Year End Tax Review 2008 Contents New Year's resolutions Investment limits Borrowings and tax Family tax planning Mr and Mrs Give generously and save tax Jam today, or jam tomorrow? Tax payback - tax credits Bringing it back home Children's pensions? A matter of trust Children's savings? All change for gains Second homes Portfolio gains Capital ideas Tax-free perks Employee pensions and NIC Pension policies Employee cars and fuel Business tax Pay rise for the other half? Company or trade Two jobs = too much NIC Should VAT be flat? VAT and cash Inheritance tax One careful owner

Give generously and save tax There are very generous tax reliefs for gifts of cash and gifts of quoted shares or land to charity. If you are thinking of making any gifts, it is worth thinking about doing so by 5 April in order to enjoy the tax relief in an earlier year. The relief on cash gifts works by reducing the donor's higher rate tax, and allowing the charity to reclaim the donor's basic rate tax already paid. If a 40% taxpayer gives £780 to charity, the charity claims back £220 (giving it £1,000 in total), and the donor claims back £180 (so the gift costs £600 net of the tax relief). After 5 April 2008, the basic rate of tax falls to 20%. Instead of claiming back 22/78 of a cash gift, a charity will only get 20/80. Regular givers may want to increase their donations by about 2.5% to compensate the charity - the general tax cut will benefit the donor by that much, so the overall gift will be the same size. The relief on quoted shares or land has two aspects. Any capital gain disappears and is not charged; and the whole value of the shares or land can be taken off the donor's taxable income for the year. If you have a portfolio with gains in, the shares with the biggest gain would be the most tax-efficient thing to give to charity. For example, a gift of shares worth £10,000 would produce an income tax refund for a 40% taxpayer of up to £4,000. If the shares had a gain of £6,000 in them, the CGT saving would be up to £2,400, so the charity would receive £10,000 for a cost of only about £3,600. The last few years have seen the introduction of "carry back gifts" (made in 2008/09 but given tax relief in 2007/08) and "giving a tax refund to charity" (directing the Revenue to pay any refund on your tax return directly to a charity). It's not yet clear whether these are really beneficial to taxpayers, or are just gimmicks. Action Point! If you want to give to charity, have you shares with gains?