Top Ten Tax Planning Tips

As this is my first posting I thought I would start with a list of top ten tax planning tips.

We all believe we pay far too much tax, but not enough of us are actually doing anything about it!

The housing market boom has seen an increasing number of families with assets that take them over the Inheritance Tax (IHT) threshold - leaving them vulnerable to whopping tax bills.

What is the IHT threshold? - For 2007/2008 the threshold is £300,000. IHT is paid at 40% on amounts above the threshold

Here are some top tax tips for 2007 to help stop the Revenue becoming and extra beneficary of your estate. With forward planning you can minimise the tax burden and hopefully ensure that your family does not have to share your estate with the Revenue

Use the Annual Exemption of £3000 per year with a carry forward of £3000 from the previous tax year if unused. This gift is immediately exempt in the context of calculating IHT liability

Use the Small Gifts Allowance to give £250 to any one or more persons eaxh tax year, provided the gifts are not made to the same people receiving the annual exemption. For example, use the annual exemption to make gifts to three children. If they have partners and say 10 grandchildren between them, using the annual exemption and small gifts exemption you can give tax-free gifts of £6,250 each tax year.

Marriage Gifts - parents can give £5000 each, grandparents £2500 each and anyone else £1000 with no adverse IHT implications

Make Gifts Early - on death a portion of the estate, currently £300000 is charged to IHT at 0% unless substantial gifts, over and above the exemptions have been made within 7 years of dying. If you live for 7 years after amking gifts the gifts could effectively be exempt and once again there will be a full 0% tax allowance

Double Up - make sure you and your spouse or civil partner both take advantage of the allowances and exemptions by making gifts and having assets to utilise the 0% tax band

Trusts - if you don't want to lose control of the management of your capital or your children are too young to receive direct gift, consider setting up a trust. Trusts can still be very tax effective

Agricultural and Business Assets - these attract fantastic exemptions and relief

Surplus Income - give it away and do so on a regular basis and you could fall within another exemption - Lifetime Gifts out of Surplus Income. BUT keep records and establish a regular patten of gifts to satisfy the Revenue

Property Rich but Disposable Assets poor? consider taking out a mortgage to release capital to fund gifts

Consider IHT planning through certain investments - some provide excellent IHT saving opportunities. A financial adviser can help

If goes without saying that reviewing wills, investments and pension plans regularly and taking advantage of all the exemptions and allowances is vital.