TAX relief

chrissiewants2save

Now a higher tax rate payer i would like to invest my 'surplus cash' each month so that I can claim my tax back! I have heard about SIPP's which seem like a good idea although the money is tied up until 50(55)+.
has anyone got any information about other ways- in particular any that can allow some sort of access

dunstonh

Investment products with tax advantages to higher rate taxpayers

ISAs are tax free.

Investment bonds allow deferment of the higher rate tax liaiblity for upto 20 years. Deferment can then take place at a time when you return to being a basic rate taxpayer and therefore no higher rate tax liability will exist. These can be done onshore or offshore with the latter offering greater savings for larger sums using gross roll up.

ZDP Investment Trusts - no income means no income tax liability.

Pensions - you mension SIPP but the same applies to stakeholder pensions, personal pensions and hybrid SIPPs. EPPs and SASS (and a few others) also over advantages to certain groups of people.

Pension contributions can also reduce your income as far as childrens/working tax credits are concerned. This can if utilised fully and in the right circumstances give you upto 72% tax relief in effect.

chrissiewants2save

Thanks - but a little confused, perhaps my question was misleading.

I understand that with a SIPP the government will add extra to cover tax paid. i.e. I would put in £1,000 and the fund claims back £282.05 at basic tax relief, any extra (higher tax relief, 12%) I claim back through my tax return.

Does this happen automatically with my stakeholder pension?

Are there any other ways to get the tax back as above?

:beer:

dunstonh

SIPPS are just a version of a pension product. The tax rules regarding pension contributions havent changed much since 1988. A few tweaks in 2001 and earlier this month but contribution wise, nothing major. SIPPs have actually been round longer than stakeholder pensions which were introduced in 2001.

What you are saying is correct but it is nothing new and it applies to all current pension products and not just SIPPs.

Are there any other ways to get the tax back as above?

Apart from the other investments listed (which was not complete. VCTs could be on that list along with others), it would depend on what tax you are trying to get back or avoid.

I am wary that this is coming across complicated but the tax rules you are talking about are specific to pensions. Other investments have different taxation issues. Some of which can reduce your taxation. However, whether they are appropriate or not would depend on you and what you are trying to achieve.

dunstonh

http://forums.moneysavingexpert.com/showthread.html?t=190175

It appears similar is being asked there. You didnt read the same Daily Mail article did you?

chrissiewants2save

Thanks very much- yes I did read the Daily Mail! :embarasse
I appreciate your help and that you aren't offering personal advice.
What I didn't realise was that my Stakeholder pension did exactly the same thing and claimed tax back!! It would seem all I need to do is claim the extra 12% back for my higher rate tax- probably not as simple but the stakeholder information line might be useful and I could always ring the tax helpline (if my phone battery doesn't die before it gets answered)!!

Do I request a self assessment form as I have never been sent one?
Thank you

:beer:

Debt_Free_Chick

If you simply want to claim higher rate relief on pension contributions, phone the tax office and ask for form PP120.

However, as a higher rate tax payer, I'm a little surprised you never completed a tax return under self assessment. Not being sent one is not an excuse the taxman will accept. You have to request one, if you have reason to believe you might owe tax. Got any savings?

chrissiewants2save

I've just become a high rate tax payer, 25 April to be precise.

I have completed a self assessment 3 times but was well under the threshold. They stopped sending them to me. The last one I completed was in 2002. I was told that they sent out random ones so I presumed that things were OK. I check my code and everything so I know when they've taken too much and i've underpaid -all correct up till new job- wages haven't closed yet so I might have to put aside some money for TAX as i still haven't got the new correct code. I will be claiming that form- thanks

Saving yes- mostly in ISA's, why?

Thanks

Debt_Free_Chick

chrissiewants2save wrote:

Saving yes- mostly in ISA's, why?

Thanks

Any taxable interest needs to be added to your other income, in order to determine which tax bracket you're in. Once you're a higher rate taxpayer, you'll have to a return for the inland revenue, so they can collect the extra tax due on interest.

Not applicable, of course, to ISAs ... but applicable to all other interest on normal savings accounts.

Cheers

chrissiewants2save

Yes - i thought that. It's very hard to get away from the tax man. Later when you get your pension then he taxes it (if appropriate).

:staradmin

ctm_2

Just being a higher rate taxpayer doesn't mean you have to complete a self assessment tax return. It used to, but that changed a few years ago.

If you are a higher rate taxpayer, just let your tax office know that you have savings, and they will send any necessary forms to collect the extra tax due on your interest, and will probably include a restriction in your tax code. They will probably not send you a self assessment return.