Saving tax???

Chief155

I am currently self-employed, my income so far this year is just over £57,000. Now that I have gone over the 40% bracket, I am looking to see if there are any possible ways that I can cut my tax bill for next year? Ive briefly spoke with my accountant and he seems to think the only real option for me is to set up a personal pension plan. Are there any other options available to me? I dont really like the idea of putting a lump sum of money into a pension plan as I then cannot touch that money until I retire. Any advice/info would be greatly appreciated?

pjclar02

Hello there

Gifts to charity would reduce your taxable income.

Also investment into shares (EIS, SEIS or VCT investments) offer great tax incentives.

PlutoinCapricorn

Have you thought about taking the limited company route?

Chief155

Yes, I have looked into the Limited company route but the majority of work I do is for 1 company. I understand for this to work for me I would need to have more income streams than I currently do, otherwise I would fall into IR35, which would make no difference tax wise to me.

grey_gym_sock

this may be pedantic, but you don't have to actually retire before you can touch a pension, though you do have to be over 55.

EIS/SEIS/VCT can be shorter term than a pension (depending on your current age), but they are rather high up the risk spectrum.

pension or gift aid are the simple answers.

Pennywise

Chief155 wrote: »

Yes, I have looked into the Limited company route but the majority of work I do is for 1 company. I understand for this to work for me I would need to have more income streams than I currently do, otherwise I would fall into IR35, which would make no difference tax wise to me.

Plenty of workers are outside IR35 despite only having one customer. It's the work and how you do it that matters. Having a single customer is way down the list of the important factors.

Pennywise

Chief155 wrote: »

I dont really like the idea of putting a lump sum of money into a pension plan as I then cannot touch that money until I retire.

As said above, pension lump sums are available at a lower age that state retirement.

Also, how about a self invested pension plan with a view to it buying business premises - possibly an office for you to work from, or a commercial building to rent out. There are a few ways to make your pension fund work to your advantage rather than the monies being tied up in stocks/shares under someone else's control!

chrismac1

Please look at some of my other posts on IR35. I have 10 or so clients who work for only 1 company, but I would be 95%-plus confident in every case of seeing off a challenge from HMRC on this issue.

It's not the number of clients, it's the way the contract is run especially with regard to the 3 key tests. I write this because on the face of your post a limited company route is likely to make a lot of sense.

PlutoinCapricorn

Surely what you said about one company applies just as much to a self employed person?

Pennywise

PlutoinCapricorn wrote: »

Surely what you said about one company applies just as much to a self employed person?

Rules are broadly the same, BUT, for self employed the risk/burden of proof rests with the "customer", but for a limited company, the risk/burden of proof rests with the worker. Basically, if self employed, you're not at risk, the tax etc will be charged to the "employer" if HMRC are successful in arguing it's employment not self employment.

Savvy_Sue

WRT a pension, how old are you, and do you have ANYTHING in a pension pot yet?

I say to all my younger colleagues, you may think you're far too young to be thinking about this now, but £10 paid in now is going to be worth a lot more than £10 in 10 years time! When you'll STILL think you're far too young to be thinking about this ...