High Earners Given ISA Advice

High earners can avoid some the tax hikes announced in the latest budget by shifting more of their salary into a pension fund and increasing ISA contributions, according to experts.

The Institute for Fiscal Studies said the 50% tax rate may not deliver the full amount of revenue the Treasury had hoped unless the Government brings in more stringent measures to block avenues of tax avoidance.

Chancellor Alistair Darling has already cut pension contribution relief in a bid to stop those with high salaries placing more of their wage into a pension fund to pay less income tax.

But this still works out as a good option for the next two years, before the new 20% relief rate is brought into force.

Expanding on the revenue maximisation theme, senior tax partner at BDO Stoy Hayward Stephen Herring, said: "The first basis is to maximise pension contributions in the next two years, and maximise contributions to ISAs noting that the limit goes up to £10,200 in October for the over 50s and for everyone else in April next year.

"Then if you're of the mindset that you're willing to take a high level of investment risk, you can look at the Enterprise Investment Scheme and Venture Capital Trusts which provide tax relief."

Sourced from Confused.com [link]