Maxed out annual allowance. How else can i reduce my income tax?

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Pythagorous
Pythagorous Posts: 746 Forumite
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in Pensions, annuities & retirement planning
Looks like I'll max out my 40k annual allowance this year. I don't have any unused allowance to carry forward from the last 3 years.

Any ideas on how i can reduce my income tax on the remaining part which I'm currently paying 40% on? I'm over 40 so LISA not an option :-(

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  • xylophone
    xylophone Posts: 44,530 Forumite
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    Charitable donations?

    https://www.taxation.co.uk/Articles/2017/10/17/337101/tax-implications-charitable-donations
  • anselld
    anselld Posts: 8,301 Forumite
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    Eis, seis, vct.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    Gotta spouse?
    Free the dunston one next time too.
  • Pythagorous
    Pythagorous Posts: 746 Forumite
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    kidmugsy wrote: »
    Gotta spouse?

    yes, my spouse is a basic rate taxpayer.
  • Pythagorous
    Pythagorous Posts: 746 Forumite
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    anselld wrote: »
    Eis, seis, vct.

    thanks. I recall looking at seis. Seems almost too good to be true in that you can't actually lose all your capital even in worst-case scenario. Can't understand why these investments aren't more well known and used by higher rate tax payers. Yes they are high risk by nature, but the tax benefits are so good that it seems to negate most of the risk. Unless I am missing something?
  • HappyHarry
    HappyHarry Posts: 1,590 Forumite
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    Pythagorous wrote: »
    thanks. I recall looking at seis. Seems almost too good to be true in that you can't actually lose all your capital even in worst-case scenario. Can't understand why these investments aren't more well known and used by higher rate tax payers. Yes they are high risk by nature, but the tax benefits are so good that it seems to negate most of the risk. Unless I am missing something?


    There are few good options out there, as these tend to be very small, very high risk start-ups. Most higher-rate tax-payers would be better suited to VCTs or even EIS. SEIS is really the realm of experienced Angel Investors. These invetsments should not be targeted at your normal higher-rate taxpayer, as depsite the tax advantages, the risk of loss is significant.

    SEIS investments are limited to £100,000 per year.

    Although a maximum of 50% of this can be reclaimed, and in the event of total loss, you can claim tax-relief on the other 50%, you can still end up losing money.

    e.g. an additional rate taxpayer invests £100,000 in a SEIS

    1. £50,000 tax relief claimed for that tax year.
    2. If the SEIS fails, then you can claim tax relief at your marginal rate on the other £50,000 i.e. £50,000 x 45% = £22,500

    The loss would then only be (£100,000 - £50,000 - £22,500) = £27,500.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • AlanP_2
    AlanP_2 Posts: 3,262 Forumite
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    Pythagorous wrote: »
    Looks like I'll max out my 40k annual allowance this year. I don't have any unused allowance to carry forward from the last 3 years.

    Any ideas on how i can reduce my income tax on the remaining part which I'm currently paying 40% on? I'm over 40 so LISA not an option :-(

    Ask for a salary reduction ;)
  • somethingcorporate
    somethingcorporate Posts: 9,449 Forumite
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    Any share schemes at work? Some of these schemes are often bought out of gross earnings and become tax free after 5 years (and are eligible for dividends too).


    The amount you can invest is limited by HMRC (think it's £3k a year) but every little helps.
    Thinking critically since 1996....
  • dharm999
    dharm999 Posts: 560 Forumite
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    Does your wife have a pension? Can she salary sacrifice down to the minimum required to get her NI stamps? That won't save you tax but it will save her tax, and then overall the picture between you is a tax saving albeit not as much as if you did something on your own.

    Do you have children, if so, have you got pensions set up for them?
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