part of a financial plan, as reducing tax liability and maximizing eligibility to contribute to retirement plans are both crucial for success.
Income tax planning should take into account the income tax treatment of savings. Simple income tax planning steps can include using ISAs or transferring savings to your spouse to eliminate or reduce income tax (and capital gains tax). Individuals with a high income or large savings may want to consider other options. There are substantial tax breaks for investing in venture capital trusts or unquoted shares that qualify under the Enterprise Investment Scheme. Making pension contributions on behalf of your children can also offer tax advantages.