Axe your tax burden ahead of Tax Freedom Day

With the only two certainties in life being death and taxes, and the inevitable Tax Freedom Day looming on 1st June 2007, Bradford & Bingley reveals that a little careful financial planning can go a long way to reducing the average Briton’s tax burden.

Tax Freedom Day is the day on which people stop working for the Chancellor and start earning for themselves. This means that the average British taxpayer will spend the first 151 days of 2007 working to earn enough to pay off their tax burden to the government. Adam Smith Institute Certain though taxation is, there is no reason why hard-working Brits should contribute more than they need to.

Top tax-busting tips:

1) ISA allowance – use it or lose it

60% Mintel June 2006 of UK savers are not taking advantage of their annual ISA allowance meaning that their hard-earned cash is unnecessarily going into the coffers of the taxman. Every adult in the UK is allowed to invest up to £7,000 in ISAs in each tax year, either as a total sum in a maxi ISA, or through a combination of £3,000 in a mini cash ISA and £4,000 in a mini stocks and shares ISA. As ISA allowances can’t be rolled over to the next tax year, savers must make sure to use it, not lose it.

2) Avoid inheritance tax (IHT)

With property prices on the up, an increasing number of taxpayers own an estate, the value of which far exceeds the current IHT threshold of £300,000. Any value above this amount is taxed at 40%. There is a lot you can do yourself to knock essential pounds off your tax bill such as making gifts to friends and family, leaving money to a charity and drawing up a will to specify how you’d like your estate to be distributed. With the help of an expert you could make substantial savings as they can look at your financial situation as a whole and put together a plan for how you can really mitigate tax.

3) Take advantage of pension plan tax benefits

To encourage workers to save for retirement, the government gives tax relief on pension contributions, which can reduce your tax bill and increase your pension fund. Those with a personal pension will benefit from a basic rate of tax relief of 22% on any contributions. In simple terms, for every £78 contributed, the government will pay £22, making a total contribution of £100. Those who are higher rate taxpayers are also eligible for a further 18% which must be claimed back through a self-assessment form.

4) Make the most of your child’s tax allowance

With the cost of raising a child, from birth to the age of 21, topping a whopping £180,137 Liverpool Victoria survey on the cost of a child, 2006, it’s vital that families start saving for their children’s future as soon as they can. Many banks and building societies have special accounts for children that can be opened with just a few pounds. Fill out a special

Inland Revenue form to ensure that your children don’t pay tax on any accounts you open on their behalf. The Child Trust Fund (CTF) is also a tax-efficient savings account which benefits from government tax breaks.

Andrew Stead, Head of Wealth for Bradford & Bingley comments: “It’s disheartening to think that for nearly half of the year we are working simply to pay our tax bill, which is why it’s so important that UK taxpayers make their hard-earned cash work for them. If consumers are willing to spend a few spare hours getting their finances in order, rather than spending unnecessary money on the taxman, then they gain to reap substantial rewards in the long-term with a potentially smaller tax bill and greater financial peace of mind. We always recommend that anyone looking to review their financial situation should seek quality financial advice.”