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.
he 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.