Three best tax tips for high income earners UK

According to Rich List researcher Philip Beresford, nearly 500 directors and partners of UK companies were leaving the UK at an alarming rate of almost 10 a week in 2013. This was so as to escape the new 50% upper rate of tax on income over £150,000 that came introduced that year. If you are a high income earner or you are about to become one, you don’t have to uproot your family and move abroad to escape high taxes. Try these three best tax tips for high income earners UK that can help significantly reduce your tax bill.

1. Take advantage of lower capital gains rates.

One of the best tax tips for high income earners UK to reduce tax bill is to structure your income in such a way that you get a smaller portion from wages and a larger portion from capital gains. Long-term capital gains often get preferred tax treatment and can be taxed at considerable lower rates than ordinary income.

Analyse your income sources and consider switching income-generating assets to capital generating assets, such property, residential dwellings, commercial office buildings, and antiques. These attract low tax rates.

2. Save your money in ISAs.

If you make investments in an Individual Savings Account (ISA), you are entitled to no personal income tax or CGT. Moreover, if you use your ISAs wisely, you can invest up to £11,520 per person before April 5, 2014 and keep all of that money from the taxman.

A new ISA, dabbed the “Nisa”, will be available from July 1 with an annual limit of £15,000, which is good news for anyone who wants to put ISA at the centre of their financial lives. The entire amount you save in ISAs can be used to invest in stocks and shares ISA. If you invest in stocks and shares ISA, any dividends you receive are paid net with a 10% tax credit and no further liability.

If, however, you are not completely convinced about the economic recovery and don’t want to invest in share or fund in your ISA, you can still shop around for an attractive cash rate and transfer money in stocks and shares accounts to cash accounts. The Chancellor recently removed most of the block on transferring shares to cash on Budget day 2014.

3. Switch to a salary sacrifice scheme.

Another one of the top tax tips for high income earners UK to help reduce tax bill is to enter in to a contractual salary sacrifice arrangement with your employer. In the salary sacrifice arrangement, you give up some of your salary in exchange for enhancements to employment benefits, such as medical insurance, pension contributions and life cover.

This might not sound like a very good idea, but it can actually help you save big on tax and National Insurance contributions. The figure on your payroll is the one that is taxable so you increase the overall value of your pay package sacrificing a portion of your salary. In addition, your employer will not be required to pay their Employers’ National Insurance contributions on your sacrifice salary and may pass on some or all of these savings to you.

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