Let’s be clear, the proposed higher rate tax band on earned income above £150,000 is 46.5% and not 45%!
Add the 0.5% additional National Insurance increase to the existing 1% charge; so for anyone with earned income, such as salary or bonuses, the effective tax rate will be 46.5%!
Unearned income, such as rental income will be taxed at 45%!
Unapproved share options will be taxed at 54.5%!
The solution for Clients in the past has been tax shelters. Many of these, such as Film Partnerships are no longer available!
Enterprise Zone Property is still available and two others:
Flats above Shops and Renovation of Commercial Buildings.
All these tax shelters have been rendered ineffective by the collapse of the property market in the UK and it remains to be seen whether or not they will be viable on a commercial basis in April 2011.
The most effective way of avoiding tax hikes for those who are earning significant amounts say above £300,000 - £400,000 per annum is to leave the UK and take up Residence elsewhere.
Strategic Tax Planning Partnership has many years specialising in the area of Residence and Domicile planning.
We are uniquely placed to assist your Clients with the complex, new and growing set of requirements to secure non-UK Residence (particularly so, after the win for the HMRC in the High Court case of HMRC–v-Grace earlier this month).
We have extensive experience of advising High Net Worth Individuals on relocating to either pure tax havens or countries with special tax arrangements that do not tax foreign source income and gains or specifically exempt it.
Another group of High Net Worth Individuals probably looking for a tax planning solution to their situation; are those UK Non-Residents who have a significant UK property portfolio.
One anomaly is that UK source property income owned by a Non-Resident Individual is taxable at the full income tax rates. So, rental income that was previously taxed at 40% will, from April 6 2011, be taxed at 45%!
We have many years experience of re-structuring property portfolios to avoid this problem and minimise UK income tax on rental income to either the 20% rate or with planning to reduce that rate to approximately 11%– 12% per annum.
With property values as low as they are this is a good time to implement such planning!
There is a second advantage because these Clients also face UK inheritance tax on UK situated property.
Re-structuring will also eliminate this, providing the individual has effectively shifted their Domicile to another country. We also offer specialist advice with regard to Domicile planning for those retaining UK assets.
About Daniel Feingold
If you already have a large CGT problem and want to know how to overcome it, then please feel free to arrange a consultation with Daniel by clicking here.