With accountant yesterday for a few minuets and he says my income is up by 25k from last year, which means 70% of income is at 42%, The question is are there anything I can do now to cut this or is it too late. Acct didn't advise. I have a small Pension scheme in operation and I have it set up in a way that I can land in a lump sum whenever I like or is it too late now, or will I buy some plant/machinery now, instead of hiring at least I would have the plant if things turned. The trouble is I don't have much money at present but I'm sure I could borrow, Would it be worth it to borrow this money or not? or should I just pay the tax, Advice welcomed. Note: being too busy all year to think about such things, didn't even have a holiday or a good night out,wonder is it worth it?.
Being slautered at 42%
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Brendan Burgess
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Most accountants have the reputation for being boring. It's nice to see one who entertains his clients.
Brendan
Are you talking about your current tax year or the 2005 tax year, which many people are dealing with at the moment? If you're talking about 2005, buying new plant and machinery will not affect that tax year. (Even if you could invest in new plant, you would have to write it off over 8 years in most cases.)
You can reduce your tax bill for 2005 by contributing extra to your pension plan up to limit for your age, or possibly more if you are a proprietery director of a limited company (which sounds unlikely based on what you've said).
Did your acountant not advise you on your options for reducing your bill? Maybe you should have spent a few extra minutes!
You can reduce your tax bill for 2005 by contributing extra to your pension plan up to limit for your age, or possibly more if you are a proprietery director of a limited company (which sounds unlikely based on what you've said).
Did your acountant not advise you on your options for reducing your bill? Maybe you should have spent a few extra minutes!
Are you self employed or PAYE? Especially if you are self employed you should consult a professional tax advisor if your accountant cannot dispense such advice (or get another accountant who can do both). This key post might also be of interest:
Are you paying too much tax? A guide to tax credits
Are you sure that 70% of your income is taxed at 42%? Can you post detailed figures?
Are you paying too much tax? A guide to tax credits
Are you sure that 70% of your income is taxed at 42%? Can you post detailed figures?
Being an accountant myself the best advise i can give you is pensions pensions pensions.... Isnt it better to put this money into a pension then to give it to the taxman at least then when you retire you will see this money again. . . Other options would be investing in a business expansion scheme (BES) or if you have alot of rental income maybe property based incentives such as section 23 relief.
He's self-employed, otherwise he would not be considering investing in plant and machinery.
While pensions are one way to save tax I don't think that one size fits all advice such as this is necessarily a good idea. What's actually suitable/prudent really depends on the specific circumstances of the individual (and their business if applicable) in question. There may be lots of other suitable options (e.g. appropriate and legitimate financial engineering within the business and for the individual) that are relevant.
Thank you very much for replies, I am a sole trader with a couple of businesses and getting ready for 31st deadline, personal income for 2005 is touching 100K am married with no dependents,I know pension is option but would rather spend money on machinery, My accountant allows plant would only boost income for next year and I will be in same boat next time round, His attitude is I'm earning plenty and its the poor fellow thats on 30K needs the help not I, he said everything is Rosy with me now as I've had some bad times in the past, so I am reluctant to put money I have to borrow into pensions, I wanted to know am I too late for this assessment to do anything about it or what would other people do at this late stage.
I suppose you must consider how your business is doing in 2006 as well. The 2005 snapshot may not necessarily reflect the current or future position. I presume your accountant is familiar with your day to day cashflow and is taking this into account.
Pension plans are among the most tax efficient options available to you and you might consider being more proactive on this throughout the year rather than as a last minute strategy.
One way of looking at it is that having a large tax bill is a sign of success. You have to make it before you have to hand half of it over!
Pension plans are among the most tax efficient options available to you and you might consider being more proactive on this throughout the year rather than as a last minute strategy.
One way of looking at it is that having a large tax bill is a sign of success. You have to make it before you have to hand half of it over!
I know the op has made another post since this one, and clarified his situation, but for the record, if someone has only paye income (and is not self employed) then the purchase of any plant and machinery would have no tax saving for them.