How to stop the taxman taking all your dough

THE taxman is taking a bigger share of our wealth than ever, with receipts hitting a record high last year.

HM Revenue & Customs (HMRC) pocketed an extra 6.7 per cent in tax revenues in the tax year 2016/17, with receipts up £35.6billion to almost £570billion.

This is the biggest jump since the recession, driven by taxes on wealthy individuals, according to accountancy group UHY Hacker Young. Head of private client services Mark Giddens said: “The last year has been a bumper one for the taxman.”

Capital gains tax receipts jumped almost 20 per cent, with national insurance contributions and stamp duty on property transactions up 10 per cent, while inheritance tax has also set records. The following tax tips can help you fight back. TAX ATTACK Inheritance tax (IHT) can cost some families hundreds of thousands of pounds, yet with careful planning families can pass on up to £1million free of tax.

Potentially exempt transfers allow you to give away assets free of tax, provided you live for another seven years. Giddens says: “Careful use of gifting, either direct or through trusts, can also reduce your liability but make sure you have sufficient income and security for yourself.”

Plan ahead to avoid capital gains tax (CGT) on share price and rental property growth, or when selling business assets. Everyone can take £11,300 this year free of CGT, so couples could protect up to £22,600 of gains.

“Take advice before selling an asset, rather than afterwards,” Giddens says.

Higher and additional rate taxpayers who make charitable donations can reclaim some of the cost through their tax return or by asking HMRC to adjust their tax code. Giddens adds: “If you do not tell HMRC you will not see the benefit.” BREAK FREE If one person in a marriage or civil partnership pays tax at a higher rate, they should consider shifting assets into their partner’s name. George Bull, senior tax partner at RSM, says this allows couples to make maximum use of income tax and CGT allowances.

“This could apply to buy-tolet property or to cash savings or shares held outside of Isas and pensions,” he says.

The marriage allowance is designed to help couples where one partner pays standard rate income tax and the other is a non-taxpayer. This is worth up to £230 a year and can be backdated, so you can claim £662.

You can claim tax relief at your marginal rate on contributions into a pension. Bull adds: “Pensions are also a good way of passing on wealth to your family free of IHT, just make sure you do not exceed your pensions lifetime allowance.”

You can also invest up to £3,600 in a pension on behalf of a non-earning spouse and claim tax relief at 20 per cent. GREAT SAVINGS Every UK adult can invest up to £20,000 in a tax-free individual savings account (Isa) allowance, with the money free of all income tax and CGT until you die.

Basic rate taxpayers can earn £1,000 of interest tax free on cash held outside an Isa, or £500 for higher rate taxpayers. This tax year the first £5,000 of any dividend income is free of tax.

You can also invest up to £4,128 in a Junior Isa on behalf of younger family members. “The Lifetime Isa allows those aged 18 to 40 to save up to £4,000 a year towards their first home or retirement, with the Government contributing 25 per cent on top to a maximum £1,000,” Bull adds. NOTHING VENTURED Patrick Connolly, certified financial planner at Chase de Vere, says wealthier savers should consider investing via a venture capital trust (VCT) or enterprise investment scheme (EIS): “Both give you 30 per cent income tax relief up front, with capital growth also free of tax.”

VCTs may also pay tax-free income while an EIS offers CGT and IHT savings. He warns: “Both invest in unquoted companies so understand the risks.”