Our top tax tips for 2011/12

The UK now possesses the longest tax code in the world. Joanna Faith asks industry experts for their views on the key points to look out for in the coming fiscal year.

It’s official. The UK has the longest tax code in the world, recently surpassing India to take home the coveted prize. George Osborne broke the good news during last month’s Budget speech.

Although the Chancellor pledged to simplify the tax system by abolishing 43 complex reliefs and wiping out 100 pages from the code, there is obviously still a long way to go.

Effective tax planning, therefore, remains a must. So, as we finish one tax year and enter another, we ask a range of tax experts for their top tips for you to pass onto your clients.

1. USE YOUR PERSONAL ALLOWANCE

The personal allowance is now on a journey towards the coalition’s aim of £10,000 of tax-free income. With the increase to £7,475 this April and then to £8,105 from 2012, tax planning around the personal allowance is key, says Edward Grant, tax specialist at Zurich UK Life.

He recommends using fixed interest yields and offshore bonds which both secure tax-free income. Ensuring wealth is distributed within a family so that all personal allowances are secured is also vital, Grant adds.

2. REVIEW YOUR PENSION CONTRIBUTIONS

From 6 April 2011, income tax relief on pension contributions will be restricted to contributions you and your employer make within your annual allowance (AA) cap. This cap is set at £50,000 but can be extended to unused relief from the previous three tax years.

Graeme Clark, head of private clients at Courtiers, says you will receive full tax relief at your highest marginal rate of tax on your pension contributions covered by the AA cap. Any pension contributions made by you or your employer that exceed the AA cap will be subject to an AA tax charge.

3. TAKE ADVANTAGE OF INCREASED ISA LIMITS

The maximum annual amount that can be invested in an ISA will increase on 6 April 2011 from £10,200 to £10,680. Half of the maximum can be in a cash ISA with the remainder invested in a stocks and shares ISA.

Clark says: “There are many ISAs on the market so it is worth shopping around to find the best deal, taking account of the rates of return and fees charged.”