Avoiding tax on savings

meester

Jonbvn wrote: »

Good thread this!

Here's my other thread:

http://forums.moneysavingexpert.com/showthread.html?t=738223

Cook_County

Just to add - and it's important here in this context - that as Mr & Mrs meester are company directors they need to review the proposed changes on income shifting in case these affect the company income they can pay each of them in 2008-09.

papoosue

This thread is fascinating, (even though I don't understand half of it!). But, just to confirm that I have understood enough - if I had £6,000 savings and also entitled to WTC, then the thing to do would be to put £3,000 in two mini ISA's - and I wouldn't have to declare the interest with regard to WTC? Is that correct?

Thanks,

Papoosue :-)

Jonbvn

papoosue wrote: »

This thread is fascinating, (even though I don't understand half of it!). But, just to confirm that I have understood enough - if I had £6,000 savings and also entitled to WTC, then the thing to do would be to put £3,000 in two mini ISA's - and I wouldn't have to declare the interest with regard to WTC? Is that correct?

Thanks,

Papoosue :-)

Interest from ISA's and NS&I tax-free products does not have to be included in the income declared on the WTC form.

BTW, you can only put £3,600 in a cash ISA in any one tax year.

papoosue

Thank you!

MiserlyMartin

meester wrote: »

In the current tax year my family income is £6k salary for me, £5,220 for my wife, and £30k dividends each (Company Director).

As of next year, she can no longer claim the £30k dividend without paying 40% tax. So next year, with no dividends, we will just have £11,220 of income.

I'm quite amazed by this thread. Is anyone else thinking along these lines? To say that you have low salary is kind of misleading (well to me anyway). To only pay yourself £6k but then take dividends of £30k is a kind of tax fiddle/loophole to me. But I suppose good luck to you. Yes its good that you can claim all these tax credits (some of which I had no idea about) while still having a reasonable income including dividends, fine. Why should only the lower income or scrounging society only have access to them. So mixed feelings really. Middle classes fighting back against being the overtaxed section while the rich avoid tax.

All those child tax credits!

"WTC basic element £1800
WTC 30 hour element £735
WTC Couple element £1770
Child tax credit family element £545
Child tax credit baby addition £545
Child tax credit child element £2085
Child tax credit child element (second child) £2085"

Maybe I ought to have a kid or two, sounds quite lucrative!

Oblivion

MiserlyMartin wrote: »

All those child tax credits!

Maybe I ought to have a kid or two, sounds quite lucrative!

You might want to consider that based on recent estimates, to raise a child to age 21, it can cost typically between £180,000 and over £300,000 depending on where you live and choices in education. I think I'd rather have a fast car

ffacoffipawb

MiserlyMartin wrote: »

I'm quite amazed by this thread. Is anyone else thinking along these lines? To say that you have low salary is kind of misleading (well to me anyway). To only pay yourself £6k but then take dividends of £30k is a kind of tax fiddle/loophole to me. But I suppose good luck to you. Yes its good that you can claim all these tax credits (some of which I had no idea about) while still having a reasonable income including dividends, fine. Why should only the lower income or scrounging society only have access to them. So mixed feelings really. Middle classes fighting back against being the overtaxed section while the rich avoid tax.

All those child tax credits!

"WTC basic element £1800
WTC 30 hour element £735
WTC Couple element £1770
Child tax credit family element £545
Child tax credit baby addition £545
Child tax credit child element £2085
Child tax credit child element (second child) £2085"

Maybe I ought to have a kid or two, sounds quite lucrative!

The grossed-up £30,000 dividend (and any grossed up taxable savings income) is included in income for tax credits purposes,so the only entitlement is to the £545 per annum, regardless of number of children. The first £300 pa of any such income is disregarded, but doesn't help with a dividend of 100 times that amount!

You'll only get the £9,000 if you have a salary of £6,000 and no other taxable income. Only do-able if you have large savings and/or little outgoings.

Personally, as a company director I'd rather stay below the radar (possible IR35 issues etc) and pay myself a sensible salary and make a decent (company) pension contribution.