Accountants Call For Pension Pot Payment To Lower Tax Bill
Monday, 12 January 2009
This month heralds the first self-assessment tax return deadline, so everyone who is self-employed or who completes a tax return will be required to file all paperwork by the 31 January 2009 and make a payment to HM Revenue & Customs (HMRC).
"This payment, and consequently July's payment, needn't be as big a burden as first expected," claims Paul Dickson, head of financial planning and wealth management at Armstrong Watson.
"If you are a higher rate tax-payer by simply making a contribution into a pension scheme before the 31 January 2009, you can effectively reduce the amount of tax that you will be required to pay in January and July. Tax-relief on this contribution will be at your highest rate, so if you pay tax at 40 per cent then this immediately becomes an attractive option, particularly in the current climate when belts are being tightened.
"It's understandable that a lot of people are cautious of the stock market at the moment, but rest assured your contribution doesn't have to be invested into stocks and shares. It can be a cash payment that will accumulate interest, without any tax to pay on it, plus it's crucial to save for the future - now more than ever."
The current economic slowdown could have considerable implications for most people's taxes. For the self-employed, 2009 looks set to be a challenging year with narrowing profit margins and smaller dividends.
Paul continues: "January doesn't just mark the completion of your 2007/8 tax affairs it also signifies the start of making payments for the 2008/09 tax period. If 2009's cash flow is likely to be a contentious issue, being proactive and planning your tax payments now is one way to try and rectify this.
"Take a realistic look at your present and predicted earnings and dividends, if you think they will be lower at the back end of the year, your accountant can apply to make a lower payment than usual with HMRC.
"Making a claim for a tax rebate is another area for small business owners to explore with their accountant. If you have made a trading loss it may be possible to carry that loss back to the previous year and obtain a tax rebate.
"As the saying goes, 'every penny counts' probably more now than ever before. It is crucial that you make smart contributions, seek out sound financial advice and vigorously plan to ride out the economic storm - it may be a bumpy road ahead."
Notes to Editors:
Armstrong Watson is a firm of accountants, business strategists and financial advisers.
We have a network of 17 offices throughout the north of England and south west Scotland, with 35 partners and over 400 team members in a variety of areas such as: Business Enterprise Services, Business & Personal Tax, VAT, Corporate Services, Corporate Finance, Payroll, Insolvency & Corporate Recovery, Agriculture, Computer Solutions and Office Equipment, Financial Planning and Wealth Management.
Armstrong Watson is registered to carry out audit work by the Institute of Chartered Accountants in England and Wales and is authorised and regulated by the Financial Services Authority.
Armstrong Watson is ranked as the UK's 26th largest accountancy firm in Accountancy Age's top 50 accountancy firms. (2008)
Visit our website at www.armstrongwatson.co.uk